What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-04 · 146 added, 280 removed, 405 unchanged (51% of the section changed)

4 unchanged sentences

(in thousands, except per share data)

SEPTEMBER 30,

2022 DECEMBER 31,

32 unchanged sentences

2,163,317 2,154,850

Treasury stock, 40,927 and 40,573 shares of common held at cost

Treasury stock, 41,031 and 41,031 shares of common stock held at cost

1,409,611 1,409,611

9 unchanged sentences

(in thousands, except per share data)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,

2021 2020 2021 2020

For the Three Months Ended March 31,

Patent licensing royalties $ 101,079 $ 80,173

11 unchanged sentences

Income before income taxes 23,665 5,723

INCOME TAX (PROVISION) BENEFIT ( 4,253 ) 12,843 ( 6,039 ) 5,879

INCOME TAX PROVISION ( 5,961 ) ( 1,765 )

NET INCOME $ 17,704 $ 3,958

11 unchanged sentences

(in thousands)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,

2021 2020 2021 2020

For the Three Months Ended March 31,

Net income $ 17,704 $ 3,958

Unrealized (loss) gain on investments, net of tax ( 67 ) ( 362 ) ( 206 ) 82

Unrealized loss on investments, net of tax ( 310 ) ( 70 )

Comprehensive income $ 17,394 $ 3,888

16 unchanged sentences

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

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

Net income attributable to InterDigital, Inc.

1 unchanged sentence

Net loss attributable to noncontrolling interest — — — — — — — ( 1,613 ) ( 1,613 )

Net change in unrealized gain on short-term investments — — — — 32 — — — 32

Noncontrolling interest distribution — — — — — — — ( 1,109 ) ( 1,109 )

Net change in unrealized loss on short-term investments — — — — ( 70 ) — — — ( 70 )

Dividends declared ($ 0.35 per share)

6 unchanged sentences

71,476 $ 714 $ 683,270 $ 1,424,151 $ ( 254 ) 40,664 $ ( 1,385,361 ) $ 20,475 $ 742,995

Net income attributable to InterDigital, Inc.

— — — 22,251 — — — — 22,251

Net loss attributable to noncontrolling interest — — — — — — — ( 1,660 ) ( 1,660 )

Net change in unrealized gain on short-term investments — — — — 412 — — — 412

Dividends declared ($ 0.35 per share)

— — 136 ( 10,917 ) — — — — ( 10,781 )

Exercise of common stock options 19 — 1,014 — — — — — 1,014

Issuance of common stock, net 36 — ( 755 ) — — — — — ( 755 )

Amortization of unearned compensation — — 4,629 — — — — — 4,629

BALANCE, JUNE 30, 2020

71,377 $ 713 $ 734,565 $ 1,413,382 $ 370 40,573 $ ( 1,379,611 ) $ 21,287 $ 790,706

Net income attributable to InterDigital, Inc.

— — — 23,784 — — — — 23,784

Net loss attributable to noncontrolling interest — — — — — — — ( 1,882 ) ( 1,882 )

Net change in unrealized loss on short-term investments — — — — ( 362 ) — — — ( 362 )

Dividends declared ($ 0.35 per share)

— — 145 ( 10,927 ) — — — — ( 10,782 )

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

Issuance of common stock, net 2 — ( 55 ) — — — — — ( 55 )

Amortization of unearned compensation — — 1,267 — — — — — 1,267

BALANCE, SEPTEMBER 30, 2020

71,379 $ 713 $ 735,922 $ 1,426,239 $ 8 40,573 $ ( 1,379,611 ) $ 19,405 $ 802,676

Common Stock Additional

6 unchanged sentences

BALANCE, DECEMBER 31, 2021 71,720 $ 717 $ 713,599 $ 1,441,105 $ ( 571 ) 41,031 $ ( 1,409,611 ) $ 7,678 $ 752,917

Adjustment to Retained Earnings related to adoption of ASU 2020-06 — — — ( 50,184 ) — — — — ( 50,184 )

Net income attributable to InterDigital, Inc.

2 unchanged sentences

Noncontrolling interest distribution — — — — — — — ( 1,928 ) ( 1,928 )

Noncontrolling interest contribution — — — — — — — 1,500 1,500

Net change in unrealized loss on short-term investments — — — — ( 310 ) — — — ( 310 )

4 unchanged sentences

Amortization of unearned compensation — — 5,386 — — — — — 5,386

Repurchase of common stock — — — — — 91 ( 5,750 ) — ( 5,750 )

BALANCE, MARCH 31, 2022

71,883 $ 718 $ 715,342 $ 1,448,138 $ ( 881 ) 41,031 $ ( 1,409,611 ) $ 6,960 $ 760,666

Net income attributable to InterDigital, Inc.

