What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-17 compared with 2021-02-18 · 352 added, 465 removed, 985 unchanged (45% of the section changed)

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CONSOLIDATED FINANCIAL STATEMENTS:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Ac counting Fi rm (PCAOB ID 238 )

Consolidated Balance Sheets as of December 31, 2021 and 2020

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Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2021, 2020 and 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019

Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019

Notes to Consolidated Financial Statements

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Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenue in 2018.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible instruments in 2021.

Basis for Opinions

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Determination of the Value of Revenue from Non-Financial Sources and of Standalone Selling Prices of Identified Performance Obligations in Dynamic Fixed-Fee License Agreements

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Additionally, certain patent license agreements contain revenue from non-financial sources in the form of patents received from the customer.

Total fixed-fee royalty revenue and non-current patent royalties were $298.5 million and $21.6 million, respectively, for the year ended December 31, 2020, of which a significant portion relates to dynamic fixed-fee agreements.

Total fixed-fee royalty revenue and noncurrent patent royalties were $314.6 million and $73.7 million, respectively, for the year ended December 31, 2021, of which a significant portion relates to dynamic fixed-fee agreements.

As disclosed by management, the process for determining the value of the standalone selling prices of identified performance obligations in dynamic fixed-fee license agreements requires the exercise of significant judgment when evaluating the valuation methods and assumptions, including the assumed royalty rates, projected sales volumes, discount rate, identification of comparable market transactions which are not directly observable and other relevant factors.

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Professionals with specialized skill and knowledge were used to assist in the evaluation of the valuation methods and the significant assumption related to the identification of comparable market transactions used to estimate the value of revenue from non-financial sources.

Recognition of Benefit For Uncertain Tax Positions

As described in Notes 2 and 14 to the consolidated financial statements, the Company has recorded $3.8 million of unrecognized tax benefits as of December 31, 2020.

In addition, during the year ended December 31, 2020, a net discrete benefit of $20.9 million was recorded that primarily relates to the expected amendment of a prior year tax return to utilize a tax asset generated in the current year, as well as the reversal of a tax reserve.

The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws.

The financial statement recognition of the benefit for an uncertain tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable tax authority.

If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50 percent likely of being realized upon ultimate settlement.

In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on the Company’s consolidated financial condition or results of operations.

The principal considerations for our determination that performing procedures relating to the recognition of benefit for uncertain tax positions is a critical audit matter are (i) the significant judgment by management in estimating the impact of uncertainties in the application of complex tax laws, including determining whether it is more likely than not that the tax position will be sustained upon audit by the applicable tax authority, based on the technical merits of the position;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence obtained related to the recognition of benefit for uncertain tax positions;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the recognition of benefit for uncertain tax positions, including controls addressing measurement of the unrecognized tax benefits.

These procedures also included, among others, evaluating the significant judgment used by management in applying the more likely than not recognition criteria and in measuring the unrecognized tax benefits.

Professionals with specialized skill and knowledge were used to assist in evaluating the technical merits of positions taken based upon application of the tax law and new information, and recognition of benefit for uncertain tax positions.

/s/ PricewaterhouseCoopers LLP

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DEFERRED TAX ASSETS 98,408 80,380

OTHER NON-CURRENT ASSETS 74,043 76,026

OTHER NON-CURRENT ASSETS, NET 102,501 98,373

577,871 613,726

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CURRENT LIABILITIES:

Current portion of long-term debt $ — $ 94,170

Accounts payable 7,155 10,979

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Deferred revenue 291,673 219,935

Taxes payable 360 51

Dividend payable 10,741 10,786

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Selling, general and administrative 61,217 48,999 51,289

Restructuring activities 27,877 — —

Total Operating expenses 354,203 303,823 281,089

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Income before income taxes 57,556 31,293 25,942

INCOME TAX BENEFIT (PROVISION) 6,648 ( 10,991 ) 27,417

INCOME TAX (PROVISION) BENEFIT ( 15,368 ) 6,648 ( 10,991 )

NET INCOME $ 42,188 $ 37,941 $ 14,951

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Net income $ 42,188 $ 37,941 $ 14,951

Unrealized gain (loss) on investments, net of tax ( 110 ) 2,397 61

Unrealized (loss) gain on investments, net of tax ( 387 ) ( 110 ) 2,397

Comprehensive income $ 41,801 $ 37,831 $ 17,348

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BALANCE, DECEMBER 31, 2018 71,134 $ 711 $ 685,512 $ 1,435,970 $ ( 2,471 ) 37,605 $ ( 1,182,993 ) $ 1,284 $ 938,013

Cumulative effect of change in accounting principle — — — 161,701 ( 449 ) — — — 161,252

Net income attributable to InterDigital, Inc.

— — — 20,928 — — — — 20,928

Distribution preference — — — — — — — ( 2,500 ) ( 2,500 )

Proceeds from and increases in noncontrolling interests — — — — — — — 29,417 29,417

Net loss attributable to noncontrolling interest — — — — — — — ( 5,977 ) ( 5,977 )

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— — 401 ( 44,119 ) — — — — ( 43,718 )

Exercise of Common Stock options and warrants 153 2 6,721 — — — — — 6,723

Exercise of common stock options — — 2 — — — — — 2

Issuance of Common Stock, net 134 1 ( 4,368 ) — — — — — ( 4,367 )

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Repurchase of Common Stock — — — — — 2,962 ( 196,269 ) — ( 196,269 )

Equity component of debt, net of tax — — 56,917 — — — — — 56,917

Net convertible note hedge transactions, net of tax — — ( 49,740 ) — — — — — ( 49,740 )

Net warrant transactions — — 43,416 — — — — — 43,416

Deferred financing costs allocated to equity, net of tax — — ( 1,692 ) — — — — — ( 1,692 )

Reacquisition of equity component of debt due to prepayment, net of tax — — ( 10,649 ) — — — — — ( 10,649 )

BALANCE, DECEMBER 31, 2019 71,268 $ 712 $ 727,402 $ 1,412,779 $ ( 74 ) 40,567 $ ( 1,379,262 ) $ 24,724 $ 786,281

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Net loss attributable to noncontrolling interest — — — — — — — ( 6,860 ) ( 6,860 )

Net change in unrealized gain on short-term investments — — — — 2,397 — — — 2,397

Net change in unrealized loss on short-term investments — — — — ( 110 ) — — — ( 110 )

Dividends declared ($ 1.40 per share)

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Repurchase of common stock — — — — — 6 ( 349 ) — ( 349 )

Equity component of debt, net of tax — — 56,917 — — — — — 56,917

Net convertible note hedge transactions, net of tax — — ( 49,740 ) — — — — — ( 49,740 )

Net warrant transactions — — 43,416 — — — — — 43,416

Deferred financing costs allocated to equity, net of tax — — ( 1,692 ) — — — — — ( 1,692 )

Reacquisition of equity component of debt due to prepayment, net of tax — — ( 10,649 ) — — — — — ( 10,649 )

BALANCE, DECEMBER 31, 2020 71,389 $ 714 $ 738,481 $ 1,413,969 $ ( 184 ) 40,573 $ ( 1,379,611 ) $ 23,197 $ 796,566

Adjustment related to the adoption of ASU 2020-06 — — ( 55,349 ) 15,587 — — — — ( 39,762 )

Net income attributable to InterDigital, Inc.

— — — 55,295 — — — — 55,295

Proceeds from and increases in noncontrolling interests — — — — — — — 5,333 5,333

Net loss attributable to noncontrolling interest — — — — — — — ( 13,107 ) ( 13,107 )

Proceeds from and increases in noncontrolling interests — — — — — — — 100 100

Noncontrolling interest distribution — — — — — — — ( 2,512 ) ( 2,512 )

Net change in unrealized loss on short-term investments — — — — ( 387 ) — — — ( 387 )

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Loss on disposal of assets — 7,539 119

Impairment of patents 13,228 — —

Other — 412 623

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Deferred charges and other assets ( 9,894 ) ( 26,256 ) ( 27,206 )

Increase (decrease) in liabilities:

(Decrease) increase in liabilities:

Accounts payable ( 1,803 ) ( 2,850 ) ( 638 )

Accrued compensation and other expenses 20,000 14,124 8,242

Accrued taxes payable and other tax contingencies 309 ( 1,457 ) ( 4,718 )

Net cash provided by operating activities 130,392 163,467 89,433

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Acquisition of patents ( 2,350 ) — —

Acquisition of business, net of cash acquired — — ( 142,985 )

Proceeds from sale of business — 910 10,000

Long-term investments 1,363 4,285 ( 350 )

Net cash (used in) provided by investing activities ( 310,046 ) 268,256 69,984

Net cash provided by (used in) investing activities 179,639 ( 310,046 ) 268,256

CASH FLOWS FROM FINANCING ACTIVITIES:

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Proceeds from noncontrolling interests 100 5,333 15,666

Non-controlling interest distribution ( 2,512 ) — —

Dividends paid ( 43,058 ) ( 43,072 ) ( 44,580 )

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The potential impact of COVID-19 will continue to be analyzed going forward.

Prior Periods' Financial Statement Revision

During 2021, we determined that we had incorrectly classified $ 24.3 million of tax receivables as other current assets, whereas we should have reflected these as other non-current assets within the December 31, 2020 consolidated balance sheet.

Although we concluded that such misclassification did not materially misstate the previously issued financial statements, we have corrected the classification by revising the accompanying 2020 balance sheet and footnotes.

Reclassifications

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Non-cash acquisition of patents — 33,300 22,500

Right-of-use assets obtained in exchange of operating lease liabilities (a)

739 2,524 14,427

Accrued capitalized patent costs and property and equipment 2,021 ( 436 ) 1,619

_____________

Effective January 1, 2019, we adopted ASU 2016-02, "Leases (Topic 842)", which outlines a comprehensive change to the lease accounting model.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING GUIDANCE

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Certain subsidiaries have monetary assets and liabilities that are denominated in a currency that is different than the functional currency.

The gains and losses resulting from this remeasurement and translation of monetary assets denominated in a currency that is different than the functional currency are reflected in the determination of net income (loss).

Cash, Cash Equivalents, Restricted Cash and Marketable Securities

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As of December 31, 2021 and 2020, the majority of our marketable securities have been classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported net-of-tax as a separate component of shareholders’ equity.

Substantially all of our investments are investment grade government and corporate debt securities that have maturities of less than 2 years, and we have both the ability and intent to hold the investments until maturity.

Substantially all of our investments are investment grade government and corporate debt securities that have maturities of less than two years , and we have both the ability and intent to hold the investments until maturity.

Other-than-Temporary Impairments

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If the carrying value of a reporting unit exceeds the reporting unit’s fair value, a goodwill impairment charge will be recorded for the difference up to the carrying value of goodwill.

The Company acquired goodwill from our acquisition of the patent licensing business of Technicolor (the "Technicolor Patent Acquisition") in 2018 and from our acquisition of Hillcrest Laboratories, Inc.

(the "Hillcrest product business") in 2016.

Refer to Note 5, " Business Combinations and Other Transactions ," for more information regarding these transactions.

The carrying value of goodwill as of December 31, 2020 and 2019 was $ 22.4 million, respectively, which was included within " Other Non-Current Assets " in the consolidated balance sheets.

The carrying value of goodwill was $ 22.4 million as of December 31, 2021 and December 31, 2020, which was included within " Other non-current assets, net " in the consolidated balance sheets.

No impairments were recorded during 2021, 2020 or 2019 as a result of our annual goodwill impairment assessment.

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Property and Equipment

Property and equipment are stated at cost.

Property and equipment are stated at cost, less depreciation, amortization and impairments.

Depreciation and amortization of property and equipment are provided using the straight-line method.

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Upon the retirement or disposition of property, plant and equipment, the related cost and accumulated depreciation or amortization are removed, and a gain or loss is recorded.

In February 2016, the FASB issued ASC 842, which outlines a comprehensive change to the lease accounting model ("ASC840").

The Company adopted ASC 842 on January 1, 2019 using the modified retrospective transition effective date method.

We determine if an arrangement is a lease at inception.

