What changed in this filing

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Item 1. Financial Statements

2023-11-02 compared with 2023-08-03 · 159 added, 101 removed, 565 unchanged (32% of the section changed)

4 unchanged sentences

(in thousands, except per share data)

JUNE 30, 2023 DECEMBER 31, 2022

SEPTEMBER 30, 2023 DECEMBER 31, 2022

CURRENT ASSETS:

43 unchanged sentences

(in thousands, except per share data)

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

23 unchanged sentences

(in thousands)

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

Net income $ 47,154 $ 21,767 $ 171,967 $ 60,055

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

Unrealized gain (loss) on investments, net of tax

30 ( 292 ) ( 1,230 ) ( 659 )

Comprehensive income $ 47,184 $ 21,475 $ 170,737 $ 59,396

42 unchanged sentences

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

Net income attributable to InterDigital, Inc.

— — — 22,222 — — — — 22,222

Net loss attributable to noncontrolling interest — — — — — — — ( 455 ) ( 455 )

Net change in unrealized loss on short-term investments — — — — ( 292 ) — — — ( 292 )

Dividends declared ($ 0.35 per share)

— — 179 ( 10,561 ) — — — — ( 10,382 )

Issuance of common stock, net 6 — ( 388 ) — — — — — ( 388 )

Amortization of unearned compensation — — 5,846 — — — — — 5,846

BALANCE, SEPTEMBER 30, 2022

71,918 $ 719 $ 710,007 $ 1,470,335 $ ( 1,230 ) 42,255 $ ( 1,484,056 ) $ 6,020 $ 701,795

Common Stock Additional

31 unchanged sentences

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

Net income attributable to InterDigital, Inc.

— — — 47,941 — — — — 47,941

Net loss attributable to noncontrolling interest — — — — — — — ( 787 ) ( 787 )

Net change in unrealized loss on short-term investments — — — — 30 — — — 30

Dividends declared ($ 0.40 per share)

— — 328 ( 10,676 ) — — — — ( 10,348 )

Issuance of common stock, net 59 1 ( 2,888 ) — — — — — ( 2,887 )

Amortization of unearned compensation — — 10,335 — — — — — 10,335

Repurchase of common stock — — — — — 653 ( 56,858 ) — ( 56,858 )

BALANCE, SEPTEMBER 30, 2023

69,431 $ 694 $ 734,627 $ 1,433,658 $ ( 2,146 ) 43,456 $ ( 1,583,403 ) $ 4,352 $ 587,782

The accompanying notes are an integral part of these statements.

3 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Impairment of assets 2,500 2,427

(Increase) decrease in assets:

Increase in assets:

Receivables ( 16,390 ) ( 371,930 )

Deferred charges and other assets ( 54,384 ) ( 12,848 )

(Decrease) increase in liabilities:

Increase in liabilities:

Accounts payable 881 3,485

Accrued compensation and other expenses 67,533 964

Net cash used in operating activities ( 73,292 ) ( 51,740 )

Net cash provided by (used in) operating activities 237,318 ( 70,469 )

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Capitalized patent costs ( 27,992 ) ( 30,267 )

Net cash (used in) provided by investing activities ( 67,545 ) 142,715

Long-term investments 567 —

Net cash used in investing activities

( 74,298 ) ( 123,199 )

CASH FLOWS FROM FINANCING ACTIVITIES:

12 unchanged sentences

Net cash (used in) provided by financing activities ( 340,469 ) 29,429

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

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

( 177,449 ) ( 164,239 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 703,161 713,224

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2023

September 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 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.

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

12 unchanged sentences

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 $ 28.1 million and $ 54.7 million for the three and six months ended June 30, 2022, respectively.

" The impact of this reclassification was $ 28.3 million and $ 83.0 million for the three and nine months ended September 30, 2022, respectively.

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

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.

Additionally, the Other category includes current technology solutions revenues and catch-up revenues is comprised of past patent royalties and revenues from static agreements.

We believe this better reflects both our current revenue sources and our growth opportunities across these vertical markets.

Supplemental Cash Flow Information

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,

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

Nine months ended September 30,

SUPPLEMENTAL CASH FLOW INFORMATION:

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New Accounting Guidance

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.