— — — 1,618 — — — — 1,618

Net loss attributable to noncontrolling interest — — — — — — — ( 8,415 ) ( 8,415 )

Net change in unrealized loss on short-term investments — — — — ( 69 ) — — — ( 69 )

Dividends declared ($ 0.35 per share)

— — 158 ( 10,925 ) — — — — ( 10,767 )

Exercise of common stock options 71 1 3,631 — — — — — 3,632

Issuance of common stock, net 41 — ( 711 ) — — — — — ( 711 )

Amortization of unearned compensation — — 3,775 — — — — — 3,775

Repurchase of common stock — — — — — 82 ( 5,391 ) — ( 5,391 )

BALANCE, JUNE 30, 2021

71,588 $ 715 $ 745,472 $ 1,349,073 $ ( 323 ) 40,746 $ ( 1,390,752 ) $ 12,060 $ 716,245

Net income attributable to InterDigital, Inc.

— — — 26,228 — — — — 26,228

Net loss attributable to noncontrolling interest — — — — — — — ( 1,014 ) ( 1,014 )

Net change in unrealized gain (loss) on short-term investments — — — — ( 67 ) — — — ( 67 )

Dividends declared ($ 0.35 per share)

— — 183 ( 10,923 ) — — — — ( 10,740 )

Exercise of common stock options 23 1 1,515 — — — — — 1,516

Issuance of common stock, net 5 — ( 74 ) — — — — — ( 74 )

Amortization of unearned compensation — — 15,082 — — — — — 15,082

Repurchase of common stock — — — — — 181 ( 11,859 ) — ( 11,859 )

BALANCE, SEPTEMBER 30, 2021

71,616 $ 716 $ 762,178 $ 1,364,378 $ ( 390 ) 40,927 $ ( 1,402,611 ) $ 11,046 $ 735,317

The accompanying notes are an integral part of these statements.

3 unchanged sentences

(in thousands)

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

For the Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 17,704 $ 3,958

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 19,282 19,861

Non-cash interest expense, net 1,498 1,819

Non-cash change in fair-value ( 949 ) ( 5,501 )

Change in deferred revenue ( 50,741 ) ( 23,429 )

1 unchanged sentence

Share-based compensation 5,386 2,153

Impairment of patents 11,000 —

Other — ( 63 )

Increase in assets

Decrease (Increase) in assets

Receivables 7,475 3,507

Deferred charges and other assets ( 2,772 ) 631

Increase (decrease) in liabilities:

Increase (Decrease) increase in liabilities:

Accounts payable 420 ( 291 )

Accrued compensation and other expenses ( 18,716 ) ( 16,234 )

Net cash provided by operating activities 59,163 144,212

Net cash used in operating activities ( 17,972 ) ( 9,842 )

CASH FLOWS FROM INVESTING ACTIVITIES:

4 unchanged sentences

Long-term investments — ( 1,091 )

Net cash used in investing activities ( 12,549 ) ( 21,976 )

Net cash provided by (used in) investing activities 107,602 ( 47,026 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from exercise of stock options 1,226 737

Payments on long-term debt — ( 94,909 )

Repurchase of common stock — ( 5,750 )

Non-controlling interest contribution 1,500 —

Non-controlling interest distribution — ( 1,109 )

2 unchanged sentences

Net cash used in financing activities ( 13,041 ) ( 19,870 )

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 7,676 ) ( 5,055 )

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 76,589 ( 76,738 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 713,224 477,663

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

March 31, 2022

BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited, condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of InterDigital, Inc.

(individually and/or collectively with its subsidiaries referred to as “InterDigital,” the “Company,” “we,” “us” or “our,” unless otherwise indicated) as of September 30, 2021, the results of our operations for the three and nine months ended September 30, 2021 and 2020 and our cash flows for the nine months ended September 30, 2021 and 2020.

(individually and/or collectively with its subsidiaries referred to as “InterDigital,” the “Company,” “we,” “us” or “our,” unless otherwise indicated) as of March 31, 2022, the results of our operations for the three months ended March 31, 2022 and 2021 and our cash flows for the three months ended March 31, 2022 and 2021.

The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the detailed schedules, information and notes necessary to state fairly the financial condition, results of operations and cash flows in conformity with United States generally accepted accounting principles (“GAAP”).

6 unchanged sentences

Actual results could differ from these estimates.

InterDigital has analyzed the impact of the ongoing Coronavirus pandemic (“COVID-19”) on its financial statements as of September 30, 2021.

InterDigital has analyzed the impact of the ongoing Coronavirus pandemic (“COVID-19”) on its financial statements as of March 31, 2022.

InterDigital has determined that the changes to its significant judgments and estimates as a result of COVID-19 did not have a material impact on its financial statements.

3 unchanged sentences

Prior Periods' Financial Statement Revision

In connection with the preparation of the condensed consolidated financial statements as of and for the three months ended June 30, 2021, it was identified that we incorrectly classified certain tax receivables, representing approximately 1.5 % of total assets as of December 31, 2020, as other current assets instead of non-current in the presentation of our consolidated balance sheet.