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When factors indicate that such assets should be evaluated for possible impairment, we review whether we will be able to realize our long-lived assets by analyzing the projected undiscounted cash flows in measuring whether the asset is recoverable.

We did not have any long-lived asset impairments in 2020, 2019 or 2018.

In 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patents, which resulted in the Company recognizing a $ 13.2 million impairment, as discussed further in Note 20, " Restructuring Activities".

In 2020, we recognized a $ 1.1 million impairment, comprised of $ 0.8 million of Property, Plant, and Equipment, and $ 0.3 million of Operating lease right-of-use asset related to the abandonment of one of our leased properties, which was included within “ Operating Expense ” in the consolidated statement of income.

We did not have any long-lived asset impairments in 2019 .

Revenue Recognition

We adopted ASU No.

2014-09, "Revenue from Contracts with Customers" (ASC 606) effective January 1, 2018.

The disclosure below is a description of our revenue recognition accounting policies which were in effect beginning January 1, 2018 under ASC 606.

We derive the vast majority of our revenue from patent licensing.

The timing and amount of revenue recognized from each licensee depends upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations.

The timing and amount of revenue recognized from each licensee depend upon a variety of factors, including the specific terms of each agreement and the nature of the deliverables and obligations.

Such agreements are often complex and include multiple performance obligations.

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We typically receive these royalty reports subsequent to the period in which our licensees’ underlying sales occurred.

As a result, we are required to estimate revenues, subject to the constraint on our ability to estimate such amounts.

As a result, we are required to estimate revenues, subject to the constraint on our ability to estimate such amounts and will record a true-up when we receive the actual royalty report from the licensee.

Estimating licensees’ quarterly royalties prior to receiving the royalty reports requires us to make assumptions and judgments related to forecasted trends and growth rates used to estimate our licensees’ sales, which could have an impact on the amount of revenue we report on a quarterly basis.

Technology Solutions

Technology solutions revenue consists of revenue from royalty payments, software licenses, engineering services and product sales.

Technology solutions revenue consists primarily of revenue from royalty payments, software licenses, and engineering services.

The nature of these contracts and timing of payments vary.

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Accounts receivable is presented net of allowance for doubtful accounts.

Our accounts receivable consists mainly of trade receivables derived from fixed-fee license arrangements, with contractual payment terms and the remaining material amounts of revenue are from variable patent license agreements, with quarterly payments.

Our accounts receivable consists mainly of trade receivables derived from fixed-fee license arrangements with contractual payment terms.

The remaining material amounts of our accounts receivable are from variable patent license agreements, which primarily are paid on a quarterly basis.

The provision for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of the financial asset, based on historical experience, current conditions and reasonable forecasts of future economic conditions.

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When there are a series of operating losses by the investee or when other factors indicate that a decrease in value of the investment has occurred which is other than temporary, we recognize an impairment equal to the difference between the fair value and the carrying amount of our investment.

The carrying value of our investments in other entities are included within " Other Non-Current Assets " on our consolidated balance sheets.

The carrying value of our investments in other entities is included within " Other non-current assets, net " on our consolidated balance sheets.

During 2021, 2020 and 2019, we made investments in other entities of $ 1.1 million, $ 0.2 million and $ 0.4 million, respectively.

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We use a variety of compensation programs to attract, retain and motivate our employees, and to align employee compensation more closely with company performance.

These programs include, but are not limited to, short-term incentives tied to performance goals, cash awards to inventors for filed patent applications and patent issuances, and long-term incentives in the form of stock option awards, time-based restricted stock unit (“RSU”) awards, performance-based awards and cash awards, noting equity awards are granted pursuant to the terms and conditions of our Equity Plans (as defined in Note 13, " Compensation Plans and Programs ").

These programs include, but are not limited to, short-term incentives tied to performance goals, cash awards to inventors for filed patent applications and patent issuances, and long-term incentives in the form of stock option awards, time-based restricted stock unit (“RSU”) awards, performance-based RSU awards and cash awards, noting equity awards are granted pursuant to the terms and conditions of our Equity Plans (as defined in Note 12, " Compensation Plans and Programs ").

Our long-term incentives, including equity awards, typically include annual equity and cash award grants with three to five year vesting periods;

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The expected life of our stock option awards is based on the simplified method as prescribed by Staff Accounting Bulletin Topic 14.

In all periods, our policy has been to set the value of RSUs and restricted stock awards equal to the value of our underlying common stock on the date of measurement.

In all periods, our policy has been to set the value of RSUs awards equal to the value of our underlying common stock on the date of measurement.

For grants with graded vesting, we amortize the associated unrecognized compensation cost using an accelerated method.

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Tax windfalls related to share-based compensation for the years ended 2021, 2020 and 2019 were $ 0.8 million, $ 0.2 million and $ 0.2 million, respectively.

Restructuring

Restructuring activities include, but are not limited to, costs associated with termination benefits such as severance costs and retention bonuses, contract termination costs, and other costs associated with an exit or disposal activity.

The termination benefits included within restructuring activities are recognized in accordance with either ASC 420, Exit or Disposal Cost Obligations ("ASC 420") or ASC 712, Compensation – Nonretirement Postemployment Benefits ("ASC 712"), as applicable.

Liabilities are recognized in accordance with ASC 420 when management commits to a plan of termination, the employees to be terminated are identified, the terms of the benefit arrangement are established, it was determined that either changes to the plan or withdrawal are unlikely, and the arrangements were communicated to employees.

Liabilities that fall under ASC 712 are recognized when the liability was determined to be probable of being paid and reasonably estimable.

The current liabilities are recorded within " Other accrued expenses " and long-term liabilities are included in " Other long-term liabilities " in the consolidated balance sheets.

The restructuring expenses are included in " Restructuring activities " in the consolidated statements of income.

Income taxes are accounted for under the asset and liability method.

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Accounting Standards Update:

Financial Instruments - Credit Losses

In June 2016, the FASB issued ASU No.

2016-13, "Financial Instruments - Credit Losses".

This ASU introduces a new accounting model for recognizing credit losses on certain financial instruments and financial assets, including trade receivables, based upon an estimate of current expected credit losses, otherwise known as CECL.

The new guidance requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset, based not only on historical experience and current conditions, but also on reasonable forecasts.

Additionally, ASU No.

2016-13 made several changes to the available-for-sale impairment model.

The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

We adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Update:

Cloud Computing Arrangements

In August 2018, the FASB issued ASU No.

2018-15 “Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract”.

The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted.

We adopted this guidance on a prospective basis as of January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Update:

Collaborative Arrangements

In November 2018, the FASB issued ASU No.

2018-18, "Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606".

The amendments in this ASU provide guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted for entities who have previously adopted the new revenue recognition guidance.

We adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Update:

Simplifying the Accounting for Income Taxes

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ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 with early adoption allowed.

We have determined that the adoption will not have a material impact on our consolidated financial statements.

We adopted this guidance as of January 1, 2021, and the adoption did not have a material impact on our consolidated financial statements.

Accounting Standards Update:

Simplifying the Accounting for Convertible Debt Instruments

Simplifying the Accounting for Convertible Instruments

In August 2020, the FASB issued ASU No.

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ASU 2020-06 also amends certain guidance in ASC 260 on the computation of earnings per share for convertible instruments and contracts on an entity’s own equity.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption permitted for fiscal years beginning after December 15, 2020.

This update permits the use of either the modified retrospective or fully retrospective methods of transition.

We will elect to early adopt this standard on a modified retrospective approach as of January 1, 2021.

We expect this adoption to increase Long-term debt $ 50.2 million at January 1, 2021, which is comprised of $ 51.6 million of unamortized interest discount and the $ 1.9 million equity component of the deferred financing costs, net catch up amortization of $ 0.5 million, due to the new standard no longer requires bifurcation of the embedded conversion feature from the host contract.

We also expect this adoption to reduce non-cash interest expense starting in 2021 due to the removal of the accretion of the debt discount.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption was permitted for fiscal years beginning after December 15, 2020.

The ASU permits the use of either the modified retrospective or fully retrospective methods of transition.

We elected to early adopt this standard on a modified retrospective approach as of January 1, 2021, which resulted in a $ 10.4 million, $ 50.2 million and $ 15.6 million increase to net deferred tax assets, long-term debt and retained earnings, respectively, and a $ 55.4 million decrease to additional paid-in capital.

This $ 50.2 million increase to long-term debt, net was comprised of $ 51.6 million of unamortized interest discount partially offset by a net increase of $ 1.4 million in unamortized debt issuance costs following the reversal of the initially established equity component of deferred financing costs.

This was due to the standard no longer requiring bifurcation of the embedded conversion feature from the host contract on the 2024 Notes, as defined in Note 9, " Obligations ".

This adoption also reduced non-cash interest expense starting in 2021 due to the removal of the accretion of the debt discount on the 2024 Notes.

In addition, the adoption requires the use of the if-converted method of calculating diluted earnings per share rather than the treasury stock method for convertible instruments and requires the inclusion of the potential effect of shares settled in cash or shares in the diluted earnings per share calculation.

Due to the reduction in non-cash interest expense, this adoption increased basic and diluted earnings per share by $ 0.35 and $ 0.34 , respectively, in the year ended December 31, 2021.

During fourth quarter 2021, we determined that in our early adoption of this accounting standard, 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.

We have concluded that this error did not result in our previously issued 2021 interim financial statements being materially misstated.

We will, however, correct the error by prospectively revising our previously issued financial statements as of and for the periods ended March 31, 2021, June 30, 2021 and September 30, 2021 in connection with our 2022 quarterly filings on Form 10-Q.

The accompanying annual financial statements reflect the correct accounting for the adoption of this standard.

Accounting Standards Update:

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options

In May 2021, the FASB issued ASU No.

The amendments in this ASU are intended 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 have determined that the adoption will not have a material impact on our consolidated financial statements.

REVENUE RECOGNITION

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Recurring revenues are comprised of current patent royalties, inclusive of Dynamic Fixed-Fee Agreement royalties, and current technology solutions revenue.

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

Non-recurring revenues are comprised of non-current patent royalties, which includes past patent royalties and royalties from static agreements, as well as patent sales.

During the year ended December 31, 2021, we recognized $ 219.7 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of December 31, 2020, we had contract assets of $ 9.7 million and $ 8.9 million included within " Accounts receivable " and " Other non-current assets " in the consolidated balance sheet, respectively.

As of December 31, 2019, we had contract assets of $ 16.2 million and $ 10.2 million included within " Accounts receivable " and " Other non-current assets " in the consolidated balance sheet, respectively.

As of December 31, 2021, we had contract assets of $ 18.9 million and $ 8.3 million included within " Accounts receivable, net " and " Other non-current assets, net " in the consolidated balance sheet, respectively.

As of December 31, 2020, we had contract assets of $ 9.7 million and $ 8.9 million included within " Accounts receivable, net " and " Other non-current assets, net " in the consolidated balance sheet, respectively.

Contracted Revenue

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United States $ 169,044 $ 128,238 $ 139,162

South Korea 111,634 113,189 112,291

China 118,197 63,172 11,103

South Korea 86,677 111,634 113,189

Japan 24,689 23,694 35,614

Taiwan 11,040 10,059 938

France 7,773 5,895 277

Sweden 7,573 6,934 6,933

Other Europe 6,848 5,810 5,116

Europe 15,762 22,194 18,639

Other Asia — — 279

Finland — — 10,000

Total $ 358,991 $ 318,924 $ 307,404

Total revenue $ 425,409 $ 358,991 $ 318,924

During 2021, 2020 and 2019, the following licensees or customers accounted for 10% or more of total revenues:

2021 2020 2019

Apple 31 % 35 % 36 %

Samsung 22 % 25 % 25 %

Huawei 15 % — % — %

LG < 10 % 10 % 10 %

As of December 31, 2020, 2019 and 2018, we held $ 435.0 million, $ 446.6 million and $ 464.6 million of our property, equipment and patents, net of accumulated depreciation and amortization, respectively, of which greater than 95 % of the total was within the United States in each of the years presented.