No new accounting pronouncement issued or effective during the nine months ended September 30, 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 and six months ended June 30, 2023 and 2022 (in thousands):

Three months ended June 30,

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

Three months ended September 30,

2023 2022 Total Increase/(Decrease)

7 unchanged sentences

Total revenues $ 140,106 $ 114,764 $ 25,342 22 %

Six months ended June 30,

Nine months ended September 30,

2023 2022 Total Increase/(Decrease)

8 unchanged sentences

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

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.

During the nine months ended September 30, 2023, we recognized $ 145.7 million of revenue that had been included in deferred revenue as of the beginning of the period.

As of September 30, 2023, we had contract assets of $ 46.1 million and $ 43.7 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 June 30, 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 September 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 $ 92,458

1 unchanged sentence

Total Revenue $ 1,622,907

(a) This table includes our estimated revenue related to Samsung and Lenovo.

(a) This table includes estimated revenue related to our Samsung arbitration and Lenovo UK proceedings.

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

In the nine months ended September 30, 2023 and 2022, the Company had an estimated annual effective tax rate of 14.7 % and 22.4 %, 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 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.

Excluding this valuation allowance, our effective tax rate for the nine months ended September 30, 2023 and 2022 would have been 13.4 % and 18.1 %, respectively.

During the nine months ended September 30, 2023, the Company recorded a discrete net benefit of $ 2.9 million primarily related to share-based compensation and foreign royalty withholding tax that was previously non-creditable.

The prior period included a net discrete tax expense of $ 2.3 million primarily 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 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.

During the nine months ended September 30, 2023 and 2022, the Company paid approximately $ 8.4 million and $ 3.7 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 restricted stock units ("RSUs").

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 unvested outstanding restricted stock units ("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 June 30, Six months ended June 30,

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

2023 2022 2023 2022

11 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 June 30, Six months ended June 30,

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

2023 2022 2023 2022

27 unchanged sentences

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.

Both parties filed Appellant’s Notices and the appeals were docketed on July 31, 2023.

On September 19, 2023, the Court of Appeal granted the Company permission to appeal on all its requested grounds.

The appeal is scheduled to be heard on June 10, 2024.

On September 24, 2023, Lenovo filed a new claim in the UK High Court against the Company.

The claim alleges invalidity of two of the Company’s patents relating to 4G/LTE standards:

European Patent (UK) Nos.

2,557,714 and 2,557,715.

Lenovo sought, among other relief, a declaration that the patents at issue are invalid, not essential, and not infringed, revocation of the patents at issue, and a declaration that, upon expiration of the current license in 2023, Lenovo is licensed under terms to be determined by the UK High Court through 2028 or, in the alternative, a determination of the terms of a FRAND license.

District of Delaware Patent Proceedings

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 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.

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.

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

District of Delaware Antitrust Proceedings

8 unchanged sentences

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.

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

International Trade Commission and Companion District Court Proceedings

On September 1, 2023, the Company and certain of its subsidiaries filed a complaint in the United States International Trade Commission (the "International Trade Commission") against Lenovo Group Ltd.

and certain of its subsidiaries alleging that Lenovo infringes five of the Company’s U.S.

patents (U.S.

10,250,877, 8,674,859, 9,674,556, 9,173,054, and 8,737,933) by making, using, offering for sale, and/or selling certain electronic devices, including smartphones, computers, tablet computers, and components thereof that infringe certain claims of the asserted patents.

As relief, the Company is seeking:

(a) a limited exclusion order against Lenovo barring from entry into the United States all of Lenovo’s products that infringe the asserted patents;

(b) cease and desist orders prohibiting Lenovo from importing, selling, offering for sale, marketing, advertising, and distributing, infringing products;

and (c) a bond during the 60-day Presidential review period.

On October 5, 2023, the International Trade Commission instituted the requested investigation.

The hearing has been scheduled for May 8-14, 2024.

The Initial Determination is expected to be issued by October 11, 2024, and the Final Determination is expected to be issued by February 11, 2025.

On September 1, 2023, the Company and certain of its subsidiaries filed a complaint in the United States District Court for the Eastern District of North Carolina (the "North Carolina District Court") against Lenovo Group Ltd.

and certain of its subsidiaries alleging that Lenovo infringes five of the Company’s U.S.

patents (U.S.