We assessed the materiality of this misstatement on prior periods’ financial statements in accordance with ASC Topic 250, Accounting Changes and Error Corrections, (“ASC 250”) and concluded it was not material to any prior annual or interim periods.

In accordance with ASC 250, we have corrected our presentation of other current and non-current assets for prior periods presented in this Form 10-Q by revising the condensed consolidated financial statements and other consolidated financial information included herein.

We will continue to present the prior periods on this revised basis to the extent we present such prior periods in future filings.

Refer to Note 10, " Other Assets " for additional information on the revision.

As previously disclosed in our 2021 Form 10-K filed with the SEC on February 17, 2022, during the fourth quarter of 2021, we determined that in our first quarter 2021 adoption of ASU 2020-06, Accounting for Convertible Debt, we incorrectly accounted for the adoption by increasing debt and decreasing retained earnings by $ 50.2 million, which resulted in a $ 10.4 million understatement of deferred taxes, $ 65.8 million understatement of retained earnings and $ 55.4 million overstatement of additional paid-in capital as of March 31, 2021.

While we concluded that this error did not result in our previously issued 2021 interim financial statements being materially misstated, we have corrected the misstatement by revising the accompanying Condensed Consolidated Statement of Shareholder’s Equity as of and for the three months ended March 31, 2021.

We will prospectively revise our previously issued financial statements as of and for the interim periods ended June 30, 2021 and September 30, 2021 in connection with our second quarter and third quarter 2022 quarterly filings on Form 10-Q.

The accompanying annual footnotes have also been adjusted to reflect such correction.

Reclassifications

1 unchanged sentence

Supplemental Cash Flow Information

The following table presents additional supplemental cash flow information for the nine months ended September 30, 2021 and 2020 (in thousands):

FOR THE NINE MONTHS ENDED SEPTEMBER 30,

The following table presents additional supplemental cash flow information for the three months ended March 31, 2022 and 2021 (in thousands):

For the Three Months Ended March 31,

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid $ 4,000 $ 4,712

Income taxes paid, including foreign withholding taxes $ 3,349 $ 4,328

2 unchanged sentences

Non-cash acquisition of patents 30,100 —

Non-cash distribution of patents 1,928 —

Accrued capitalized patent costs and property and equipment 1,562 2,096

2 unchanged sentences

Accounting Standards Update:

Simplifying the Accounting for Income Taxes

In December 2019, the FASB issued ASU No.

2019-12, "Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes" ("ASU 2019-12").

The amendments in this ASU are intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

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

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 Instruments

In August 2020, the FASB issued ASU No.

2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”).

The amendments in this ASU are intended to simplify accounting for convertible debt instruments and convertible preferred stock by removing certain accounting models which separate the embedded conversion features from the host contract.

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 is 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 elected to early adopt this standard on a modified retrospective approach as of January 1, 2021.

This adoption increased long-term debt by $ 50.2 million at January 1, 2021, which was comprised of $ 51.6 million of unamortized interest discount and was partially offset by a net increase of $ 1.4 million 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 7, " 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.

Lastly, 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 both basic and diluted earnings per share by $ 0.09 in the three months ended September 30, 2021 and $ 0.26 in the nine months ended September 30, 2021.

Accounting Standards Update:

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

2 unchanged sentences

ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, with early adoption allowed.

The Company is currently evaluating the anticipated impact of the adoption of ASU 2021-04 on its consolidated financial statements.

We adopted this guidance as of January 1, 2022 and the adoption did not have a material impact on our consolidated financial statements.

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three months ended September 30,

2021 2020 Increase/(Decrease)

Variable patent royalty revenue $ 8,346 $ 7,377 $ 969 13 %

Fixed-fee royalty revenue 84,295 77,338 6,957 9 %

Current patent royalties a

92,641 84,715 7,926 9 %

Non-current patent royalties b

50,108 507 49,601 9,783 %

Total patent royalties 142,749 85,222 57,527 68 %

Current technology solutions revenue a

747 2,271 ( 1,524 ) ( 67 ) %

Total revenue $ 143,496 $ 87,493 $ 56,003 64 %

Nine months ended September 30,

The following table presents the disaggregation of our revenue for the three months ended March 31, 2022 and 2021 (in thousands):

Three months ended March 31,

2022 2021 Increase/(Decrease)

11 unchanged sentences

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

During the nine months ended September 30, 2021, we recognized $ 186.9 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of September 30, 2021, we had contract assets of $ 20.5 million and $ 8.7 million included within " Accounts receivable " and " Other non-current assets, net " in the condensed consolidated balance sheet, respectively.

During the three months ended March 31, 2022, we recognized $ 83.8 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of March 31, 2022, we had contract assets of $ 18.9 million and $ 7.9 million included within " Accounts receivable " and " Other non-current assets, net " in the condensed 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 " and " Other non-current assets, net " in the condensed consolidated balance sheet, respectively.