As of December 31, 2020, we held $ 23.1 million of property, equipment and patents, net of accumulated depreciation and amortization, collectively, in Canada, and Europe.

BUSINESS COMBINATIONS AND OTHER TRANSACTIONS

Acquisition of Technicolor's Patent Licensing Business

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, which we refer to as the Technicolor Patent Acquisition.

The Technicolor Patent Acquisition included the acquisition by InterDigital of approximately 18,000 patents and applications, across a broad range of technologies, including approximately 3,000 worldwide video coding patents and applications.

The acquisition of Technicolor’s portfolio greatly expanded InterDigital’s technology footprint in the mobile industry, and opens new markets in consumer home electronics, display technology and video.

Under the terms of the original agreement, the portfolio was to be supplemented by a jointly funded R&D collaboration.

This jointly funded R&D collaboration was terminated in conjunction with the acquisition of Technicolor's Research & Innovation unit (the "R&I Acquisition"), which is discussed below.

Members of Technicolor’s licensing, legal and other support teams in offices in Rennes and Paris, France;

Princeton, New Jersey, USA;

and other locations joined InterDigital’s team of more than 300 R&D and other staff in locations around the world.

In addition, we have assumed Technicolor’s rights and obligations under a joint licensing program with Sony Corporation (“Sony”) relating to digital televisions and standalone computer display monitors (the “Madison Arrangement”), including Technicolor's role as sole licensing agent for the Madison Arrangement.

We account for our assumption of Technicolor’s rights and obligations under the Madison Arrangement as a collaborative arrangement.

As part of this transaction, we also granted back to Technicolor a perpetual license for patents acquired in the transaction.

The Technicolor Patent Acquisition met the definition of a business combination and, as such, was accounted for using the acquisition method of accounting.

Under the terms of the agreement, in third quarter 2018, we paid Technicolor $ 158.9 million in cash, inclusive of $ 15.9 million of cash acquired, yielding net cash consideration of $ 143.0 million.

We funded this payment with cash on hand.

Under the terms of the original agreement, Technicolor was to receive 42.5 % of all of InterDigital's future cash receipts (net of estimated operating expenses) from InterDigital’s new licensing efforts in the consumer electronics field;

there was no revenue sharing associated with InterDigital’s mobile industry licensing efforts.

As such, we accounted for the portion of the future cash receipts owed to Technicolor relating to patents existing as of the date of the acquisition as a contingent consideration liability, which was valued at $ 18.6 million as of the acquisition date.

This revenue-sharing arrangement and associated contingent consideration liability were modified in conjunction with the R&I Acquisition, which closed during second quarter 2019.

Refer to the discussion below.

Additionally, as of the acquisition date, we estimated we would receive payments totaling $ 20.2 million relating to the transaction from Technicolor.

We allocated the fair value of consideration transferred to identifiable assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date.

We recorded the excess of the fair value of consideration transferred over the net values of these assets and liabilities as goodwill.

We estimated the fair value of the intangible assets in this transaction through a combination of a discounted cash flow analysis (the income approach) and an analysis of comparable market transactions (the market approach).

For the income approach, we based the inputs and assumptions used to develop these estimates on a market participant perspective and included estimates of projected revenues, discount rates, economic lives and income tax rates, among others, and all of these estimates require significant management judgment.

For the market approach, we applied judgment to identify the most comparable market transactions to this transaction.

Refer to Note 7, " Concentration of Credit Risk and Fair Value of Financial Assets and Financial Liabilities" , for discussion regarding the valuation methodologies used for the contingent consideration liability.

The following table summarizes the fair value of consideration transferred and our allocation of that consideration based on the fair values of the assets acquired and liabilities assumed as of the date of acquisition (in thousands):

July 30, 2018

Cash $ 158,898

Contingent consideration liability 18,616

Transaction-related receivable ( 20,200 )

Net fair value of consideration transferred $ 157,314

Estimated useful life (Years)

Net tangible assets and liabilities:

Restricted cash $ 15,913

Other current assets 5,600

Other non-current assets 3,116

Current liabilities ( 6,219 )

Long-term debt ( 17,717 )

Other long-term liabilities ( 3,767 )

Total net tangible assets and liabilities $ ( 3,074 )

Identified intangible assets:

Patents $ 154,000 9 - 10

Total identified intangible assets $ 160,388

Total fair value of consideration transferred $ 157,314

(1) Goodwill consists of expected synergies resulting from the combination of our and Technicolor’s patent licensing businesses in the increasingly complementary areas of mobile and video technology.

We expect almost all of the goodwill resulting from the Technicolor Patent Acquisition will be deductible for income tax purposes.

The amount of revenue and earnings that would have been included in the Company’s consolidated statements of income for the years ended December 31, 2018 had the acquisition date been January 1, 2018 are reflected in the table below.

These amounts have been calculated after applying the Company's accounting policies and adjusting the results to reflect additional interest expense as well as amortization that would have been charged assuming the fair value adjustments to amortizable intangible assets had been recorded as of January 1, 2018.

In addition, pro forma adjustments have been made to reflect the impact of the transaction-related costs discussed below.

These unaudited pro forma combined results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the date indicated, or that may result in the future.

The amounts in the table are unaudited (in thousands, except per share data):

For the Year Ended December 31,

Actual revenue $ 307,404

Supplemental pro forma revenue $ 314,096

Actual earnings $ 65,031

Supplemental pro forma earnings $ 52,754

Actual diluted earnings per share $ 1.84

Supplemental pro forma diluted earnings per share $ 1.49

Acquisition of Technicolor's Research & Innovation Unit

On May 31, 2019, we completed the acquisition of the Research & Innovation unit of Technicolor, which we refer to as the R&I Acquisition.

The R&I Acquisition expanded the Company’s research capabilities in video coding, Internet of Things (IoT) and smart home, imaging sciences, augmented reality and virtual reality, and artificial intelligence and machine learning technologies.

The Technicolor R&I unit was the driving creative force behind the patent portfolio that was acquired in the Technicolor Patent Acquisition discussed above.

The R&I Acquisition unit met the definition of an asset acquisition and was accounted for using the cost accumulation and allocation model.

There was no cash consideration for the R&I Acquisition.

As consideration for the R&I Acquisition, the jointly funded R&D collaboration that was entered into as part of the Technicolor Patent Acquisition was terminated.

Technicolor will continue to fund research to be performed by the R&I unit for certain limited projects for a specified time period, subject to renewal.

The Company also assumed certain employee-related liabilities, including obligations for certain defined benefit post-retirement plans for the acquired R&I unit employees, which are further discussed below.

Additionally, Technicolor agreed to reduce its rights under the revenue-sharing arrangement entered into as part of the Technicolor Patent Acquisition, as further discussed below.

The R&I Acquisition resulted in a net gain of approximately $ 14.2 million, inclusive of the $ 20.5 million gain from the derecognition of the contingent consideration liability described below, all of which is included within “ Other Income, Net ” in the consolidated statement of income for the year ended December 31, 2019.

Contingent Consideration

As discussed above, in conjunction with the initial Technicolor Patent Acquisition, Technicolor was to receive 42.5 % of all of InterDigital's future cash receipts (net of estimated operating expenses) from InterDigital's new licensing efforts in the consumer electronics field;

there was no revenue sharing associated with InterDigital’s mobile industry licensing efforts.

The portion of the future cash receipts relating to patents existing as of the date of the acquisition was originally accounted for as a contingent consideration liability in accordance with ASC 805-30-25, Business Combinations - Contingent Consideration.

There are no minimum or maximum payments under the revenue sharing arrangement, and, except in certain circumstances, the arrangement continues through December 31, 2038.

The estimated acquisition date fair value of the contingent consideration liability of $ 18.6 million was determined utilizing a Monte Carlo simulation model.

This initial fair value measurement was based on the perspective of a market participant and included significant unobservable inputs that are classified as Level 3 inputs within the fair value hierarchy and are discussed further within Note 7, " Concentration of Credit Risk and Fair Value of Financial Assets and Financial Liabilities" .

As a result of the R&I Acquisition in second quarter 2019, u nder the amended revenue-sharing arrangement described above, Technicolor will now receive 42.5 % of future cash receipts from new licensing efforts from the Madison Arrangement only, subject to certain conditions and hurdles, but will no longer receive revenue-sharing from other licensing efforts in the consumer electronics field outside of the Madison Arrangement.

We determined that the initial contingent consideration liability from the Technicolor Patent Acquisition was significantly modified in conjunction with the R&I Acquisition, and, as such, the contingent consideration liability will now be accounted for under ASC 450 - Contingencies under the asset acquisition framework when the liability is deemed probable and estimable.

Since the contingent consideration liability arising from the amended revenue-sharing arrangement was not probable and estimable as of the R&I Acquisition date, the carrying value of the previous contingent consideration liability was derecognized, which resulted in a $ 20.5 million gain during the year ended December 31, 2019 and is included within " Other Income, Net" in the consolidated statement of income for the period.

As of December 31, 2020 and 2019, the contingent consideration liability from the amended revenue-sharing arrangement was deemed not probable and estimable and is therefore not reflected within the consolidated financial statements.

Defined Benefit Plans

In connection with the Technicolor Patent Acquisition and the R&I Acquisition, we assumed certain defined benefit plans which are accounted for in accordance with ASC 715 - Compensation - Retirement Benefits .

These plans include a retirement lump sum indemnity plan and jubilee plan, both of which provide benefit payments to employees based upon years of service and compensation levels.

As of December 31, 2020 and 2019, the combined accumulated projected benefit obligation related to these plans totaled $ 7.6 million and $ 6.2 million, respectively.

Service cost and interest cost for the combined plans totaled $ 0.6 million, $ 0.1 million and $ 0.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The weighted average discount rate and assumed salary increase rate for these plans were 0.44 % and 3.0 %, respectively.

These plans are not required to be funded and were not funded as of December 31, 2020.

Expected future benefit payments under these plans as of December 31, 2020 were as follows (in thousands):

Thereafter 2,699

Madison Arrangement

As discussed above, in conjunction with the Technicolor Patent Acquisition, effective July 30, 2018, we assumed Technicolor’s rights and obligations under the Madison Arrangement, which commenced in 2015.

The Madison Arrangement falls under the scope of ASC 808, Collaborative Arrangements.

Under the Madison Arrangement, Technicolor and Sony combined portions of their respective digital TV (“DTV”) and computer display monitor (“CDM”) patent portfolios and created a combined licensing opportunity to DTV and CDM manufacturers.

Per an Agency and Management Services Agreement (“AMSA”) entered into upon the creation of the Madison Arrangement, Technicolor was initially appointed as sole licensing agent of the arrangement, and InterDigital has now assumed that role.

As licensing agent, we are responsible for making decisions regarding the prosecution and maintenance of the combined patent portfolio and the licensing and enforcement of the combined patent portfolio in the field of use of DTVs and CDMs on an exclusive basis during the term of the AMSA in exchange for an agent fee.

We were deemed to be the principal in this collaborative arrangement under ASC 808, and, as such, in accordance with ASC 606-10-55-36, Revenue From Contracts with Customers - Principal Agent Considerations , we record revenues generated on sales to third parties and costs incurred on a gross basis in the consolidated statements of income.

Therefore, we recognize all royalties from customers as revenue and payments to Sony for its royalty share as operating expenses within the consolidated statements of income.

Cost reimbursements for expenses incurred resulting from fulfilling the duties of the licensing agent are recorded as contra expenses.

During the year ended December 31, 2020 and 2019, gross revenues recorded related to the Madison Arrangement were $ 5.5 million and $ 13.5 million, respectively, and are reflected within " Patent licensing royalties " in the consolidated statement of income.

Net operating expenses related to the Madison Arrangement during the year ended December 31, 2020, 2019, and 2018 were approximately $ 8.4 million, $ 12.0 million and $ 2.8 million, including $ 2.5 million, $ 6.3 million, and $ 0.0 million related to revenue sharing, respectively, and are reflected primarily within " Patent administration and licensing " expenses in the consolidated statement of income.

Long-term debt

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 met 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 consolidated balance sheet.

