What changed in this filing

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Item 1. Financial Statements

2023-08-03 compared with 2023-05-04 · 162 added, 82 removed, 504 unchanged (33% of the section changed)

4 unchanged sentences

(in thousands, except per share data)

2023 DECEMBER 31,

JUNE 30, 2023 DECEMBER 31, 2022

CURRENT ASSETS:

12 unchanged sentences

CURRENT LIABILITIES:

Current portion of long-term debt $ 125,628 $ —

Accounts payable 8,313 9,997

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(in thousands, except per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

REVENUES $ 101,591 $ 124,657 $ 303,964 $ 225,975

OPERATING EXPENSES:

Research and portfolio development 49,878 45,177 99,307 89,354

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(in thousands)

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Net income $ 21,293 $ 20,584 $ 124,813 $ 38,288

Unrealized gain (loss) on investments, net of tax 579 ( 310 )

Unrealized loss on investments, net of tax ( 1,839 ) ( 57 ) ( 1,260 ) ( 367 )

Comprehensive income $ 19,454 $ 20,527 $ 123,553 $ 37,921

29 unchanged sentences

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

Net income attributable to InterDigital, Inc.

— — — 21,069 — — — — 21,069

Net loss attributable to noncontrolling interest — — — — — — — ( 485 ) ( 485 )

Net change in unrealized loss on short-term investments — — — — ( 57 ) — — — ( 57 )

Dividends declared ($ 0.35 per share)

— — 153 ( 10,533 ) — — — — ( 10,380 )

Issuance of common stock, net 29 1 ( 708 ) — — — — — ( 707 )

Amortization of unearned compensation — — 3,977 — — — — — 3,977

Repurchase of common stock — — — — — 1,224 ( 74,445 ) — ( 74,445 )

Net convertible note hedge transactions, net of tax — — ( 54,257 ) — — — — — ( 54,257 )

Net warrant transactions — — 39,863 — — — — — 39,863

BALANCE, JUNE 30, 2022

71,912 $ 719 $ 704,370 $ 1,458,674 $ ( 938 ) 42,255 $ ( 1,484,056 ) $ 6,475 $ 685,244

Common Stock Additional

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69,329 $ 693 $ 719,129 $ 1,384,243 $ ( 337 ) 42,255 $ ( 1,484,056 ) $ 5,629 $ 625,301

Net income attributable to InterDigital, Inc.

— — — 21,783 — — — — 21,783

Net loss attributable to noncontrolling interest — — — — — — — ( 490 ) ( 490 )

Net change in unrealized loss on short-term investments — — — — ( 1,839 ) — — — ( 1,839 )

Dividends declared ($ 0.35 per share)

— — 360 ( 9,633 ) — — — — ( 9,273 )

Exercise of common stock options 1 — 12 — — — — — 12

Issuance of common stock, net 42 — ( 1,389 ) — — — — — ( 1,389 )

Amortization of unearned compensation — — 8,740 — — — — — 8,740

Repurchase of common stock — — — — — 548 ( 42,489 ) — ( 42,489 )

BALANCE, JUNE 30, 2023

69,372 $ 693 $ 726,852 $ 1,396,393 $ ( 2,176 ) 42,803 $ ( 1,526,545 ) $ 5,139 $ 600,356

The accompanying notes are an integral part of these statements.

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(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Change in deferred revenue ( 81,407 ) ( 127,700 )

Loss on extinguishment of debt — 11,190

Deferred income taxes 430 9,850

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of convertible senior notes — 460,000

Purchase of convertible bond hedge — ( 80,500 )

Proceeds from issuance of warrants — 43,700

Payments on long-term debt — ( 282,499 )

Proceeds from hedge unwind — 11,851

Payment for warrant unwind — ( 3,837 )

Payments of debt issuance costs ( 100 ) ( 8,726 )

4 unchanged sentences

Dividends paid ( 19,833 ) ( 21,544 )

Net cash used in financing activities ( 218,136 ) ( 13,041 )

Net cash (used in) provided by financing activities ( 271,452 ) 40,993

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 412,289 ) 131,968

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2023

June 30, 2023

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 March 31, 2023, the results of our operations for the three months ended March 31, 2023 and 2022 and our cash flows for the three months ended March 31, 2023 and 2022.