Contracted Revenue

Based on contracts signed and committed as of September 30, 2021, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands):

Remainder 2021 $ 89,541

2025 and beyond 60,000

Based on contracts signed and committed as of March 31, 2022, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands):

Remainder of 2022 $ 234,529

2026 and thereafter —

Total Revenue $ 490,457

In the nine months ended September 30, 2021 and 2020, the Company had an effective tax rate of 21.3 % and ( 16.8 )%, respectively.

The effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit, as well as by the foreign-derived intangible income deduction and non-deductible compensation.

Excluding this valuation allowance, our effective tax rate for the nine months ended September 30, 2021 and 2020 would have been 8.4 % and ( 31.3 )% respectively.

During the nine months ended September 30, 2021 and 2020, the Company recorded a discrete net expense of $ 0.3 million and $ 18.2 million, respectively, primarily related to share-based compensation and the expected amendment of a prior year return to utilize a tax asset generated in the prior year.

Due to the closing of the statute of limitations on certain tax years, the Company believes it is reasonably possible that it will have a reduction in the liability for unrecognized tax benefits of $ 1.1 million, excluding interest and penalties.

In the three months ended March 31, 2022 and 2021, the Company had an effective tax rate of 25.2 % and 30.8 %, respectively.

The effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit.

Excluding this valuation allowance, our effective tax rate for the three months ended March 31, 2022 and 2021 would have been 19.2 % and 12.0 % respectively.

During both the three months ended March 31, 2022 and 2021, the Company recorded a discrete net benefit of $ 0.3 million primarily related to share-based compensation and changes in uncertain tax positions.

The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs.

domestic classification of the Company’s customers, and any discrete items that may occur.

During the nine months ended September 30, 2021 and 2020, the Company paid approximately $ 8.9 million and $ 17.8 million, respectively, in foreign source creditable withholding tax.

During the three months ended March 31, 2022 and 2021, the Company paid approximately $ 3.2 million and $ 3.6 million, respectively, in foreign source creditable withholding tax.

NET INCOME PER SHARE

Basic Earnings Per Share ("EPS") is calculated by dividing net income or loss available to common shareholders by the weighted-average number of common shares outstanding for the period.

Diluted EPS reflects the potential dilution that could occur if options or other securities with features that could result in the issuance of common stock were exercised or converted to common stock or resulting from the unvested outstanding RSUs.

The following tables reconcile the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Net income applicable to InterDigital, Inc.

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Set forth below are the securities and the weighted average number of shares of common stock underlying such securities that were excluded from our computation of EPS for the periods presented (in thousands):

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

Three months ended March 31,

Restricted stock units and stock options 414 120

Convertible securities (a)

— 4,921 — 5,222

Warrants 4,921 4,921

Total 5,335 5,041

______________________________

(a) As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $ 1,000 per $ 1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock.

Convertible Notes and Warrants

7 unchanged sentences

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.

European Patent (UK) Nos.

and 3,355,537.

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 is scheduled in January 2022.

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.

1 unchanged sentence

2,485,558 valid, infringed, and essential to Release 8 of LTE.

The Company is awaiting the court’s decision regarding the merits of the second technical trial.

Lenovo is appealing this decision.

On January 6, 2022, the UK High Court issued its decision regarding the second technical trial finding European Patent (UK) No.

3,355,537 invalid, but essential and infringed but for the finding of invalidity.

The Company plans to appeal the second technical trial decision as legally erroneous.

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

The third technical trial is scheduled to commence on May 10, 2022, to be completed by May 18, 2022.

District of Delaware Patent Proceeding

10 unchanged sentences

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 December 5, 2022.

Trial for the consolidated proceedings is scheduled for March 6, 2023.

On April 25, 2022, the parties filed a stipulation to stay only the claims relating to U.S.

District of Delaware Antitrust Proceeding

8 unchanged sentences

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 patent proceeding against Lenovo in the Delaware District Court discussed above.

China Proceeding

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

and certain of its affiliates filed a complaint against the Company and certain of its subsidiaries in the Beijing Intellectual Property Court (the “Beijing IP Court”) seeking a determination of the FRAND royalty rates payable for the Company's Chinese 3G, 4G and 5G SEPs.

On February 20, 2021, the Company filed an application challenging the jurisdiction of the Beijing IP Court to take up Lenovo’s complaint.

The jurisdictional challenge remains pending.

As a result of the license agreement between the Company and a subsidiary of Xiaomi Corporation ("Xiaomi"), the parties have ceased all activity in each of the disputes described below and will be taking timely action to formally withdraw all claims.

China Proceeding

On August 5, 2020, Xiaomi informed the Company that certain of its affiliates filed a complaint in the Wuhan Intermediate People's Court (the "Wuhan Court") seeking a determination of a global FRAND rate for a license to the Company's 3G and/or 4G/LTE SEPs.