This initial fair value measurement was based on the perspective of a market participant and includes 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 December 31, 2020 is disclosed within Note 7, " Concentration of Credit Risk and Fair Value of Financial Assets and Financial Liabilities" .

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.

Under ASC 470, amounts recorded as debt shall be 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 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 year ended December 31, 2020 and 2019, we recognized $ 3.1 million and $ 2.7 million of interest expense related to this debt which is included within “ Interest expense ” in the 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.

Restricted cash

Under the Madison Arrangement, the parties reserve cash in bank accounts to fund our activities to manage the portfolios.

These accounts are custodial accounts for which the funds are restricted for this purpose.

As of December 31, 2020 and 2019, the Company had $ 3.1 million and $ 9.5 million of restricted cash included within the consolidated balance sheet attributable to the Madison Arrangement.

Refer to Note 6, " Cash, Cash Equivalents, Restricted Cash and Marketable Securities", for a reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets.

To receive consent from both Sony and CPPIB Credit to assume the rights and responsibilities of Technicolor under the Madison Arrangement, we committed to contributing cash to fund shortfalls in the Madison Arrangement, up to a maximum of $ 25.0 million.

This commitment expired as of December 31, 2020 and we did not contribute any shortfall funding.

Transaction Costs

Transaction and integration related costs related to the above transactions for the years ended December 31, 2020, 2019 and 2018 were $ 2.3 million, $ 8.4 million and $ 17.8 million, respectively.

The majority of these costs were recorded within “ Patent administration and licensing ” and “ Selling, general and administrative ” expenses in the consolidated statements of income.

Hillcrest Product Business

On December 20, 2016, we acquired Hillcrest Laboratories, Inc.

("Hillcrest"), a pioneer in sensor processing technology, for approximately $ 48.0 million in cash, net of $ 0.4 million cash acquired.

The business combination transaction was accounted for using the acquisition method of accounting.

On July 19, 2019, we completed the sale of Hillcrest's product business to a subsidiary of CEVA, Inc.

In connection with the sale, we received initial proceeds of $ 10.0 million, with a customary portion of the purchase price placed in escrow to secure potential indemnification claims.

As part of the transaction, we retained substantially all of the Hillcrest patent assets that we acquired in 2016.

As a result of this transaction, we recorded an $ 8.5 million gain on sale which is included within " Other Income, Net " in the consolidated statements of income for the year ended December 31, 2019.

Customer A 28 % 31 % 35 %

Customer B 18 % 22 % 25 %

Customer C 14 % — % — %

Customer D 10 % 15 % — %

Customer E < 10 % < 10 % 10 %

As of December 31, 2021, and 2020, we held $ 377.0 million and $ 435.0 million of our property, equipment and patents, net of accumulated depreciation and amortization, respectively, of which greater than 90 % of the total was within the United States in each of the years presented.

As of December 31, 2021 and 2020, we held $ 25.9 million and $ 23.1 million of property, equipment and patents, net of accumulated depreciation and amortization, collectively, in Canada and Europe.

CASH, CASH EQUIVALENTS, RESTRICTED CASH AND MARKETABLE SECURITIES

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Marketable Securities

As of December 31, 2020 and 2019, the majority of our marketable securities have been classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported net-of-tax as a separate component of shareholders’ equity.

Substantially all of our investments are investment-grade government and corporate debt securities that have maturities of less than 2 years, and we have both the ability and intent to hold the investments until maturity.

As of December 31, 2021 and 2020, the majority of our marketable securities are classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported net-of-tax as a separate component of shareholders’ equity.

Substantially all of our investments are investment-grade government and corporate debt securities that have maturities of less than two years , and we have both the ability and intent to hold the investments until maturity.

We recorded no other-than-temporary impairments during 2021, 2020 or 2019.

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Available-for-sale securities

Commercial paper $ 285,244 $ 5 $ ( 7 ) $ 285,242

government securities 166,195 44 ( 16 ) $ 166,223

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Our accounts receivable are derived principally from patent license and technology solutions agreements.

As of December 31, 2020 and 2019, five and seven licensees comprised 53 % and 73 %, respectively, of our accounts receivable balance.

As of December 31, 2021, four licensees comprised 66 %, and as of December 31, 2020 five licensees comprised 53 %, of our accounts receivable balance.

We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers.

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$ 397,522 $ — $ — $ 397,522

Commercial paper (b) — 285,242 — 285,242

government securities — 166,223 — 166,223

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(a) Included within cash and cash equivalents.

(b) As of December 31, 2020, $ 80.1 million of commercial paper was included within cash and cash equivalents.

(b) As of December 31, 2021 and 2020, $ 7.5 million and $ 80.1 million of commercial paper was included within cash and cash equivalents, respectively.

Level 3 Fair Value Measurements

Contingent Consideration

As discussed further in Note 5, " Business Combinations and Other Transactions ," we completed the Technicolor Patent Acquisition during third quarter 2018.

In conjunction with the Technicolor Patent Acquisition, we initially recognized a contingent consideration liability which was measured at fair value on a recurring basis using significant unobservable inputs classified as Level 3 measurements within the fair value hierarchy.

We utilized a Monte Carlo simulation model to determine the estimated fair value of the contingent consideration liability through first quarter 2019.

A Monte Carlo simulation uses random numbers together with volatility assumptions to generate individual paths, or trials, for variables of interest governed by a Geometric Brownian Motion in a risk-neutral framework.

During second quarter 2019, we completed the R&I Acquisition.

The transaction met the definition of an asset acquisition and was accounted for using the cost accumulation and allocation model.

As discussed in Note 5, " Business Combinations and Other Transactions ," as part of this acquisition, Technicolor reduced its rights to the revenue-sharing arrangement that created the initial contingent consideration liability from the Technicolor Patent Acquisition.

As part of this acquisition, Technicolor reduced its rights to the revenue-sharing arrangement that created the initial contingent consideration liability from the Technicolor Patent Acquisition.

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Technicolor Patent Acquisition Long-term Debt

As more fully disclosed in Note 5, " Business Combinations and Other Transactions ," we recognized long-term debt in conjunction with the Technicolor Patent Acquisition.

As more fully disclosed in Note 9, " Obligations ," we recognized long-term debt in conjunction with the Technicolor Patent Acquisition.

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported in the consolidated balance sheet as of December 31, 2021 and December 31, 2020 was as follows (in thousands).

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Any adjustments to the carrying value of those investments are considered non-recurring fair value measurements.

During year ended 2020, we recognized $ 5.6 million of unrealized gains resulting from observable price changes in orderly transactions of our long-term strategic investments, which was included within “ Other Income, Net ” in the consolidated statement of income.

During year ended December 31, 2021 and 2020, we recognized $ 7.6 million and $ 5.6 million, respectively, of gains resulting from observable price changes of our long-term strategic investments, which was included within “ Other income, net ” in the consolidated statement of income.

During the year ended December 31, 2019, we recognized a net loss of $ 2.6 million resulting from the partial impairment of one of our strategic investments partially offset by a gain on sale of a separate strategic investment, which is included within " Other income, net " in the consolidated statement of income.

During the year ended December 31, 2018, we recognized an aggregate $ 8.4 million loss resulting from the sale of our entire ownership interest in one of our strategic investments and the impairment of a separate strategic investment.

Certain of our investments in other entities may be seeking additional financing in the next twelve months or potential exit strategies.

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During 2020, we recognized a $ 1.1 million impairment, comprised of $ 0.8 million of Property, Plant, and Equipment, and $ 0.3 million of Operating lease right-of-use asset related to the abandonment of one of our leased properties, which was included within “ Operating Expense ” in the consolidated statement of income.

During 2020, we entered into a multi-year, worldwide, non-exclusive, royalty-bearing patent license with Huawei Investment & Holding Co., Ltd.

During 2021, we recognized a $ 13.2 million impairment, resulting from our restructuring activities as described in Note 20, " Restructuring Activities ", which was included within “Restructuring activities” expenses in the consolidated statement of income.

The Patents held for sale are recorded at fair value on December 31, 2021 and are included within " Prepaid and other current assets " in the consolidated balance sheet.

Also during 2021, we renewed our multi-year, worldwide, non-exclusive patent license agreement with Sony.

A portion of the future consideration for the agreement was in the form of patents.

We have yet to record these patents on our balance sheet as of December 31, 2021 as they have not yet been transferred.

However, we have determined the estimated 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 approach.

The value will be amortized as a non-cash expense over the patents' estimated useful lives once transferred.

During 2020, we entered into a patent license agreement with Huawei and a portion of the future consideration for the agreement was in the form of patents.

We have determined the estimated fair value of the patents for determining the transaction price for revenue recognition purposes, which was estimated to be $ 19.3 million utilizing the market approach.

The value is amortized as a non-cash expense over the patents' estimated useful lives.

Additionally, as previously disclosed, during 2019 and 2018, we entered into patent license agreements with ZTE and Sony, respectively, for which a portion of the consideration was patents.

The estimated fair value of the ZTE patents was $ 14.0 million, and the estimated fair value of the Sony patents was $ 22.5 million, which are being amortized as a non-cash expense over their estimated useful lives.

We estimated the fair value of the patents in the ZTE and Sony transactions utilizing the market approach, and the cost approach, respectively.

During 2019 we entered into patent license agreements with ZTE for which a portion of the consideration was patents.

The estimated fair value of the ZTE patents was $ 14.0 million which are being amortized as a non-cash expense over their estimated useful lives.

We estimated the fair value of the patents in the ZTE transaction utilizing the market approach.

As noted above, we estimated the fair value of the patents in these transactions using one of, or a combination of, an analysis of comparable market transactions (the market approach), a discounted cash flow analysis (the income approach) and/or by quantifying the amount of money required to replace the future service capability of the assets (the cost approach).

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The estimated aggregate amortization expense for the next five years related to our patents balance as of December 31, 2021 is as follows (in thousands):

2022 $ 69,436

The following table shows the change in the carrying amount of our goodwill balance from December 31, 2019 to December 31, 2021, all of which is allocated to our one reportable segment (in thousands):

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Goodwill balance as of December 31, 2021 $ 22,421

Refer to Note 5, " Business Combinations and Other Transactions, " and Note 7, " Concentration of Credit Risk and Fair Value of Financial Assets and Financial Liabilities ," for information regarding the long-term debt initially recognized during 2018 resulting from the Technicolor Patent Acquisition.

Long-term debt obligations, excluding the long-term debt resulting from the Technicolor Patent Acquisition, are comprised of the following (in thousands):

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$ 400,000 $ 400,000

1.50 % Senior Convertible Notes due 2020

Unamortized interest discount ( 51,567 ) ( 65,393 )

Unamortized interest discount (a)

Deferred financing costs ( 4,368 ) ( 4,612 )

Total net carrying amount of Senior Convertible Notes $ 395,632 $ 343,821

Current portion of long-term debt — 94,170

Long-term net carrying amount of Senior Convertible Notes $ 343,821 $ 329,487

_____________

Due to the adoption of ASU 2020-06 on January 1, 2021, the unamortized interest discount was reclassified back to the carrying value of the 2024 Notes.

Refer to Note 2, " Summary of Significant Accounting Policies and New Accounting Guidance ", for further information regarding this adoption.

There were no finance leases as of December 31, 2021 or December 31, 2020.

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The 2024 Notes 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 mature on June 1, 2024, unless earlier converted or repurchased.

The 2024 Notes will be convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 12.3018 shares of 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 "Indenture").

The 2024 Notes were initially convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 12.3018 shares of 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 "Indenture").

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.

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The aggregate cost of the 2024 Note Hedge Transactions was $ 72.0 million.

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.

As consideration for the 2024 Warrant Transactions, we received aggregate proceeds of $ 47.6 million.

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The initial $ 72.0 million ($ 56.9 million net of tax) equity component represents the difference between the fair value of the initial $ 328.0 million in debt and the $ 400.0 million gross proceeds.

The related initial debt discount of $ 72.0 million is being amortized over the life of the 2024 Notes using the effective interest method.