(individually and/or collectively with its subsidiaries referred to as “InterDigital,” the “Company,” “we,” “us” or “our,” unless otherwise indicated) as of June 30, 2023, the results of our operations for the three and six months ended June 30, 2023 and 2022 and our cash flows for the six months ended June 30, 2023 and 2022.

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

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The Company grouped research and portfolio related costs within the line " Research and portfolio development ", previously referred to as " Development ", which resulted in reclassifying certain portfolio related costs out of the " Licensing " line, previously referred to as " Patent administration and licensing ", and into " Research and portfolio development.

" The impact of this reclassification was $ 26.6 million for the three months ended March 31, 2022.

" The impact of this reclassification was $ 28.1 million and $ 54.7 million for the three and six months ended June 30, 2022, respectively.

Additionally, the previous " Selling, general, and administrative " line is now referred to as " General and administrative ".

Beginning in third quarter 2022, we updated our disaggregated revenue disclosures to provide information to enable investors to better understand the composition of revenue from contracts with customers.

During 2022, we updated our disaggregated revenue disclosures to provide information to enable investors to better understand the composition of revenue from contracts with customers.

As a result, variable patent royalty revenue and fixed-fee royalty revenue was combined and disaggregated into the Smartphone and CE, IoT/Auto groupings.

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Supplemental Cash Flow Information

The following table presents additional supplemental cash flow information for the three months ended March 31, 2023 and 2022 (in thousands):

Three months ended March 31,

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

Six months ended June 30,

SUPPLEMENTAL CASH FLOW INFORMATION:

Interest paid $ 9,312 $ 3,938

Income taxes paid, including foreign withholding taxes 21,132 4,363

1 unchanged sentence

Dividend payable 9,273 10,380

Accrued debt issuance costs — 1,233

Right-of-use assets obtained in exchange of operating lease liabilities 93 417

Non-cash acquisition of patents — 30,100

1 unchanged sentence

Accrued capitalized patent costs and property and equipment purchases 729 3,634

Unsettled repurchase of common stock 1,998 —

New Accounting Guidance

No new accounting pronouncement issued or effective during the quarter had or is expected to have a material impact on our condensed consolidated interim financial statements.

No new accounting pronouncement issued or effective during first half of 2023 has or is expected to have a material impact on our condensed consolidated interim financial statements.

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three months ended March 31, 2023 and 2022 (in thousands):

Three months ended March 31,

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

Three months ended June 30,

2023 2022 Total Increase/(Decrease)

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Total revenues $ 101,591 $ 124,657 $ ( 23,066 ) ( 19 ) %

Six months ended June 30,

2023 2022 Total Increase/(Decrease)

Recurring revenues:

Smartphone $ 172,506 $ 175,182 $ ( 2,676 ) ( 2 ) %

CE, IoT/Auto 27,518 23,135 4,383 19 %

Other 622 911 ( 289 ) ( 32 ) %

Total recurring revenues 200,646 199,228 1,418 1 %

Catch-up revenues a

103,318 26,747 76,571 286 %

Total revenues $ 303,964 $ 225,975 $ 77,989 35 %

(a) Catch-up revenues are comprised of past patent royalties and revenues from static agreements.

During the three months ended March 31, 2023, we recognized $ 59.1 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of March 31, 2023, we had contract assets of $ 133.1 million and $ 19.6 million included within " Accounts receivable " and " Other non-current assets, net " in the condensed consolidated balance sheet, respectively.

During the six months ended June 30, 2023, we recognized $ 102.4 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of June 30, 2023, we had contract assets of $ 35.1 million and $ 39.1 million included within " Accounts receivable " and " Other non-current assets, net " in the condensed consolidated balance sheet, respectively.

As of December 31, 2022, we had contract assets of $ 32.9 million and $ 2.5 million included within " Accounts receivable " and " Other non-current assets, net " in the condensed consolidated balance sheet, respectively.