The Company was informed that the Wuhan Court held an ex parte hearing on or about September 23, 2020 and issued an order that enjoins the Company from seeking an injunction against Xiaomi and certain of its subsidiaries for infringement of certain of the Company's 3G and/or 4G/LTE SEPs on threat of a fine of up to one million yuan per day for violating that order.

On September 30, 2020, the Company filed a response seeking reconsideration of the anti-suit injunction, which was denied.

The Company challenged that decision at the Supreme People's Court of the People's Republic of China, but that challenge was also denied.

The Wuhan Court held two evidentiary hearings in April and June 2021.

On July 29, 2021, the Wuhan Court held the first of multiple substantive hearings during which the parties presented their respective claims, defenses and evidence.

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 (the “Wuhan Court”) seeking a determination of a global FRAND royalty rate for the period from 2024 to 2029 for the Company’s 3G, 4G, and 5G SEPs.

On April 16, 2022, the Company filed an application challenging, among other things, process of service and the jurisdiction of the Wuhan Court.

That application remains pending.

German Proceedings

On March 25, 2022, March 28, 2022, and April 6, 2022, the Company and certain of its subsidiaries filed patent infringement claims in the Munich and Mannheim Regional Courts against Lenovo and certain of its affiliates, alleging infringement of European Patent Nos.

3,624,447 and 3,267,684 relating to HEVC standards.

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

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.

On January 19, 2022, Oppo filed a jurisdictional challenge with the UK High Court which is scheduled for a two-day hearing starting October 25, 2022.

India Proceeding

On July 29, 2020, the Company and certain of its subsidiaries filed two patent infringement actions in the Delhi High Court (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.

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

On May 3, 2021, the interim anti-anti-suit injunction was made permanent for the duration of the Indian cellular case.

On June 4, 2021, Xiaomi filed responses to the two complaints (cellular and H.265/HEVC), which included counterclaims seeking invalidation of the patents in the respective suits.

The Company filed its replies on July 5, 2021.

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 pursuing the Wuhan Court's anti-suit injunction order described above with respect to Germany.

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

Xiaomi opposed the injunction and requested a stay of enforcement.

On January 28, 2021, the Munich District Court dismissed the request for stay of enforcement.

On February 25, 2021 the Munich District Court confirmed its earlier ex parte anti-anti-suit injunction against Xiaomi.

Xiaomi appealed the decision to the Higher Regional Court Munich.

On April 27, 2021, the Company was informed that the Munich Regional Court commenced service of three patent infringement actions filed against Xiaomi and certain of its subsidiaries by a subsidiary of the Company.

The complaints involve infringement of the Company's German 3G and/or 4G/LTE patents (Patent Nos.

EP 2,421,318;

EP 2,485,558;

and EP 3,355,537).

We are party to certain other disputes and legal actions in the ordinary course of business, including legal proceedings with licensees regarding the terms of their agreements and the negotiation thereof.

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 Regional Court and one in the Mannheim Regional Court, against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme and certain of its affiliates, alleging infringement of European Patent Nos.

and 2,421,318 relating to cellular 3G, 4G/LTE and/or 5G standards.

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

The Munich Regional Court has schedule hearings for November 17, 2022, and December 14, 2022.

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 (the “Guangzhou IP Court”) seeking a determination of a global FRAND royalty rate for the Company’s 3G, 4G, 5G, 802.11 and HEVC SEPs.

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.

We do not currently believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows.

None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of September 30, 2021.

None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of March 31, 2022.

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

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Cash, cash equivalents and restricted cash currently consists of money market and demand accounts.

The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of September 30, 2021, December 31, 2020 and September 30, 2020 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

September 30, December 31, September 30,

The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of March 31, 2022, December 31, 2021 and March 31, 2021 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

March 31, December 31, March 31,

2022 2021 2021

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

As of September 30, 2021 two licensees comprised 93 % and as of December 31, 2020 five licensees comprised 53 %, respectively, of our net accounts receivable balance.

As of March 31, 2022 three licensees comprised 66 % and as of December 31, 2021 four licensees comprised 66 % of our net accounts receivable balance.

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

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Our financial assets are generally included within short-term investments on our condensed consolidated balance sheets, unless otherwise indicated.

Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of September 30, 2021 and December 31, 2020 (in thousands):

Fair Value as of September 30, 2021

Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of March 31, 2022 and December 31, 2021 (in thousands):

Fair Value as of March 31, 2022

Level 1 Level 2 Level 3 Total

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(a) Primarily included within cash and cash equivalents.

(b) As of September 30, 2021 and December 31, 2020, $ 0.0 million and $ 80.1 million, respectively, of commercial paper was included within cash and cash equivalents.

(b) As of March 31, 2022 and December 31, 2021, $ 0.0 million and $ 7.5 million, respectively, of commercial paper was included within cash and cash equivalents.