The related initial debt discount of $ 72.0 million was being amortized over the life of the 2024 Notes using the effective interest method.

An effective interest rate of 6.25 % was used to calculate the debt discount on the 2024 Notes.

Upon the adoption of ASU 2020-06 on January 1, 2021, we reclassified the unamortized debt discount from equity to Long-term debt.

Refer to Note 2, " Summary of Significant Accounting Policies and New Accounting Guidance " for further information regarding this adoption.

In connection with the above-noted transactions, the Company incurred approximately $ 8.4 million of directly related costs.

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These costs are being amortized as interest expense over the term of the debt using the effective interest method.

The remaining $ 1.9 million of costs ($ 1.7 million net of tax) allocated to the equity component were recorded as a reduction of the equity component.

The remaining $ 1.9 million of costs ($ 1.7 million net of tax) allocated to the equity component were recorded as a reduction of equity.

2020 Senior Convertible Notes, and Related Note Hedge and Warrant Transactions

During second quarter 2019, the Company used $ 232.7 million from the offering of the 2024 Notes to repurchase $ 221.1 million in aggregate principal amount of the 1.50 % Senior Convertible Notes due 2020 (the "2020 Notes") in privately negotiated transactions concurrently with the offering of the 2024 Notes.

As a result of the partial repurchase of the 2020 Notes, $ 94.9 million in aggregate principal amount of the 2020 Notes remain outstanding as of December 31, 2019.

As a result of the partial repurchase of the 2020 Notes, $ 94.9 million in aggregate principal amount of the 2020 Notes remained outstanding as of December 31, 2019.

On March 1, 2020, the maturity date of the 2020 Notes, the Company repaid in full the remaining $ 94.9 million of outstanding principal.

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2021 2020 2019

2024 Notes 2020 Notes Total 2024 Notes 2020 Notes Total 2020 Notes

2024 Notes 2024 Notes 2020 Notes Total 2024 Notes 2020 Notes Total

Contractual coupon interest $ 8,000 $ 8,000 $ 237 $ 8,237 $ 4,600 $ 2,824 $ 7,424

Accretion of debt discount 13,157 669 13,826 7,322 7,743 $ 15,065 12,434

Accretion of debt discount (a)

— 13,157 669 $ 13,826 7,322 7,743 $ 15,065

Amortization of financing costs 1,627 1,176 70 1,246 654 821 $ 1,475

Total $ 9,627 $ 22,333 $ 976 $ 23,309 $ 12,576 $ 11,388 $ 23,964

_____________

Due to the adoption of ASU 2020-06 on January 1, 2021, the unamortized interest discount was reclassified back to the carrying value of the 2024 Notes.

Refer to Note 2, " Summary of Significant Accounting Policies and New Accounting Guidance ", for further information regarding this adoption.

Madison Arrangement

In conjunction with the Technicolor Patent Acquisition, we assumed Technicolor’s rights and obligations under the Madison Arrangement, which commenced in 2015.

The Madison Arrangement falls under the scope of ASC 808, Collaborative Arrangements.

Therefore, we recognize all royalties from customers as revenue and payments to Sony for its royalty share as operating expenses within the consolidated statements of income.

Cost reimbursements for expenses incurred resulting from fulfilling the duties of the licensing agent are recorded as contra expenses.

During the years ended December 31, 2021, 2020, and 2019, gross revenues recorded related to the Madison Arrangement were $ 26.1 million, $ 5.5 million, and $ 13.5 million, respectively, and are reflected within " Patent licensing royalties " in the consolidated statement of income.

Net operating expenses related to the Madison Arrangement during the years ended December 31, 2021, 2020, and 2019 were $ 18.9 million, $ 8.4 million and $ 12.0 million, including $ 11.9 million, $ 2.5 million, and $ 6.3 million related to revenue sharing, respectively, and are reflected primarily within " Patent administration and licensing " expenses in the consolidated statement of income.

Long-term debt

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.

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 consolidated balance sheet.

The fair value of the long-term debt as of December 31, 2021 is disclosed within Note 6, " Concentration of Credit Risk and Fair Value of Financial Assets and Financial Liabilities" .

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.

Under ASC 470, amounts recorded as debt shall be 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 effective interest rate as of the acquisition date was approximately 14.5 %.

During the years ended December 31, 2021, 2020 and 2019, we recognized $ 2.9 million, $ 3.1 million, and $ 2.7 million, respectively, of interest expense related to this debt which is included within “ Interest expense ” in the 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.

Restricted cash

Under the Madison Arrangement, the parties reserve cash in bank accounts to fund our activities to manage the portfolios.

These accounts are custodial accounts for which the funds are restricted for this purpose.

As of December 31, 2021 and 2020, the Company had $ 5.9 million and $ 3.1 million, respectively, of restricted cash included within the consolidated balance sheet attributable to the Madison Arrangement.

Refer to Note 5, " Cash, Cash Equivalents, Restricted Cash and Marketable Securities", for a reconciliation of cash, cash equivalents and restricted cash within the consolidated balance sheets.

Technicolor Contingent Consideration

As part of the Technicolor Acquisitions, we entered into a revenue-sharing arrangement with Technicolor that created a contingent consideration liability, which is accounted for under ASC 450 - Contingencies under the asset acquisition framework when the liability is deemed probable and estimable.

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 December 31, 2021 and 2020, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements.

Minimum future payments for accounts payable and other purchase commitments, excluding long-term operating leases for office space, as of December 31, 2021 were as follows (in thousands):

2022 $ 12,700

We are subject to a revenue-sharing arrangement with Technicolor resulting from the Technicolor Patent Acquisition and the R&I Acquisition.

We also assumed certain defined benefit plan liabilities in conjunction with these transactions.

Refer to Note 5, " Business Combinations and Other Transactions ," for further information.

Refer to Note 10, " Obligations ," for details of the Company's long-term debt obligations.

Refer to Note 9, " Obligations ," for details of the Company's long-term debt obligations and the revenue-sharing arrangement with Technicolor resulting from the Technicolor Patent Acquisition and the R&I Acquisition .

Refer to Note 16, " Leases ," for maturities of the Company's operating lease liabilities as of December 31, 2021.

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Defined Benefit Plans

These plans include a retirement lump sum indemnity plan and jubilee plan, both of which provide benefit payments to employees based upon years of service and compensation levels.

As part of the Company's announced restructuring plan, as discussed below in Note 20, "Restructuring Activities", the number of employees under the Company's plan was significantly reduced.

The Company revalued the projected benefit obligation and recognized a $ 2.3 million gain on curtailment during 2021, which was included within " Other income, net " in the consolidated statement of income.

As of December 31, 2021 and 2020, the combined accumulated projected benefit obligation related to these plans totaled $ 4.8 million and $ 7.6 million, respectively.

Service cost and interest cost for the combined plans totaled $ 0.4 million, $ 0.6 million and $ 0.1 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The weighted average discount rate and assumed salary increase rate for these plans were 0.7 % and 3.0 %, respectively.

These plans are not required to be funded and were not funded as of December 31, 2021.

Expected future benefit payments under these plans as of December 31, 2021 were as follows (in thousands):

2027-2031 2,266

LITIGATION AND LEGAL PROCEEDINGS

COURT PROCEEDINGS

Huawei China Proceeding

On January 3, 2019, InterDigital was notified that a civil complaint was filed on January 2, 2019 by Huawei Technologies Co., Ltd.

("Huawei") and certain of its subsidiaries against InterDigital, Inc.

and certain of its subsidiaries in the Shenzhen Intermediate People’s Court (the "Shenzhen Court") seeking a determination that the Company had violated an obligation to license their patents that are essential to 3G, 4G and 5G wireless telecommunication standards on fair, reasonable and non-discriminatory terms and conditions.

On June 8, 2020, Huawei filed an application with the Shenzhen Court to dismiss the legal proceeding, and on June 9, 2020, the Company filed an application with the IP Tribunal of the China Supreme People's Court (the "SPC") to dismiss the Company's jurisdictional appeal.

On July 1, 2020, the SPC dismissed the Company's jurisdictional appeal, and on July 31, 2020, the Shenzhen Court granted Huawei's petition to dismiss the legal proceeding.

Accordingly, there are no further proceedings in this matter.

On August 27, 2019, InterDigital, Inc.

and certain of its subsidiaries filed a claim in the High Court against Lenovo Group Limited and certain of its subsidiaries.

UK Proceeding

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 (U.K.) Nos.

2,363,008 (the "'008 Patent");

and 3,355,537.

On August 26, 2020, the UK Supreme Court handed down its judgment in the combined appeals in the Unwired Planet and Conversant proceedings, finding, among other things, that UK Courts have jurisdiction to determine fair, reasonable and non-discriminatory ("FRAND") royalty terms and conditions (including, where appropriate, that the terms of a FRAND license would be worldwide) and to award a FRAND injunction under a UK patent that has been found valid, essential and infringed against a defendant that does not enter into a license on the terms the UK Court determines to be FRAND.

Subsequently, on September 25, 2020 the Court made an Order recording that Lenovo was no longer pursuing its application challenging the jurisdiction of the High Court and that Lenovo would pay the Company's costs in relation to the same.

The Court has held case management conferences on October 6, 2020, December 16, 2020, a further 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 High Court entered a schedule for the technical and non-technical FRAND proceedings.

The first two trials that have been scheduled are technical trials in March 2021 and June 2021 and the non-technical FRAND trial is scheduled in January 2022.

The Company was also granted permission at the October 6 hearing to amend its claim to seek declarations that Lenovo is an "unwilling licensee" based on its refusal to submit to the outcome of the FRAND determination by the High Court, and that it is therefore not entitled to enforce the Company's commitments under the ETSI IPR Policy against it.

Lenovo has subsequently amended its case to seek a declaration that the Company is an "unwilling licensor" and has denied that it is not entitled to enforce the Company's commitments under the ETSI IPR Policy.

On October 27, 2020, the Company filed an application to schedule a trial to determine the issue of whether Lenovo is an "unwilling licensee," and whether Lenovo is able to rely on the Company's commitments under the ETSI IPR Policy against it, prior to the non-technical FRAND trial.

The Court held that while the Company was entitled to plead these issues and have them determined, the trial timetable and likely timing of any appeals meant that the determination of the "willingness" issues should be reserved to the non-technical FRAND trial.

The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

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 on 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.

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.

The Company plans on appealing the second technical trial decision.

The FRAND trial commenced on January 11, 2022 concluded on February 11, 2022.

District of Delaware Patent Proceeding

On August 28, 2019, InterDigital, Inc.

and certain of its subsidiaries filed a complaint in the United States District Court for the District of Delaware (the "Delaware District Court") against Lenovo Holding Company, Inc.

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 District Court") against Lenovo Holding Company, Inc.

and certain of its subsidiaries alleging that Lenovo infringes eight of InterDigital's U.S.

8,085,665 (the "'665 Patent");

8,199,726 (the "'726 Patent");

8,427,954 (the "'954 Patent");

8,675,612 (the "'612 Patent");

8,797,873 (the "'873 Patent");

and 9,456,449 (the "'449 Patent")—by making, using, offering for sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities.

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 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 High Court in the separately filed U.K.

Proceedings described above, an injunction prohibiting Lenovo from continued infringement;

and (d) attorneys’ fees and costs.

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On July 14, 2020, the Delaware District Court heard the parties' oral arguments regarding Lenovo's motion to dismiss six of the eight patents-at-issue in the case.

The Delaware District Court denied Lenovo's motion to dismiss in its entirety, finding in the Company's favor that all of the challenged claims of all six of the challenged patents cover patent-eligible subject matter under Section 101 of the Patent Act.

On September 16, 2020, the Delaware District Court entered a schedule for the case, setting a patent jury trial for December 5, 2022.

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 March 6, 2023.

District of Delaware Antitrust Proceeding

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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 European Telecommunications Standards Institute ("ETSI") with respect to the licensing of 3G and 4G SEPs on FRAND terms and conditions.

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.

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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.

On July 17, 2020, the United States Department of Justice ("DOJ") filed a statement of interest supporting the Company's motion to dismiss Lenovo's antitrust claims.

