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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-31 · 98 added, 196 removed, 120 unchanged (71% of the section changed)

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The following discussion should be read in conjunction with the unaudited, condensed consolidated financial statements and notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, in addition to our 2024 Form 10-K, other reports filed with the SEC and the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 — Forward-Looking Statements below.

Throughout the following discussion and elsewhere in this Form 10-Q, we refer to “recurring revenues” and “catch-up revenues.” For variable and dynamic fixed-fee license agreements, “catch-up revenues” primarily represents revenue associated with reporting periods prior to the execution of the license agreement, while “recurring revenue” represents revenue associated with reporting periods beginning with the execution of the license agreement.

For static fixed-fee license agreements, we typically classify the associated revenue as catch-up revenues.

Throughout the following discussion and elsewhere in this Form 10-Q, we refer to “catch-up revenues.” For variable and dynamic fixed-fee license agreements, “catch-up revenues” primarily represents revenue associated with reporting periods prior to the execution of the license agreement.

New Agreement

In March 2025, we signed a new multi-year, worldwide, non-exclusive, royalty bearing license agreement with vivo Mobile, a major Chinese smartphone vendor.

We now have seven of the ten largest smartphone vendors and almost 80% of the entire global smartphone market under license.

Subsequent Events

In October 2024, we entered into a patent license agreement with Oppo Group.

The agreement covers Oppo, realme and OnePlus branded mobile devices worldwide.

As part of the agreement, both parties have agreed to dismiss all pending litigations between us.

We expect to recognize revenue related to the patent license agreement beginning in fourth quarter 2024.

In October 2024, we entered into an arbitration agreement with Lenovo to determine the terms of a new patent license.

As part of the agreement to arbitrate, both parties have agreed to dismiss all pending litigations between them.

We expect to recognize revenue related to the arbitration agreement, on an estimated basis, beginning in fourth quarter 2024.

New Agreements

In September 2024, we signed new patent license agreements with TPV, a major manufacturer of a range of digital TVs under various brands.

These agreements license TPV to InterDigital’s extensive portfolio of HEVC patents as well as DTV patents licensed through InterDigital´s joint licensing program with Sony.

Additionally, in August 2024, we signed a signed a new license agreement with Panasonic.

Notes, Hedge, and Warrant Transactions

A portion of the 2024 Warrant Transaction settled during third quarter 2024 resulting in the issuance of 0.1 million shares.

As of September 30, 2024, 1.1 million warrants at an initial strike price of approximately $109.43 per share, subject to adjustment, remain outstanding and will settle, on a net-share basis, during the period October 1, 2024 to December 17, 2024.

Additionally, 5.9 million warrants remain outstanding related to the 2027 Warrant Transactions at a weighted average strike price of $106.31 per share, subject to adjustment, which mature on a net-share basis beginning September 2027 through April 2028.

During third quarter 2024, the 2027 Notes had a dilutive impact of 2.4 million shares, which are offset from an economic standpoint by the 2027 Note Hedge Transactions and would result in no incremental shares being issued upon conversion.

However, under GAAP, we are required to exclude the impact of the shares received from the 2027 Note Hedge Transactions counterparties from the calculation of weighted average diluted shares outstanding.

Assuming a share price of $150, we would issue 0.3 million and 1.7 million of common shares related to the 2024 and 2027 Warrant Transactions, respectively.

Refer to " Financial Position, Liquidity, and Capital Resources — Convertible Notes " for further information regarding how changes in our stock price would affect the number of shares issuable related to the 2024 Warrant Transactions and the 2027 Warrant Transactions.

In April 2025, we signed a new multi-year license agreement with HP Inc.

The agreement licenses HP personal computers to InterDigital’s Wi-Fi and video decoding technologies.

No revenue related to this agreement was recognized in first quarter 2025.

Return of Capital to Shareholders

During the third quarter 2024, we returned $14.5 million to shareholders, including $11.4 million, or $0.45 per share, of cash dividends declared and $3.1 million through the repurchase of shares of common stock.

Additionally, we announced an increase to the quarterly cash dividend from $0.40 to $0.45 per share, beginning with the dividend paid in fourth quarter 2024.

As of October 31, 2024, there was $229.5 million remaining under the share repurchase authorization, which we plan to utilize to periodically repurchase additional common shares.

In February 2025, we announced an additional increase in the quarterly cash dividend by $0.15 per share to $0.60 per share, beginning with the quarterly dividend payable in second quarter 2025.

During first quarter 2025, we returned $20.8 million to shareholders, including $15.6 million, or $0.60 per share, of cash dividends declared and $5.2 million through the repurchase of shares of common stock.

As of April 30, 2025, there was $216.1 million remaining under the share repurchase authorization, which we plan to utilize to periodically repurchase additional common shares.