Non-Recurring Fair Value Measurements

Investments in Other Entities

During second quarter 2021, we recognized a $ 1.0 million unrealized gain resulting from observable price changes of one of our long-term strategic investments, which was included within “ Other (expense) income, net ” in the condensed consolidated statement of income.

During first quarter 2020, we recognized a $ 5.5 million unrealized gain resulting from observable price changes of one of our long-term strategic investments, which was included within “ Other (expense) income, net ” in the condensed consolidated statement of income.

During first quarter 2020, we recognized a $ 1.1 million impairment, comprised of $ 0.8 million of Property, Plant, and Equipment, and $ 0.3 million of Right of Use Asset related to the abandonment of one of our leased properties, which was included within “ Operating Expenses ” in the condensed consolidated statement of income.

During second quarter 2021, Convida approved a plan to sell certain patent assets, which were classified as held-for sale.

This resulted in an impairment of $ 11.0 million and was included within restructuring activities as more fully discussed below.

The patents held for sale are recorded at fair value on September 30, 2021 and are included within " Prepaid and other current assets " in the condensed consolidated balance sheet.

During second quarter 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patent assets, which were classified as held-for sale.

These patents held for sale are recorded at fair value on March 31, 2022 and are included within " Prepaid and other current assets " in the condensed consolidated balance sheet.

We determined the fair value based upon evaluation of market conditions.

During fourth quarter 2021, we renewed our multi-year, worldwide, non-exclusive patent license agreement with Sony Corporation of America ("Sony").

A portion of the consideration for the agreement was in the form of patents, which we received in March 2022.

We have determined the 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 approaches.

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

Fair Value of Long-Term Debt

The principal amount, carrying value and related estimated fair value of the Company's senior convertible debt reported in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020 was as follows (in thousands).

The principal amount, carrying value and related estimated fair value of the Company's senior convertible debt reported in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 was as follows (in thousands).

The aggregate fair value of the principal amount of the senior convertible long-term debt is a Level 2 fair value measurement.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Amount Carrying

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Technicolor Patent Acquisition Long-term Debt

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported in the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020 was as follows (in thousands).

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported in the condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021 was as follows (in thousands).

The aggregate fair value of the Technicolor Patent Acquisition long-term debt is a Level 3 fair value measurement.

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Value Carrying

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On July 30, 2018, we completed our acquisition of the patent licensing business of Technicolor SA ("Technicolor"), a worldwide technology leader in the media and entertainment sector (the "Technicolor Patent Acquisition").

In conjunction with the Technicolor Patent Acquisition we assumed Technicolor’s rights and obligations under a joint licensing program with Sony Corporation ("Sony") relating to digital televisions and standalone computer display monitors, which commenced in 2015 and is referred to as the "Madison Arrangement." An affiliate of CPPIB Credit Investments Inc.

In conjunction with the Technicolor Patent Acquisition we assumed Technicolor’s rights and obligations under a joint licensing program with Sony relating to digital televisions and standalone computer display monitors, which commenced in 2015 and is referred to as the "Madison Arrangement." An affiliate of CPPIB Credit Investments Inc.

("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement.

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This initial fair value measurement was based on the perspective of a market participant and included significant unobservable inputs which are classified as Level 3 inputs within the fair value hierarchy.

The fair value of the long-term debt as of September 30, 2021 and December 31, 2020 is disclosed within Note 6, " Cash, Concentration of Credit Risk and Fair Value of Financial Instruments.

The fair value of the long-term debt as of March 31, 2022 and December 31, 2021 is disclosed within Note 6, " Cash, Concentration of Credit Risk and Fair Value of Financial Instruments.

" Our repayment obligations are contingent upon future royalty revenues generated from the Madison Arrangement and there are no minimum or maximum payments under the arrangement.

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This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt as of the acquisition date, and is used to compute the amount of interest to be recognized each period based on the estimated life of the future revenue streams.

During the three and nine months ended September 30, 2021, we recognized $ 0.4 million and $ 2.0 million, respectively, of interest expense related to this debt, compared to $ 0.8 million and $ 2.3 million during the three and nine months ended September 30, 2020, respectively.

During the three months ended March 31, 2022 and 2021, we recognized $ 0.9 million and $ 0.8 million, respectively, of interest expense related to this debt.

This was included within “ Interest Expense ” in the condensed consolidated statements of income.

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There have been no material changes regarding the 2024 Notes and 2024 Call Spread Transactions from the disclosures included in Note 9, " Obligations " within the notes to the consolidated financial statements included in Part II, Item 8 of the 2021 Form 10-K.

On March 11, 2015, we issued $ 316.0 million in aggregate principal amount of 1.50 % Senior Convertible Notes due 2020 (the "2020 Notes").

The 2020 Notes bore interest at a rate of 1.50 % per year and matured on March 1, 2020.