On July 20, 2020, Lenovo filed its response to the Company's motion to dismiss, and ACT | The App Association ("App Association") filed a motion for leave to file an amicus brief in support of Lenovo's antitrust claims.

On August 5, 2020, the Company filed its reply in support of its motion to dismiss.

Oral argument on the Company's motion to dismiss was held on October 27, 2020.

The Delaware District Court has not yet ruled on the motion.

China Proceeding

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.

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 seeking a determination of the FRAND royalty rates payable for the Company's Chinese 3G, 4G and 5G SEPs.

The Beijing action remains pending.

China Proceeding

On August 5, 2020, the Company was informed in writing by Xiaomi Corporation ("Xiaomi") that, on June 3, 2020, Xiaomi Communication Technology Co., Ltd.

and certain of its affiliates filed a complaint against the Company and one of its subsidiaries in the Wuhan Intermediate People's Court (the "Wuhan Court") seeking for the Wuhan Court to determine a global FRAND rate for a license to the Company's 3G and/or 4G/LTE SEPs.

The Company was informed on September 25, 2020 that the Wuhan Court held an ex parte hearing on or about September 23, 2020 and issued an order that, among other things, enjoins the Company from seeking a preliminary and permanent injunction against Xiaomi and certain of its subsidiaries for infringement of certain of the Company's patents related to 3G and/or 4G/LTE standards in the Company's case in the Delhi High Court discussed below, or elsewhere.

The Wuhan Court ordered a fine of up to one million yuan per day if the Company were to violate the order.

The Company contends that it has not yet been properly served with Xiaomi's complaint or the Wuhan Court's anti-suit injunction order.

On October 13, 2020, the Company filed an application challenging the jurisdiction of the Wuhan Court to take up Xiaomi’s complaint.

That jurisdiction challenge remains pending.

On September 30, 2020, the Company filed a preliminary conditional response seeking reconsideration of the Wuhan Court's anti-suit injunction, and requested a hearing, which was held on October 16, 2020.

The Company filed a post-hearing submission on October 23, 2020.

In a decision dated December 4, 2020, the Wuhan Court dismissed the Company’s reconsideration petition.

and certain of its affiliates filed a complaint against the Company and certain of its subsidiaries in the Beijing Intellectual Property Court (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) on December 14, 2021.

The appeal remains pending.

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 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.

The Company has not yet been served with this complaint.

Oppo, OnePlus and realme

UK Proceeding

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.

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.

India Proceeding

On July 29, 2020, the Company and certain of its subsidiaries filed two patent infringement actions in the Delhi High Court in New Delhi, India (the "Delhi High Court") against Xiaomi and certain of its subsidiaries.

The first complaint alleges infringement of five of the Company's patents related to 3G and/or 4G/LTE standards:

Indian Patent Nos.

The second complaint alleges infringement of three of the Company's patents related to H.265/HEVC standards:

Indian Patent Nos.

In these proceedings, the Company is seeking compensatory and punitive damages for Xiaomi's infringement of the asserted patents.

The Company is further seeking, among other remedies, interim and permanent injunctive relief to prevent further infringement of the litigated patents in India, unless Xiaomi elects to take a license on terms determined to be FRAND by the Delhi High Court.

The Company’s application for interim injunctive relief remains pending.

On January 21, 2021, Xiaomi filed its replies to the cellular and HEVC complaints.

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The Company has filed an application to forfeit or strike those replies as untimely filed.

The Company’s application remains pending.

On September 29, 2020, the Company filed an anti-anti-suit injunction application against Xiaomi in the Delhi High Court, seeking, among other things, to enjoin Xiaomi from enforcing the Wuhan Court's September 23, 2020 anti-suit injunction order described above.

On October 9, 2020, the Delhi High Court granted the Company's motion and issued an ad interim injunction restraining Xiaomi from enforcing the anti-suit injunction order issued by the Wuhan Court, pending further consideration of the Company's application for an anti-anti-suit injunction at a hearing on November 25, 2020.

On November 3, 2020, Xiaomi filed an appeal with the appellate division of the Delhi High Court seeking, inter alia, to (i) set aside the October 9 ad interim anti-anti-suit injunction order, (ii) set aside certain subsequent orders of the first instance court and (iii) stay further pursuit of the Company's application for an interim injunction with respect to infringement of the patents in the first suit.

That appeal was dismissed on November 6.

From November 25, 2020 through December 15, 2020, the Delhi High Court held hearings on the Company’s application for an anti-anti-suit injunction.

A decision on the Company’s application remains pending.

German Proceeding

On October 30, 2020, the Company filed an anti-anti-suit injunction application against Xiaomi in the Munich District Court, seeking to enjoin Xiaomi from continuing to pursue the Wuhan Court's September 23, 2020 anti-suit injunction order described above with respect to Germany.

On November 11, 2020, the Munich court granted the Company's motion and issued an ex parte injunction restraining Xiaomi from pursuing the anti-suit injunction.

The Company filed penalty requests for non-compliance with said court order.

Xiaomi opposed the injunction and requested stay of enforcement, and an oral hearing was held on January 28, 2021.

At the hearing, the Munich Court dismissed the request for stay of enforcement.

A decision on the opposition and the penalty request will be rendered on February 25, 2021.

This decision can then be appealed to the Higher Regional Court Munich.

REGULATORY PROCEEDING

Investigation by National Development and Reform Commission of China

On September 23, 2013, counsel for InterDigital was informed by China's National Development and Reform Commission ("NDRC") that the NDRC had initiated a formal investigation into whether InterDigital has violated China's Anti-Monopoly Law ("AML") with respect to practices related to the licensing of InterDigital's standards-essential patents to Chinese companies.

Companies found to violate the AML may be subject to a cease and desist order, fines and disgorgement of any illegal gains.

On March 3, 2014, the Company submitted to NDRC, pursuant to a procedure set out in the AML, a formal application for suspension of the investigation that included proposed commitments by the Company.

On May 22, 2014, NDRC formally suspended its investigation of the Company based on the commitments proposed by the Company.

The Company's commitments with respect to the licensing of its patent portfolio for wireless mobile standards to Chinese manufacturers of cellular terminal units ("Chinese Manufacturers") are as follows:

Whenever InterDigital engages with a Chinese Manufacturer to license InterDigital's patent portfolio for 2G, 3G and 4G wireless mobile standards, InterDigital will offer such Chinese Manufacturer the option of taking a worldwide portfolio license of only its standards-essential wireless patents, and comply with F/RAND principles when negotiating and entering into such licensing agreements with Chinese Manufacturers.

As part of its licensing offer, InterDigital will not require that a Chinese Manufacturer agree to a royalty-free, reciprocal cross-license of such Chinese Manufacturer's similarly categorized standards-essential wireless patents.

With the consolidation of China’s antimonopoly enforcement authorities into the State Administration for Market Regulation ("SAMR") in April 2018, SAMR is now responsible for overseeing InterDigital's commitments.

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

On December 20, 2021, a subsidiary of the Company filed three patent infringement claims, two in the Munich District Court and one in the Mannheim District 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 (DE) Nos.

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 first hearing is scheduled for November 17, 2022, before the Munich District Court.

China Proceeding

On January 19, 2022, the Company was informed that Oppo had purportedly filed a complaint against the Company in the Guangzhou Intellectual Property Court seeking a determination of a global FRAND royalty rate for the Company’s 3G, 4G, 5G, 802.11 and HEVC SEPs.

The Company has not yet been served with this complaint.

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.

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None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of December 31, 2021.

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COMPENSATION PLANS AND PROGRAMS

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We use a variety of compensation programs to attract, retain and motivate our employees, and to more closely align employee compensation with company performance.

These programs include, but are not limited to, short-term incentive awards tied to performance goals, cash awards to inventors for filed patent applications and patent issuances, and long-term incentives in the form of stock option awards, time-based RSU awards, performance-based awards and cash awards.

Our long-term incentives typically include annual time-based RSU grants or cash awards with a three-year vesting period, as well as annual performance-based RSU grants or cash awards with a three to five-year performance period;

as a result, in any one year, we are typically accounting for at least three active cycles.

Additionally, from time to time, executive officers are awarded long term incentives or new hire grants that may include time-based RSUs, performance-based RSUs or options.

We issue new shares of our common stock to satisfy our obligations under the share-based components of these programs.

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On June 14, 2017, our shareholders adopted and approved the 2017 Equity Incentive Plan (the "2017 Plan"), under which officers, employees, non-employee directors and consultants can receive share-based awards such as RSUs, restricted stock and stock options as well as other stock or cash awards.

From June 2009 through June 14, 2017, we granted such awards pursuant to our 2009 Stock Incentive Plan (the “2009 Plan," and, together with the 2017 Plan, the "Equity Plans"), which was adopted and approved by our shareholders on June 4, 2009, and the material terms of which were re-approved on June 12, 2014.

Upon the adoption of the 2017 Plan in June 2017, the 2009 Plan was terminated and all shares remaining available for grant under the 2009 Plan were canceled.

The number of shares available for issuance under the 2017 Plan is equal to 2,400,000 shares plus any shares subject to awards granted under the 2009 Plan that, on or after June 14, 2017, expire or otherwise terminate without having been exercised in full, or that are forfeited to or repurchased by us.

The plan was amended in order to reserve an additional 1.8 million shares of our common stock for issuance under the 2017 Plan.

Such amendment was adopted and approved by our shareholders on June 2, 2021.

From June 2009 through June 14, 2017, we granted equity awards pursuant to our 2009 Stock Incentive Plan (the “2009 Plan," and, together with the 2017 Plan, the "Equity Plans"), which was adopted and approved by our shareholders on June 4, 2009, and the material terms of which were re-approved on June 12, 2014.

Upon the adoption of the 2017 Plan, the 2009 Plan was terminated and all shares remaining available for grant under the 2009 Plan were canceled.

The number of shares available for issuance under the 2017 Plan, as amended, is equal to 4.2 million shares plus any shares subject to awards granted under the 2009 Plan that, on or after June 14, 2017, expire or otherwise terminate without having been exercised in full, or that are forfeited to or repurchased by us.

RSUs and Restricted Stock

We may issue RSUs and/or shares of restricted stock to officers, employees, non-employee directors and consultants.

We may issue RSUs to officers, employees, non-employee directors and consultants.

Any cancellations of unvested RSUs granted under the Equity Plans will increase the number of shares remaining available for grant under the 2017 Plan.

Time-based RSUs vest over periods generally ranging from 1 to 3 years from the date of the grant.

Performance-based RSUs generally have a vesting period of between 3 and 5 years.

Performance-based RSUs generally have a vesting period between 3 and 5 years.

Milestone performance-based RSUs may vest at any time, upon achievement of the milestone goal, during the performance period, which is typically 5 years.

As of December 31, 2021, we had unrecognized compensation cost related to share-based awards of $ 16.4 million, at current performance accrual rates.

For grants with graded vesting, we expect to amortize the associated unrecognized compensation cost using an accelerated method.

For grants made that cliff vest, we expect to amortize the associated unrecognized compensation cost as of December 31, 2020, on a straight-line basis generally over a three to five-year period.

For time-based grants with graded vesting, we expect to amortize the associated unrecognized compensation cost using an accelerated method.

For time-based grants that cliff vest, we expect to amortize the associated unrecognized compensation cost as of December 31, 2021, on a straight-line basis generally over the remaining vesting period.

Vesting of performance-based RSU awards is subject to attainment of specific goals established by the Compensation Committee of the Board of Directors.

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Balance at December 31, 2020

1,265 $ 53.53

Granted* 491 68.44

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Balance at December 31, 2021

* These numbers include less than 0.1 million RSUs credited on unvested RSU awards as dividend equivalents.

1,059 $ 57.43

* These numbers include fewer than 0.1 million RSUs credited on unvested RSU awards as dividend equivalents.

Dividend equivalents accrue with respect to unvested RSUs when and as cash dividends are paid on the Company's common stock, and vest if and when the underlying RSUs vest.

Granted amounts include performance-based RSU awards at their maximum potential payout.