10,250,877, 8,674,859, 9,674,556, 9,173,054, and 8,737,933) by making, using, offering for sale, and/or selling Lenovo smartphones, computers (including both laptop and desktop), and tablet computers that utilize the Company’s patented technology.

As relief, the Company is seeking:

(a) a finding that Lenovo is liable for infringement of the asserted patents;

(b) an injunction against further infringement;

and (d) costs.

Lenovo filed its answer and counterclaims and motion to dismiss a portion of the complaint on October 10, 2023, which remains pending.

China Proceedings

8 unchanged sentences

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

The application remains pending.

The application was denied on August 7, 2023.

The Company filed an appeal before the SPC on September 4, 2023.

Germany Proceedings

1 unchanged sentence

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

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

On September 21, 2023, the parties entered into a patent license agreement regarding the Company’s HEVC portfolio.

On October 4, 2023, the Company filed motions to withdraw the litigations involving European Patent Nos.

3,624,447 and 3,267,684;

the litigations were withdrawn on October 9, 2023.

On September 22, 2023, the Company filed a complaint with the Munich Regional Court against Lenovo and certain of its affiliates, alleging infringement of European Patent No.

2,127,420, relating to cellular 4G/LTE and/or 5G standards.

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

The Mannheim Regional Court held a hearing on April 21, 2023 regarding European Patent No.

The Mannheim Regional Court held a hearing regarding European Patent No.

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.

2,449,782 and 2,452,498 for September 14, 2023 and June 20, 2024, respectively.

Oppo, OnePlus and realme

6 unchanged sentences

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 the parties have agreed to adjourn pending the outcome of Oppo’s jurisdiction challenge before the UK Supreme Court in a case involving Nokia.

On December 8, 2022, the Company received confirmation that Oppo had dropped its jurisdictional challenge with the UK High Court.

On March 24, 2023, the parties agreed to stay all technical trials on the basis that European Patent No.

2,485,558 is valid and essential based on the result of Technical Trial A in the Lenovo UK proceedings.

The willingness trial is expected to commence on October 23, 2023.

The rate determination trial is scheduled to commence on February 26, 2024.

The FRAND trial to determine the royalties to be paid under the license with Oppo is scheduled to commence on February 26, 2024.

India Proceedings

7 unchanged sentences

The Munich Regional Court held a hearing on December 14, 2022 regarding European Patent No.

2,421,318, with a second hearing scheduled for October 18, 2023.

2,421,318, with a second hearing scheduled for December 6, 2023.

The Munich Regional Court held a hearing on March 2, 2023 regarding European Patent No.

2,127,420, with a second hearing scheduled for September 15, 2023.

The Munich Regional Court has also scheduled a hearing for September 19, 2023 on European Patent No.

2,127,420, with a second hearing scheduled for November 23, 2023.

On March 10, 2023, the Munich Regional Court entered a stay of the proceedings regarding European Patent No.

China Proceedings

2 unchanged sentences

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

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

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

The Supreme People’s Court denied the appeal on September 7, 2023.

An initial evidentiary hearing was held on October 13, 2023.

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.

On July 21, 2023, the International Chamber of Commerce confirmed the full tribunal for the arbitration.

The hearing has been scheduled for Summer of 2024 with an expected resolution in late 2024.

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 June 30, 2023, except as noted above.

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

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

September 30, 2023 December 31, 2022 September 30, 2022

Cash and cash equivalents $ 518,483 $ 693,479 $ 539,651

6 unchanged sentences

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 June 30, 2023 and December 31, 2022, respectively.

Four licensees comprised 71 % and 76 % of our net accounts receivable balance as of September 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 June 30, 2023 and December 31, 2022 (in thousands):

Fair Value as of June 30, 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 September 30, 2023 and December 31, 2022 (in thousands):

Fair Value as of September 30, 2023

Level 1 Level 2 Level 3 Total

21 unchanged sentences

(a) Primarily included within cash and cash equivalents.

(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.

(b) As of September 30, 2023 and December 31, 2022, $ 0.0 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 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.

(d) As of September 30, 2023 and December 31, 2022, $ 8.4 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

6 unchanged sentences

Investment in Other Entities

During third quarter 2023, we recognized a $ 6.1 million gain resulting from observable price changes of our long-term strategic investments, which was included within “ Other income (expense), net ” in the condensed consolidated statement of income.