On the maturity date, the outstanding balance of $ 94.9 million under the 2020 Notes was repaid in full.

The following table reflects the carrying value of our convertible notes long-term debt as of September 30, 2021 and December 31, 2020 (in thousands):

September 30, 2021 December 31, 2020

The following table reflects the carrying value of our convertible notes long-term debt as of March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022 December 31, 2021

Principal $ 400,000 $ 400,000

Unamortized interest discount (a)

Deferred financing costs (a)

( 4,783 ) ( 4,612 )

Deferred financing costs ( 3,944 ) ( 4,368 )

Net carrying amount of the 2024 Notes $ 396,056 $ 395,632

______________________________

(a) 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 1, " Basis of Presentation ", for further information regarding this adoption.

The following table presents the amount of interest cost recognized, which is included within " Interest Expense" in our condensed consolidated statements of income, for the three and nine months ended September 30, 2021 and 2020 relating to the contractual interest coupon, accretion of the debt discount, and the amortization of deferred financing costs of the 2024 Notes and 2020 Notes (in thousands):

Three months ended September 30,

2024 Notes 2024 Notes 2020 Notes Total

Contractual coupon interest $ 2,000 $ 2,000 $ — $ 2,000

Accretion of debt discount (a)

— 3,323 — 3,323

Amortization of deferred financing costs 411 297 — 297

Total $ 2,411 $ 5,620 $ — $ 5,620

Nine months ended September 30,

2024 Notes 2024 Notes 2020 Notes Total

The following table presents the amount of interest cost recognized, which is included within " Interest Expense" in our condensed consolidated statements of income, for the three months ended March 31, 2022 and 2021 relating to the contractual interest coupon and the amortization of deferred financing costs of the 2024 Notes (in thousands):

Three months ended March 31,

Contractual coupon interest $ 2,000 $ 2,000

Accretion of debt discount (a)

— 9,800 669 10,469

Amortization of deferred financing costs 424 398

Total $ 2,424 $ 2,398

______________________________

(a) Due to the adoption of ASU 2020-06, there is no longer accretion of the debt discount starting January 1, 2021.

Refer to Note 1, " Basis of Presentation ", for further information regarding this adoption.

Technicolor Contingent Consideration

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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 September 30, 2021, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements.

As of March 31, 2022, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements.

VARIABLE INTEREST ENTITIES

As further discussed below, we are the primary beneficiary of three variable interest entities.

As of September 30, 2021, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were $ 37.6 million and $ 2.9 million, respectively.

As of March 31, 2022, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were $ 20.8 million and $ 2.3 million, respectively.

Assets included $ 7.3 million of cash and cash equivalents, $ 4.1 million of accounts receivable and prepaid and other current assets, and $ 9.4 million of patents, net.

2 unchanged sentences

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

The spinout of the unit, which includes an affiliate of Sony as an investor along with the Company, gave 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 three and nine months ended September 30, 2021, we have allocated approximately $ 0.0 million and $ 2.3 million, respectively, of Chordant's net loss to noncontrolling interests held by other parties, and for the three and nine months September 30, 2020, we allocated $ 0.4 million and $ 0.9 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.

For the three months ended March 31, 2022 and 2021, we have allocated approximately $ 0.0 million and $ 0.1 million, respectively, of Chordant's net loss to noncontrolling interests held by other parties.

Chordant ceased operations during 2021.

Convida Wireless

Convida Wireless was launched in 2013 and most recently renewed in 2021 to combine Sony's consumer electronics expertise with our pioneering IoT expertise to drive IoT communications and connectivity.

Based on the terms of the agreement, the parties 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.

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

Convida Wireless is a variable interest entity.

Based on our provision of research and platform development services to Convida Wireless, we have determined that we remain the primary beneficiary for accounting purposes and will continue to consolidate Convida Wireless.

For the three and nine months ended September 30, 2021, we allocated $ 1.0 million and $ 8.7 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other parties and for the three and nine months ended September 30, 2020, we allocated $ 1.5 million and $ 4.4 million, respectively.

During second quarter 2021, Convida approved a plan to sell certain patent assets, which were classified as held-for sale.

This resulted in an impairment of $ 11.0 million and was included within restructuring activities as more fully discussed below.

The patents held for sale are recorded at fair value on September 30, 2021 and are included within " Prepaid and other current assets " in the condensed consolidated balance sheet.

For the three months ended March 31, 2022 and 2021, we allocated $ 0.3 million and $ 1.5 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other parties.

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 the Trust, in first quarter 2021 we provided our consent, as major beneficiary, to dissolve the 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.

Pending the dissolution of the Trust, we will continue to consolidate the Trust in our consolidated financial statements.

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.