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During 2020, 2019 and 2018, we granted approximately 0.4 million, 0.3 million and 0.3 million RSUs under the Equity Plans, respectively, with weighted-average grant date fair values of $ 46.18 , $ 66.19 and $ 73.75 , respectively, assuming target payout for the performance based awards.

During 2021, 2020 and 2019, we granted approximately 0.5 million, 0.4 million and 0.3 million RSUs under the Equity Plans, respectively, with weighted-average per share grant date fair values of $ 68.44 , $ 46.18 and $ 66.19 , respectively, assuming target payout for the performance-based awards.

The total vest date fair value of the RSUs that vested in 2021, 2020 and 2019 was $ 22.6 million, $ 6.7 million and $ 12.7 million, respectively.

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Other Equity Grants

We may also grant equity awards to non-management Board members and certain consultants.

We grant equity awards to non-management Board members and may grant equity awards certain consultants.

Stock Options

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During the year ended December 31, 2018, performance-based options were granted for the first time.

The number of options which cliff vest, if at all, is anywhere from 0 to 2 times the target number of options subject to the attainment of performance goals measured at the end of the performance period.

These performance-based options have a vesting period between three and five years .

The number of performance-based options which vest, if at all, is anywhere from 0 to 3 times the target number of options subject to the attainment of performance goals measured either during or at the end of the performance period.

Performance-based options typically have a vesting period between three and five years .

Milestone performance options may vest at any time, upon achievement of the milestone goal, during the performance period, which is typically 5 years.

Under the terms of the Equity Plans, the exercise price per share of each option, other than in the event of options granted in connection with a merger or other acquisition, cannot be less than 100 % of the fair market value of a share of common stock on the date of grant.

Options granted under the Equity Plans are generally exercisable for a period of between 7 to 10 years from the date of grant and may vest on the grant date, another specified date, over a period of time and/or dependent upon the attainment of specified performance goals.

We also have approximately 0.1 million options outstanding under a prior stock plan that have an indefinite contractual life.

We also have approximately 0.1 million options outstanding under a prior stock plan that do not expire.

The fair value for option awards is computed using the Black-Scholes pricing model, whose inputs and assumptions are determined as of the date of grant and which require considerable judgment.

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The majority of these options have an exercise price between $ 9.00 and $ 11.63 .

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The total intrinsic value of our outstanding options as of December 31, 2021 was $ 7.7 million.

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Our 401(k) contribution expense was approximately $ 1.3 million, $ 1.1 million and $ 1.1 million for 2021, 2020 and 2019, respectively.

At our discretion, we may also make a profit-sharing contribution to our employees’ 401(k) accounts.

Additionally, the company contributed $ 3.4 million, $ 0.2 million and $ 0.2 million in 2021, 2020 and 2019, respectively, to other defined contribution plans.

Under InterDigital’s Deferred Compensation Plan (“Deferred Plan”), eligible US employees may make tax-deferred contributions that cannot be made under the 401(k) Plan due to Internal Revenue Service limitations.

We match 50 % of a participant’s contributions up to 6 % of the participants excess compensation pay.

From time to time InterDigital makes discretionary company contributions to the Deferred Plan on behalf of a participant.

The company contributed $ 3.0 million to the Deferred Plan in 2021.

Our income tax provision (benefit) consists of the following components for 2021, 2020 and 2019 (in thousands):

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Total $ 15,368 $ ( 6,648 ) $ 10,991

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The deferred tax assets and liabilities were comprised of the following components at December 31, 2021 and 2020 (in thousands):

Net operating losses $ 143,275 $ 140,940

Deferred revenue, net 26,213 33,131

Tax credit carryforward 32,692 27,813

Deferred revenue, net 22,875 26,213

Amortization and depreciation 19,810 19,086

Debt amortization 12,659 993

Other employee benefits 10,973 5,857

Stock compensation 4,774 4,082

Patent amortization 22,530 18,522

Depreciation ( 1,233 ) 443

Goodwill ( 2,211 ) ( 1,933 )

Other-than-temporary impairment 441 1,138

Lease liability 4,773 5,382

Other 1,521 ( 1,225 )

Other employee benefits 5,857 7,520

Right of use asset ( 3,763 ) ( 4,684 )

Lease liability 5,382 5,760

249,589 224,457

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Net deferred tax asset $ 98,067 $ 80,090

Included within the balance sheet, but not reflected in the tables are deferred tax assets primarily related to foreign withholding taxes that are expected to be paid within the next twelve months of $ 0.4 million and $ 0.1 million as of December 31, 2020 and December 31, 2019, respectively.

The following is a reconciliation of income taxes at the federal statutory rate with income taxes recorded by the Company for the years ended December 31, 2021, 2020 and 2019:

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statutory rate 21.0 % 21.0 % 21.0 %

State tax provision (b)

0.6 % 10.2 % ( 8.9 ) %

Effects of rates different than statutory ( 2.0 ) % ( 2.8 ) % ( 1.4 ) %

Change in valuation allowance 10.3 % 28.5 % 23.3 %

Research and development tax credits ( 1.6 ) % ( 4.5 ) % ( 4.3 ) %

Non-deductible officers' compensation 8.4 % 0.7 % 1.2 %

Uncertain tax positions 5.5 % ( 2.7 ) % ( 0.8 ) %

Permanent differences ( 1.2 ) % 2.3 % 4.9 %

Stock compensation 1.1 % ( 0.6 ) % ( 5.0 ) %

Foreign derived intangible income deduction (c)

Non-creditable withholding taxes 4.4 % — % 3.6 %

State tax provision (b)

2.6 % 0.6 % 10.2 %

Other permanent differences 1.9 % ( 1.9 ) % 1.1 %

Other — % 0.1 % ( 0.9 ) %

Stock compensation ( 1.2 ) % 1.1 % ( 0.6 ) %

Research and development tax credits ( 1.3 ) % ( 1.6 ) % ( 4.5 ) %

Effect of rates different than statutory ( 2.2 ) % ( 2.0 ) % ( 2.8 ) %

Amended return benefit (a)

( 7.7 ) % ( 65.0 ) % ( 8.4 ) %

Other 0.1 % 2.7 % 1.5 %

Foreign derived intangible income deduction ( 14.7 ) % — % — %

Total tax provision (benefit) 27.0 % ( 21.2 ) % 42.4 %

(a) In 2020, a net discrete benefit of $ 20.9 million was recorded that primarily relates to the expected amendment of a prior year tax return to utilize a tax asset generated in the current year, as well as the reversal of a tax reserve.

(a) In 2020, a net discrete benefit of $ 20.9 million was recorded that primarily relates to the expected amendment of prior year returns to utilize a tax asset generated in the current year.

In 2021, when the returns were filed, there was an additional benefit recorded.

(b) In 2019, we determined that we would not be able to utilize our state deferred tax assets for our parent company in Delaware and Pennsylvania, therefore we put a full valuation allowance on these assets.

(c) In 2018, the new Foreign Derived Intangible Income ("FDII") deduction that was enacted as part of the TCJA decreased the tax provision by 56.3 %.

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Valuation Allowances and Net Operating Losses

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The total amount of unrecognized tax benefits could change within the next twelve months for a number of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this guidance.

During 2020, we established reserves of $ 1.1 million uncertainty arising from our ability to generate the full benefit of the amended returns that utilize the current year tax asset.

During 2021, after finalizing our amended return position we increased the reserve established in 2020 by $ 12.8 million.

We also reversed reserves of $ 1.1 million previously established on 2017 research and development and manufacturing deduction credits as a result of the lapsing of stature of limitations for that tax year.

During 2020, we established reserves of $ 1.1 million related to uncertainty arising from our ability to generate the full benefit of the amended returns that utilize the current year tax asset.

We also reversed reserves of $ 1.8 million previously established on 2016 research and development and manufacturing deduction credits as a result of the lapsing of the statute of limitations for that tax year.

During 2019, we established a reserve of $ 0.3 million related to an additional deduction related to the issuance cost of convertible debt that is recorded through equity.

During 2018, we established a reserve of $ 1.1 million related to the recognition of the 2006 to 2010 research and development credits and manufacturing deduction credits.

The following is a roll forward of our total gross unrecognized tax benefits, which if reversed would impact the effective tax rate, for the fiscal years 2021 through 2019 (in thousands):

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Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

For certain positions that related to years prior to 2020, we have recorded approximately $ 0.1 million of accrued interest during 2020 and 2019.

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The Company and its subsidiaries are subject to United States federal income tax, foreign income and withholding taxes and income taxes from multiple state jurisdictions.

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The total amount of state net operating losses is $ 1.6 billion.

In November 2018, the Company received notice that its 2016 U.S.

Federal income tax return will be subject to audit.

In February 2020, the Company received a no change letter from the IRS indicating the audit is closed.

In December 2018, the Company received a notice of proposed assessment related to an ongoing audit of its California tax returns for 2013 through 2015.

The Company filed a protest to the California assessment in February 2019 and in October 2020 received notice the audit was withdrawing their claim.

In February 2020, the Company was notified their 2016 and 2017 California tax returns are under audit.

Foreign Taxes

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As a result of this agreement, the Company does not anticipate any tax consequences.

On July 24, 2018, the Company received notification that its request for competent authority pertaining to Article 27 (Mutual Agreement 14 Table of Contents Procedure) of the United States-Republic of Korea Income Tax Convention had been reviewed by the IRS and an agreement had been reached (the "Korea Competent Authority Proceeding").

As a result of this agreement, the Company received refunds of $ 97.4 million, inclusive of interest.

In addition, we have recorded a net tax benefit of $ 14.7 million in our full year 2018.

In September 2019, the amended tax returns for tax years covered by this agreement were filed and an additional benefit of $ 2.2 million was recorded related to the final refund the Company expects to receive.

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NET INCOME PER SHARE

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2021 2020 2019

Basic Diluted Basic Diluted Basic Diluted

Net income applicable to common shareholders $ 55,295 $ 44,801 $ 20,928

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Basic 30,764 30,776 31,546

Dilutive effect of stock options, RSUs and convertible securities 282 239 816

Weighted-average shares outstanding:

Dilutive effect of stock options, RSUs, convertible securities and warrants 489 282 239

Diluted 31,253 31,058 31,785

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Basic 1.80 1.46 0.66

Dilutive effect of stock options, RSUs and convertible securities ( 0.02 ) — ( 0.05 )

Dilutive effect of stock options, RSUs, convertible securities and warrants ( 0.03 ) ( 0.02 ) —

Diluted $ 1.77 $ 1.44 $ 0.66

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In June 2014, our Board of Directors authorized a $ 300 million share repurchase program (the “2014 Repurchase Program”).

In June 2015, September 2017, December 2018, and May 2019, our Board of Directors authorized four $ 100 million increases to the program, respectively, bringing the total amount of the 2014 Repurchase Program to $ 700 million.

Subsequently our Board of Directors authorized four $ 100 million increases to the program, respectively, bringing the total amount of the 2014 Repurchase Program to $ 700 million.

The Company may repurchase shares under the 2014 Repurchase Program through open market purchases, pre-arranged trading plans or privately negotiated purchases.

The table below sets forth the total number of shares repurchased and the dollar value of shares repurchased under the 2014 Repurchase Program (in thousands).

As of December 31, 2020, there was approximately $ 71.5 million remaining under the stock repurchase authorization.

As of December 31, 2021, there was approximately $ 41.5 million remaining under the share repurchase authorization.

2014 Repurchase Program

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2015 1,836 96,410

2014 3,554 152,625

Total 11,705 $ 658,536

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Our incremental borrowing rate represents the rate we would incur to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment.

The table below includes the balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2020 (in thousands):

The table below includes the balances of operating lease right-of-use assets and operating lease liabilities as of December 31, 2021 and 2020 (in thousands):

Balance Sheet Classification December 31, 2021 December 31, 2020

Operating lease receivable - current Prepaid and other current assets $ 51 $ 817

Operating lease right-of-use assets, net Other Non-current Assets 22,456 24,513

Operating lease right-of-use assets, net Other non-current assets, net 17,851 22,456

Total Lease Assets $ 17,902 $ 23,273

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For the Year Ended December 31,

2021 2020 2019

Operating lease cost $ 5,188 $ 5,442 $ 4,776

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Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2021 and 2020 was $ 4.0 million and $ 4.9 million, respectively, and was included in net cash provided by operating activities in our consolidated statement of cash flows.