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.

2 unchanged sentences

Convertible Notes

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 principal amount, carrying value and related estimated fair value of the Company's Convertible Notes reported as of September 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.

June 30, 2023 December 31, 2022

September 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 June 30, 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 September 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.

June 30, 2023 December 31, 2022

September 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.

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

$ 126.2 million in aggregate principal amount of the 2024 Notes remained outstanding as of September 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 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

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 September 30, 2023.

As of September 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 September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023 December 31, 2022

3.50 % Senior Convertible Notes due 2027

6 unchanged sentences

Long-term net carrying amount of the Convertible Notes $ 452,377 $ 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,

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, 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 September 30,

2027 Notes 2024 Notes Total 2027 Notes 2024 Notes Total

2 unchanged sentences

Total $ 4,473 $ 778 $ 5,251 $ 4,447 $ 769 $ 5,216

Six months ended June 30,

Nine months ended September 30,

2027 Notes 2024 Notes Total 2027 Notes 2024 Notes Total

10 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 June 30, 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 September 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.

4 unchanged sentences

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 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.

During the three and nine months ended September 30, 2023, we recognized $ 1.1 million and $ 2.5 million, respectively, of interest expense related to this debt, compared to $ 1.0 million and $ 2.9 million during the three and nine months ended September 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 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.

As of September 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 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.

As of September 30, 2023, the book value of the assets and liabilities associated with this variable interest entity included in our condensed consolidated balance sheet were $ 11.4 million and $ 0.7 million, respectively.

Assets included $ 2.5 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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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 will contribute funding and resources for additional research and platform development, which we will perform.

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

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 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.

Based on our provision of research and platform development services to Convida Wireless, we determined that we were the primary beneficiary for accounting purposes and consolidated Convida Wireless through September 30, 2023.

For the three and nine months ended September 30, 2023, we allocated approximately $ 0.8 million and $ 3.0 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, 2022, we allocated approximately $ 0.5 million and $ 1.2 million, respectively.

In October 2023, Convida Wireless appointed a President and Chief Licensing Officer who will be responsible for directing the operating activities of Convida, including research and platform development services.

Accordingly, we expect to deconsolidate Convida Wireless during fourth quarter 2023.

OTHER INCOME (EXPENSE), NET

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,

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

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

2023 2022 2023 2022

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Other income (expense), net $ 14,725 $ 912 $ 42,303 $ ( 15,109 )

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 .

The changes in Other income (expense), net for the three and nine months ended September 30, 2023 and 2022 were $ 13.8 million and $ 57.4 million, respectively.

Interest and investment income increased in both three and nine months ended September 30, 2023 and 2022, due to increased short-term investments made by the Company and market conditions driving higher yields on our short-term investments.

The change in the nine months ended September 30, 2023 and 2022 was also due to the $ 11.2 million loss on extinguishment of the 2024 Notes in second quarter 2022, as described further in Note 7, " Obligations ".

The changes in Other were 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

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

September 30, 2023 December 31, 2022

Tax receivables $ 75,934 $ 64,117

Restricted cash 13,273 9,682

Prepaid assets 11,474 9,044

Restricted cash 7,229 9,682

Patents held for sale — 4,000

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Total Prepaid and other current assets $ 104,198 $ 89,716

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

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

September 30, 2023 December 31, 2022

Contract asset

$ 43,720 $ 2,544

Tax receivables 26,688 29,370

Goodwill 22,421 22,421

Long-term investments 25,556 19,593

Goodwill 22,421 22,421

Right-of-use assets 16,335 18,034

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Total Other non-current assets, net $ 137,473 $ 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

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

September 30, 2023 December 31, 2022

Customer deposit $ 76,100 $ —

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Total Other accrued expenses $ 101,185 $ 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

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

September 30, 2023 December 31, 2022

Operating lease liabilities $ 17,941 $ 19,923

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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 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.

As of September 30, 2023 and December 31, 2022, the Company's restructuring liability was $ 0.2 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 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,

Cash payments ( 956 )

Balance as of September 30, 2023 $ 193

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

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

2023 2022 2023 2022

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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