Contracted Revenue

Based on contracts signed and committed as of March 31, 2023, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands):

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

Remainder of 2023 $ 178,651

Thereafter 472,696

2028 and Thereafter 472,696

Total Revenue $ 1,661,542

1 unchanged sentence

In accordance with ASC 606, these estimates are limited to the amount of revenue we expect to recognize only to the extent it is probable that a subsequent change in the estimate would not result in a significant revenue reversal.

In the three months ended March 31, 2023 and 2022, the Company had an estimated annual effective tax rate of 14.0 % and 25.2 %, respectively.

The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income deduction benefit available to the Company due to higher taxable income and as well as timing difference between the recognition of book and tax revenue.

In the six months ended June 30, 2023 and 2022, the Company had an estimated annual effective tax rate of 14.5 % and 26.8 %, respectively.

The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income deduction benefit available to the Company due to higher taxable income inclusive of timing differences between the recognition of book and tax revenue.

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

Excluding this valuation allowance, our effective tax rate for the three months ended March 31, 2023 and 2022 would have been 13.8 % and 19.2 % respectively.

During both the three months ended March 31, 2023 and 2022, the Company recorded discrete net benefits of $ 1.0 million and $ 0.3 million, respectively, primarily related to share-based compensation.

Excluding this valuation allowance, our effective tax rate for the six months ended June 30, 2023 and 2022 would have been 13.0 % and 23.2 %, respectively.

During the six months ended June 30, 2023 the Company recorded a discrete net benefit of $ 1.2 million primarily related to share-based compensation.

The prior period included a net discrete tax expense of $ 2.3 million related to the extinguishment of long-term debt recognized during second quarter of 2022.

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

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

During the three months ended March 31, 2023 and 2022, the Company paid approximately $ 4.4 million and $ 3.2 million, respectively, in foreign source creditable withholding tax.

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

NET INCOME PER SHARE

2 unchanged sentences

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 March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Net income applicable to InterDigital, Inc.

10 unchanged sentences

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 March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Restricted stock units and stock options 4 529 212 471

24 unchanged sentences

A form of order hearing took place in May 2023 regarding the license terms, interest, costs, and permission to appeal.

The Company is awaiting the decision from that hearing.

We have accrued an estimated net one-time litigation fee reimbursement of $ 5.7 million in first quarter 2023 within the Licensing line in our Consolidated Statement of Income.

On June 27, 2023, the court issued an order awarding the Company an additional $ 46.2 million, thus increasing the total award to $ 184.9 million, which was paid on July 11, 2023.

The court also found that the Company should pay a portion of Lenovo’s costs and granted both parties permission to appeal on certain grounds.

The judge has not yet determined the amount of Lenovo’s costs the Company must pay.

District of Delaware Patent Proceedings

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On March 24, 2021, the Delaware District Court consolidated the antitrust proceeding discussed below with this patent proceeding.

Trial for the consolidated proceedings has been rescheduled from March 6, 2023 to July 10, 2023, and once again to December 4, 2023.

Trial for the consolidated proceedings was rescheduled from March 6, 2023 to July 10, 2023, and once again to December 4, 2023.

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

1 unchanged sentence

On January 13, 2023, Lenovo filed a motion to sever and stay the Company’s patent infringement claims, requesting that its Sherman Act and breach of FRAND claims proceed to trial.

That motion is currently pending.

On June 30, 2023, the parties submitted an update to the Court requesting that the case be stayed, and on July 18, 2023 the court ordered that the case be stayed pending all appeals in the UK proceedings.

District of Delaware Antitrust Proceedings

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The Delaware District Court dismissed the Sherman Act Section 1 claim without prejudice, denied the motion to dismiss the Sherman Act Section 2 claim, and consolidated the Section 2 and breach of contract claims with Company’s Delaware patent proceeding discussed above.

Accordingly, these claims have stayed pending all appeals in the UK proceedings.

China Proceedings

5 unchanged sentences

On November 9, 2022, the Company filed a petition to stay the case.

That petition is currently pending.