Operating lease right-of-use assets obtained in exchange for operating lease obligations totaled $ 2.5 million and $ 14.4 million during the years ended December 31, 2020 and 2019, respectively.

As of December 31, 2021, the weighted average remaining operating lease term was 6.2 years and the weighted average discount rate used to determine the operating lease liabilities was 5.4 %.

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Present value of lease liabilities $ 21,573

OTHER INCOME (EXPENSE), NET

OTHER INCOME, NET

The amounts included in " Other income, net " in the consolidated statements of income for the year ended December 31, 2021, 2020 and 2019 were as follows (in thousands):

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Loss on extinguishment of long-term debt — — ( 5,488 )

Other income (expense), net 11,263 ( 1,598 ) ( 9,171 )

Other 9,885 11,263 ( 1,598 )

Other income, net $ 11,575 $ 16,924 $ 29,062

Refer to Note 5, " Business Combinations and Other Transactions, " for further information regarding the $ 14.2 million gain resulting from the R&I Acquisition and the $ 8.5 million gain on sale of our Hillcrest product business during the year ended December 31, 2019.

The decrease in interest and investment income during 2021 and 2020 was primarily due to reduced rates of return on our short-term investments.

Refer to Note 9, " Obligations, " for further information on the $ 5.5 million loss on extinguishment of long-term debt recognized during the year ended December 31, 2019.

During the year ended December 31, 2020, we recognized $ 5.6 million of unrealized gains resulting from observable price changes in orderly transactions of our long-term strategic investments.

These items are included in the " Other income (expense), net " caption in the table above.

SELECTED QUARTERLY RESULTS (UNAUDITED)

The table below presents quarterly data for the years ended December 31, 2020 and 2019.

(In thousands, except per share amounts, unaudited)

2020 First Second Third Fourth

$ 76,210 $ 104,498 $ 87,493 $ 90,790

Income from operations $ 4,681 $ 31,917 $ 15,430 $ 3,140

Net income (loss) applicable to InterDigital, Inc.'s common shareholders (b)

$ 116 $ 22,251 $ 23,784 $ ( 1,350 )

Net income (loss) per common share — basic $ — $ 0.72 $ 0.77 $ ( 0.04 )

Net income (loss) per common share — diluted $ — $ 0.72 $ 0.76 $ ( 0.04 )

2019 First Second Third Fourth

$ 68,631 $ 75,609 $ 72,523 $ 102,161

Income (loss) from operations $ ( 150 ) $ 8,915 $ 3,774 $ 25,296

Net income applicable to InterDigital, Inc.'s common shareholders $ ( 2,803 ) $ 7,743 $ 2,234 $ 13,754

Net income (loss) per common share — basic $ ( 0.09 ) $ 0.25 $ 0.07 $ 0.44

Net income (loss) per common share — diluted $ ( 0.09 ) $ 0.24 $ 0.07 $ 0.44

(a) In 2020, we recognized $ 21.6 million of non-current patent royalties primarily attributable to the Huawei patent license agreement signed in second quarter 2020.

(b) In third quarter 2020, we recognized a net discrete tax benefit of $ 18.5 million that primarily related to the expected amendment of a prior year tax return to utilize a tax asset generated in the current year, as well as the reversal of a tax reserve.

(c) In 2019, we recognized $ 19.8 million of non-current patent royalties primarily attributable to the Funai, ZTE Corporation, and Innovius LLC patent license agreements, all of which were signed in fourth quarter 2019.

Gain on asset acquisition and sale of business

On May 31, 2019, we completed the acquisition of the Research & Innovation unit of Technicolor SA ("Technicolor"), which we refer to as the R&I Acquisition.

The R&I Acquisition unit met the definition of an asset acquisition and was accounted for using the cost accumulation and allocation model.

The R&I Acquisition resulted in a net gain of approximately $ 14.2 million, inclusive of the $ 20.5 million gain from the derecognition of a contingent consideration liability, all of which is included within “ Other income, net ” in the consolidated statement of income for the year ended December 31, 2019.

On July 19, 2019, we completed the sale of Hillcrest's product business to a subsidiary of CEVA, Inc.

In connection with the sale, we received proceeds of $ 10.0 million and we retained substantially all of the Hillcrest patent assets that we acquired in 2016.

As a result of this transaction, we recorded an $ 8.5 million gain on sale which is included within " Other income, net " in the consolidated statements of income for the year ended December 31, 2019.

Other included a $ 3.0 million foreign currency translation loss in 2021, compared to $ 4.6 million and $ 4.2 million of gains in 2020 and 2019, respectively, arising from euro translation of our foreign subsidiaries.

Additionally, in 2021 we recognized a $ 1.9 million gain on a contract termination and a $ 2.3 million gain on the curtailment of our defined benefit plan, as discussed further in Note 10, " Commitments ".

Lastly, during 2021 and 2020 we recognized $ 7.6 million and $ 5.6 million of gains, respectively, and in 2019 a loss of $ 2.6 million resulting from observable price changes of our long-term strategic investments.

All of these items are included in the " Other " caption in the table above.

VARIABLE INTEREST ENTITIES

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As of December 31, 2021, the combined book values of the assets and liabilities associated with these variable interest entities included in our consolidated balance sheet were $ 27.1 million and $ 2.5 million, respectively.

Assets included $ 24.5 million of cash and cash equivalents, $ 2.3 million of accounts receivable and prepaid assets, $ 35.2 million of patents, net, and $ 0.0 million of other non-current assets.

Assets included $ 5.1 million of cash and cash equivalents, $ 4.0 million of accounts receivable and prepaid assets, and $ 18.0 million of patents, net.

As of December 31, 2020, the combined book values of the assets and liabilities associated with these variable interest entities included in our consolidated balance sheet were $ 62.0 million and $ 5.8 million, respectively.

Assets included $ 18.5 million of cash and cash equivalents, $ 1.7 million of accounts receivable, $ 39.3 million of patents, net, and $ 1.3 million of other non-current assets.

Assets included $ 24.5 million of cash and cash equivalents, $ 2.3 million of accounts receivable, and $ 35.2 million of patents, net.

On January 31, 2019, we launched the Company’s Chordant™ business as a standalone company.

The spinout of the unit, which now includes an affiliate of Sony as an investor along with the Company, gives Chordant added independence and flexibility in driving into its core operator and smart city markets.

Chordant is a variable interest entity and we have determined that we are the primary beneficiary for accounting purposes and consolidate Chordant.

For the years ended December 31, 2020 and 2019, we have allocated approximately $ 1.1 million and $ 1.5 million, respectively, of Chordant's net loss to noncontrolling interests held by other parties.

For the years ended December 31, 2021, 2020 and 2019, we have allocated approximately $ 2.3 million, $ 1.1 million, and $ 1.5 million, respectively, of Chordant's net loss to noncontrolling interests held by other parties.

During second quarter 2021, Chordant began the process of ceasing operations.

Convida Wireless

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Based on the terms of the agreement, the parties will contribute funding and resources for additional research and platform development, which we will perform.

SCP IP Investment LLC, an affiliate of Stephens Inc., is a minority investor in Convida Wireless.

Convida Wireless is a variable interest entity.

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For the years ended December 31, 2021, 2020 and 2019, we have allocated approximately $ 10.8 million, $ 5.7 million and $ 4.5 million, respectively, of Convida Wireless' net loss to noncontrolling interests held by other parties.

During 2021, we recognized a $ 13.2 million impairment on the patents within the Convida portfolio, resulting from our restructuring activities as described in Note 20, " Restructuring Activities ", which is included within “ Restructuring activities ” expenses in the consolidated statement of income.

The patents held for sale are recorded at fair value on December 31, 2021 and are included within "Prepaid and other current assets" in the consolidated balance sheet.

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 cellular infrastructure.

In response to a request from Signal Trust, in first quarter 2021, we provided our consent, as major beneficiary, to dissolve Signal Trust.”

The Trust has been accounted for as a variable interest entity.

Based on the terms of the trust agreement, we determined that we are the primary beneficiary for accounting purposes and have included the Trust in our consolidated financial statements.

As such, we recorded a $ 2.4 million charge within the " Patent administration and licensing " line of our consolidated statements of income in 2020 associated with the pending wind down of the Trust.

PREPAID AND OTHER CURRENT ASSETS

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.

We recorded a $ 2.4 million charge within the " Patent administration and licensing " line of our consolidated statements of income in 2020 associated with the wind down of the Trust.

The amounts included in " Prepaid and other current assets " in the consolidated balance sheet as of December 31, 2021 and 2020 were as follows (in thousands):

As Reported As Revised (a)

December 31, 2021 December 31, 2020 December 31, 2020

Tax receivables $ 57,127 $ 69,592 $ 45,262

Prepaid assets 11,340 10,899 10,899

Operating lease receivable 817 —

Patents held for sale 4,000 — —

Other current assets 5,078 3,733 3,733

Total Prepaid and other current assets $ 77,545 $ 84,224 $ 59,894

The amounts included in " Other non-current assets, net " in the consolidated balance sheet as of December 31, 2021 and 2020 were as follows (in thousands):

As Reported As Revised (a)

December 31, 2021 December 31, 2020 December 31, 2020

Tax receivables $ 30,026 $ — $ 24,330

Goodwill 22,421 22,421 22,421

Right-of-use assets 17,851 22,456 22,456

Long-term investments 21,280 15,489 15,489

Other non-current assets 10,923 13,677 13,677

Total Other non-current assets, net $ 102,501 $ 74,043 $ 98,373

____________________________

(a) As discussed in Note 1, we revised our prior period presentation of " Prepaid and other current assets " and " Other non-current assets, net ".

This column represents the effect of the revision on the consolidated balance sheet.

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 66 positions in its research and innovation unit, 60 of whom are based in France.

The Company launched an information-consultation process with respect to the contemplated reorganization with the works council of certain of its French subsidiaries, as required by French law.

On September 28, 2021, the Company finalized an agreement with the representative trade unions of certain of its French subsidiaries to commence the reorganization of the research and innovation unit located in France as part of the reduction in force.

This agreement was validated by the Regional Director of Economy, Employment, Labor and Solidarity on October 25, 2021.

The majority of termination notices were issued in fourth quarter 2021.

This action resulted in a reduction of employees under the benefit plans , and as a result the Company recognized a $ 2.3 million curtailment gain during 2021.

This curtailment gain was included within " Other income, net " in the consolidated statement of income.

During June 2021, Chordant began the process of ceasing operations.

The Company implemented a reduction in workforce action in second quarter 2021, consisting of 18 employees.

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 to funding Convida's operations.

These assets were evaluated as a separate asset group and reclassified as assets held for sale.

Upon the reclassification, the patents to be sold are recorded at fair value, which resulted in the Company recognizing a $ 13.2 million impairment in 2021.

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 will result in a further reduction in force of approximately 8 % of total headcount as well as cuts to our non-labor expenses.

These employees were provided notification of termination during fourth quarter 2021.

Restructuring 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 of, or that are associated with, the reduction in force or other restructuring activities.

The restructuring charges associated with the above activities totaling $ 27.9 million in 2021 are presented net of any reimbursement arrangements and include $ 1.7 million of outside services and other associated costs related to non-recurring consultant and legal fees.

We expect additional charges to be recorded in 2022.

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, 2020 $ —

Accrual 24,286

Cash payments ( 5,212 )

Other $ ( 793 )

Balance as of December 31, 2021 $ 18,281

The restructuring expenses included in " Restructuring activities " in the consolidated statements of income for the year December 31, 2021 were as follows (in thousands):

For the Year Ended December 31, 2021

Patent impairment $ 13,228

Severance and other benefits 22,616

Outside services and other associated costs 1,671

Reimbursement arrangements ( 9,638 )

Total $ 27,877

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data