OTHER (EXPENSE) INCOME, NET

The amounts included in " Other (expense) income, net " in the condensed consolidated statements of income for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2021 2020 2021 2020

The amounts included in " Other (expense) income, net " in the condensed consolidated statements of income for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three months ended March 31,

Interest and investment income $ 209 $ 553

1 unchanged sentence

Other (expense) income, net $ ( 1,005 ) $ 724

Interest and investment income decreased in both the three and nine months ended September 30, 2021, due to reduced rates of return on our short-term investments.

Other decreased in the three months ended September 30, 2021, compared to the three months ended September 30, 2020 primarily due to a foreign currency translation loss in the three months ended September 30, 2021, compared to a gain in three months ended September 30, 2020 arising from euro translation of our foreign subsidiaries.

The decrease in other in the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020 was primarily driven by a decrease in gains resulting from observable price changes of our long-term strategic investments, which were $ 5.5 million during the nine months ended September 30, 2020 and $ 1.0 million during the nine months ended September 30, 2021.

This decrease was partially offset by a $ 1.9 million gain on a contract termination in first quarter 2021.

The amounts included in " Prepaid and other current assets " in the consolidated balance sheet as of September 30, 2021 and December 31, 2020 were as follows (in thousands):

As Reported As Revised (a)

September 30, 2021 December 31, 2020 December 31, 2020

Other (expense) income, net changed $ 1.7 million primarily due to a $ 1.9 million gain on a contract termination recognized in first quarter 2021.

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

March 31, 2022 December 31, 2021

Tax receivables $ 55,290 $ 57,127

Prepaid assets 8,662 5,479

Restricted cash 5,716 5,861

Patents held for sale 4,000 4,000

Receivable from sale of long-term investments 3,016 — —

Operating lease receivable 64 817 817

Other current assets 4,687 5,078

Total Prepaid and other current assets $ 78,355 $ 77,545

The amounts included in " Other non-current assets, net " in the consolidated balance sheet as of September 30, 2021 and December 31, 2020 were as follows (in thousands):

As Reported As Revised (a)

September 30, 2021 December 31, 2020 December 31, 2020

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

March 31, 2022 December 31, 2021

Tax receivables $ 32,252 $ 30,026

4 unchanged sentences

Total Other non-current assets, net $ 104,215 $ 102,501

_____________________________

(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 which 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 will be issued during the remainder of 2021.

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, Convida approved a plan to sell certain patents.

The proceeds from the sale of these patents will contribute to funding Convida's operations.

All notices of termination have been issued to the impacted employees.

During 2021, Chordant ceased operations.

The Company implemented a reduction in workforce action in second quarter 2021.

Additionally, in June 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patents.

The proceeds from the sale of these patents will contribute to funding the non-controlled subsidiary'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 an $ 11.0 million impairment during the three months ended June 30, 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 resulted in a further reduction in force as well as cuts to our non-labor expenses.

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

Restructuring charges are estimated based on information available at the time such charges are recorded.

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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 $ 7.0 million and $ 20.3 million in the three and nine months ended September 30, 2021, respectively, are presented net of any reimbursement arrangements and include $ 0.1 million and $ 1.2 million of outside services and other associated costs related to non-recurring consultant and legal fees in the three and nine months ended September 30, 2021.

We expect additional charges to be recorded in fourth quarter 2021.

As of September 30, 2021, the Company's restructuring liability was $ 17.8 million, of which $ 6.9 million was included in " Other accrued expenses " and $ 10.9 million was included in " Other long-term liabilities " on our condensed consolidated balance sheet.

The restructuring charges associated with the above activities totaling $ 0.5 million and $ 0.0 million in the three months ended March 31, 2022 and 2021, respectively.

We expect additional restructuring charges of $ 3.0 million to $ 4.0 million largely related to aligning our facilities with our current needs.

As of March 31, 2022, the Company's restructuring liability was $ 14.3 million and was included in " Other accrued expenses " on our condensed consolidated balance sheet.

As of December 31, 2021, the Company's restructuring liability was $ 18.3 million, of which $ 12.5 million was included in " Other accrued expenses " and $ 5.8 million was included in " Other long-term liabilities " on our condensed consolidated balance sheet.

The following table presents the change in our restructuring liability during the period (in thousands):

Balance as of March 31, 2021 $ —

Accrual 12,285

Cash payments ( 628 )

Balance as of June 30, 2021 $ 11,657

Accrual 7,033

Balance as of December 31, 2021 $ 18,281

Cash payments ( 4,519 )

Balance as of September 30, 2021 $ 17,831

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

Three months ended September 30, 2021 Nine months ended September 30, 2021

Patent impairment $ — $ 11,000

Balance as of March 31, 2022 $ 14,346

The restructuring expenses included in " Restructuring activities " in the condensed consolidated statements of income for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three months ended March 31,

Severance and other benefits 527 —

Outside services and other associated costs 15 —

Reimbursement arrangements — ( 10,040 )

Total $ 542 $ —

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-Q

Item 1. Financial Statements