On June 12, 2023, the Beijing IP Court decided not to dismiss or stay the case at this time.

On November 26, 2021, the Company was informed that Lenovo had purportedly filed an additional complaint against the Company in the Wuhan Intermediate People’s Court (the “Wuhan Court”) seeking a determination of a global FRAND royalty rate for the period from 2024 to 2029 for the Company’s 3G, 4G, and 5G SEPs.

8 unchanged sentences

3,624,447 on May 2, 2023.

On May 17, 2023, based on the parties’ agreement, the court ordered a pause in the proceedings regarding European Patent No.

The Munich Regional Court has scheduled hearings regarding European Patent Nos.

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On January 12, 2023, the Guangzhou IP Court denied the application.

On February 28, 2023, the Company filed an appeal to the decision.

On February 28, 2023, the Company filed an appeal to the decision, which is still pending.

Spain Proceedings

7 unchanged sentences

On March 31, 2023, the Company filed a request for arbitration with the International Chamber of Commerce.

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

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 March 31, 2023, except as noted above.

None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of June 30, 2023, except as noted above.

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

1 unchanged sentence

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 March 31, 2023, December 31, 2022 and March 31, 2022 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

March 31, December 31, March 31,

2023 2022 2022

The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of June 30, 2023, December 31, 2022 and June 30, 2022 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

June 30, 2023 December 31, 2022 June 30, 2022

Cash and cash equivalents $ 277,599 $ 693,479 $ 833,533

4 unchanged sentences

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable.

We place our cash equivalents and short-term investments only in highly rated financial instruments and in United States government instruments.

We place our cash equivalents and short-term investments only in highly rated financial instruments, such as United States government instruments.

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

Four licensees comprised 94 % and 76 % of our net accounts receivable balance, as of March 31, 2023 and December 31, 2022, respectively.

Four licensees comprised 94 % and 76 % of our net accounts receivable balance as of June 30, 2023 and December 31, 2022, respectively.

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

13 unchanged sentences

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 March 31, 2023 and December 31, 2022 (in thousands):

Fair Value as of March 31, 2023

Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of June 30, 2023 and December 31, 2022 (in thousands):

Fair Value as of June 30, 2023

Level 1 Level 2 Level 3 Total

21 unchanged sentences

(a) Primarily included within cash and cash equivalents.

(b) As of March 31, 2023 and December 31, 2022, $ 0.0 million and $ 26.7 million of commercial paper was included within cash and cash equivalents, respectively.

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

government securities was included within cash and cash equivalents, respectively.

(d) As of March 31, 2023 and December 31, 2022, $ 9.4 million and $ 16.9 million of corporate bonds, asset backed and other securities was included within cash and cash equivalents, respectively.

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

Non-Recurring Fair Value Measurements

During first quarter 2023, we incurred a one-time impairment of $ 2.5 million on our patents held for sale.

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").

2 unchanged sentences

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

During first quarter 2023, we incurred a one-time impairment of $ 2.5 million on our patents held for sale.

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

The patents held for sale are included within " Prepaid and other current assets " in the consolidated balance sheet.

Investment in Other Entities

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

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

Fair Value of Long-Term Debt

Convertible Notes

The principal amount, carrying value and related estimated fair value of the Company's Convertible Notes reported as of March 31, 2023 and December 31, 2022 was as follows (in thousands).

The principal amount, carrying value and related estimated fair value of the Company's Convertible Notes reported as of June 30, 2023 and December 31, 2022 was as follows (in thousands).

The aggregate fair value of the principal amount of the Convertible Notes is a Level 2 fair value measurement.

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Amount Carrying

4 unchanged sentences

Technicolor Patent Acquisition Long-term Debt

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported as of March 31, 2023 and December 31, 2022 was as follows (in thousands).

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported as of June 30, 2023 and December 31, 2022 was as follows (in thousands).

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Value Carrying

19 unchanged sentences

During second quarter 2022, the Company repurchased $ 273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes.

As a result of the partial repurchase of the 2024 Notes, $ 126.2 million in aggregate principal amount of the 2024 Notes remained outstanding as of March 31, 2023.

$ 126.2 million in aggregate principal amount of the 2024 Notes remained outstanding as of June 30, 2023.

Additionally, in connection with the partial repurchase of the 2024 Notes, the Company entered into partial unwind agreements that amend the terms of the 2024 Note Hedge Transactions to reduce the number of options corresponding to the principal amount of the repurchased 2024 Notes.

The unwind agreements also reduce the number of warrants exercisable under the 2024 Warrant Transactions.

As a result of the partial unwind transactions, approximately 1.6 million shares of common stock in the aggregate were covered under each of the 2024 Note Hedge Transactions and the 2024 Warrant Transactions as of March 31, 2023.

As of March 31, 2023, the warrants under the 2024 Warrant Transactions had a strike price of approximately $ 109.43 per share, as adjusted.

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

March 31, 2023 December 31, 2022

The unwind agreements also reduced the number of warrants exercisable under the 2024 Warrant Transactions.

Approximately 1.6 million shares of common stock in the aggregate were covered under each of the 2024 Note Hedge Transactions and the 2024 Warrant Transactions as of June 30, 2023.

As of June 30, 2023, the warrants under the 2024 Warrant Transactions had a strike price of approximately $ 109.43 per share, as adjusted.

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

June 30, 2023 December 31, 2022

3.50 % Senior Convertible Notes due 2027

4 unchanged sentences

Net carrying amount of the Convertible Notes 577,557 576,404

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, 2023 and 2022 relating to the contractual interest coupon and the amortization of deferred financing costs of the Convertible Notes (in thousands):

Three months ended March 31,

2027 Notes 2024 Notes Total 2024 Notes

Current portion of long-term debt ( 125,628 ) —

Long-term net carrying amount of the Convertible Notes $ 451,929 $ 576,404

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

Three months ended June 30,

2027 Notes 2024 Notes Total 2027 Notes 2024 Notes Total

Contractual coupon interest $ 4,025 $ 631 $ 4,656 $ 1,476 $ 1,498 $ 2,974

1 unchanged sentence

Total $ 4,461 $ 775 $ 5,236 $ 1,618 $ 1,816 $ 3,434

Six months ended June 30,

2027 Notes 2024 Notes Total 2027 Notes 2024 Notes Total

Contractual coupon interest $ 8,050 $ 1,262 $ 9,312 $ 1,476 $ 3,498 $ 4,974

Amortization of deferred financing costs 867 286 1,153 142 742 884

Total $ 8,917 $ 1,548 $ 10,465 $ 1,618 $ 4,240 $ 5,858

Technicolor Patent Acquisition Long-Term Debt

6 unchanged sentences

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 March 31, 2023 and December 31, 2022 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 June 30, 2023 and December 31, 2022 is disclosed within Note 6, " Cash, Concentration of Credit Risk and Fair Value of Financial Instruments.

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

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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 months ended March 31, 2023 and 2022, we recognized $ 0.3 million and $ 0.9 million of interest expense related to this debt.

During the three and six months ended June 30, 2023, we recognized $ 1.0 million and $ 1.3 million, respectively, of interest expense related to this debt, compared to $ 1.0 million and $ 1.9 million during the three and six months ended June 30, 2022, respectively.

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

3 unchanged sentences

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 March 31, 2023, 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 June 30, 2023, 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 one variable interest entity.

As of March 31, 2023, the book value of the assets and liabilities associated with this variable interest entity included in our condensed consolidated balance sheet were $ 14.6 million and $ 0.3 million, respectively.

As of June 30, 2023, the book value of the assets and liabilities associated with this variable interest entity included in our condensed consolidated balance sheet were $ 12.9 million and $ 0.6 million, respectively.

Assets included $ 4.0 million of cash and cash equivalents, $ 0.1 million of prepaid and other current assets, and $ 8.8 million of patents, net.

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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 months ended March 31, 2023 and 2022 we allocated approximately $ 1.7 million and $ 0.3 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other parties.

For the three and six months ended June 30, 2023, we allocated approximately $ 0.5 million and $ 2.2 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other parties and for the three and six months ended June 30, 2022, we allocated approximately $ 0.5 million and $ 0.8 million, respectively.

OTHER INCOME (EXPENSE), NET

The amounts included in " Other income (expense), net " in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Three months ended March 31,

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

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Interest and investment income $ 10,254 $ 297 $ 21,934 $ 506

Loss on extinguishment of long-term debt — ( 11,190 ) — ( 11,190 )

Other 4,133 ( 4,123 ) 5,644 ( 5,337 )

Other income (expense), net $ 14,387 $ ( 15,016 ) $ 27,578 $ ( 16,021 )

Interest and investment income of $ 11.7 million increased $ 11.5 million compared to first quarter 2022 primarily due to market conditions driving higher yields on our short-term investments.

The change in Other was primarily due to fair value adjustments of our investments resulting in a $ 1.0 million net gain in first quarter 2023, compared to a $ 0.8 million net loss in first quarter 2022, and a foreign currency translation net gain arising from euro translation of our foreign subsidiaries of $ 0.7 million in first quarter 2023, compared to a $ 0.4 million net loss in first quarter 2022.

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

March 31, 2023 December 31, 2022

The changes in Other income (expense), net for the three and six months ended June 30, 2023 and 2022 were $ 29.4 million and $ 43.6 million, respectively.

The changes between both the three and six months ended June 30, 2023 and 2022 were primarily due to the $ 11.2 million loss on extinguishment of the 2024 Notes in second quarter 2022, as described further in Note 7, "Obligations", and an increase in interest and investment income primarily due to increased short-term investments made by the Company and market conditions driving higher yields on our short-term investments.

The changes in Other was primarily due to foreign currency translation arising from euro translation of our foreign subsidiaries and fair value adjustments of our investments .

OTHER ASSETS AND LIABILITIES

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

June 30, 2023 December 31, 2022

Tax receivables $ 79,801 $ 64,117

Prepaid assets 13,447 9,044

Restricted cash 13,273 9,682

Prepaid assets 10,386 9,044

Patents held for sale — 4,000

1 unchanged sentence

Total Prepaid and other current assets $ 114,630 $ 89,716

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

March 31, 2023 December 31, 2022

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

June 30, 2023 December 31, 2022

Contract asset $ 39,147 $ 2,544

Tax receivables 24,320 29,370

1 unchanged sentence

Long-term investments 19,579 19,593

Contract asset 19,573 2,544

Right-of-use assets 16,914 18,034

1 unchanged sentence

Total Other non-current assets, net $ 125,081 $ 95,720

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

June 30, 2023 December 31, 2022

Customer deposit $ 76,100 $ —

Accrued legal fees 22,248 12,230

Other accrued expenses 9,977 11,276

Total Other accrued expenses $ 108,325 $ 23,506

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

June 30, 2023 December 31, 2022

Operating lease liabilities $ 18,792 $ 19,923

Deferred compensation liabilities 17,352 14,078

Other long-term liabilities 20,676 19,599

Total Other long-term liabilities $ 56,820 $ 53,600

RESTRUCTURING ACTIVITIES

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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.

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.

The proceeds from the sale of these patents contributed to funding the non-controlled subsidiary's operations.

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.

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Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts incurred for such activities may differ from amounts initially estimated.

As of March 31, 2023 and December 31, 2022, the Company's restructuring liability was $ 3.1 million and $ 4.5 million, respectively, and is included in " Other accrued expenses " on our condensed consolidated balance sheet.

As of June 30, 2023 and December 31, 2022, the Company's restructuring liability was $ 1.2 million and $ 4.5 million, respectively, and is included in " Other accrued expenses " on our condensed consolidated balance sheet.

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

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Balance as of March 31, 2023 3,060

The restructuring expenses included in " Restructuring activities " in the condensed consolidated statements of income for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Three months ended March 31,

Cash payments ( 1,903 )

Balance as of June 30, 2023 $ 1,159

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

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

Asset impairment $ — $ 2,427 $ — $ 2,427

Severance and other benefits — ( 221 ) — 305

2 unchanged sentences

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