See Part II, Item II - Unregistered Sales of Equity Securities and Use of Proceeds—Issuer Purchases of Equity Securities of this Quarterly Report on Form 10-Q.

Cash & Short-term Investments

As of September 30, 2024, we had $822.9 million of cash, restricted cash, and short-term investments and over $1.1 billion of cash payments due under contracted fixed price agreements, which includes our conservative estimates of the minimum cash receipts that we expect to receive under the wireless patent license agreement with Samsung.

88% of our recurring revenue comes from fixed-fee royalties.

As of March 31, 2025, we had $894.8 million of cash, restricted cash, and short-term investments and over $1.6 billion of cash payments due under contracted fixed price agreements, which includes our conservative estimates of the minimum cash receipts that we expect to receive under the Samsung and Lenovo arbitrations.

92% of our first quarter 2025 revenues are from fixed-fee agreements.

Such agreements often have prescribed payment schedules that are uneven and sometimes front-loaded, resulting in timing differences between when we collect the cash payments and recognize the related revenue.

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

Three Months Ended September 30, Nine Months Ended September 30,

The following table reconciles the timing differences between cash receipts and recognized revenue during the three months ended March 31, 2025 and 2024, including the resulting operating cash flow (in thousands):

Three Months Ended March 31,

Non-cash revenue:

2024 2023 2024 2023

Fixed fee cash receipts (a)

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Change in receivables 115,966 28,337

20,069 12,162 95,937 (18,840)

Other 8,961 5,905

Total Revenue $ 210,507 $ 263,542

Net cash provided by operating activities

$ 77,631 $ 310,610 $ 79,494 $ 237,318

(a) Fixed fee cash receipts are comprised of cash receipts from Dynamic Fixed-Fee Agreement royalties, including the associated catch-up royalties

Net cash (used in) provided by operating activities $ (19,989) $ 50,773

(a) Fixed fee cash receipts are comprised of cash receipts from Dynamic Fixed-Fee Agreement royalties, including the associated catch-up revenues.

(b) Other cash receipts are primarily comprised of cash receipts related to our variable patent royalty revenue and catch-up revenues.

(c) The changes in other are primarily driven by customer deposits partially offset by long-term contract assets associated with revenue estimates.

When we collect payments on a front-loaded basis, we recognize a deferred revenue liability equal to the cash received and accounts receivable recorded which relate to revenue expected to be recognized in future periods.

That liability is then reduced as we recognize revenue over the balance of the agreement.

The following table shows the projected amortization of our current and long term deferred revenue as of September 30, 2024 (in thousands):

The following table shows the projected amortization of our current and long term deferred revenue as of March 31, 2025 (in thousands):

Deferred Revenue

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Total Revenue $ 324,378

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

Third quarter 2024 recurring revenues were $98.6 million, compared to recurring revenues of $104.5 million in third quarter 2023.

In third quarter 2024, revenues (in descending order) from Apple, Samsung, TPV, Lenovo, and Xiaomi each comprised 10% or more of our consolidated revenues.

Refer to " Results of Operations --Third Quarter 2024 Compared to Third Quarter 2023 " for further discussion of our 2024 revenue.

First quarter 2025 revenues of $210.5 million includes $84.8 million of catch-up revenues, while first quarter 2024 revenues of $263.5 million includes $166.7 million of catch-up revenues.

The $53.0 million decrease was primarily due to catch-up revenues from the Samsung TV agreement recognized in first quarter 2024, partially offset by revenues recognized from new agreements signed over the last twelve months.

In first quarter 2025, revenues (in descending order) from vivo Mobile, Apple, and Samsung each comprised 10% or more of our consolidated revenues.

Refer to " Results of Operations --First Quarter 2025 Compared to First Quarter 2024 " for further discussion of our 2025 revenue.

Impact of Macroeconomic and Geopolitical Factors

We have been actively monitoring the impact of the current macroeconomic environment in the U.S.

and globally characterized by inflation, supply chain issues, high interest rates, labor shortages, and the potential for a recession.

and globally characterized by market volatility, inflation, supply chain issues, high interest rates, labor shortages, tariffs and other potential trade-related sanctions, and the potential for a recession.

These market factors, as well as the impacts of the Ukraine-Russia and Middle East conflicts, have not had a material impact on our business to date.

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Comparability of Financial Results

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

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

Operating Expenses

• During third quarter 2024, we recorded a $1.2 million one-time contra expense for a net litigation fee reimbursement.

See Note 6, “ Litigation and Legal Proceedings ,” to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding the litigation proceedings.

When comparing first quarter 2025 financial results against other periods, the following items should be taken into consideration:

• Our first quarter 2025 revenues include $84.8 million of catch-up revenues primarily related to a new patent license agreement with vivo Mobile signed in first quarter 2025.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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From time to time, we may engage in a variety of transactions to augment our liquidity position as our business dictates and to take advantage of favorable interest rate environments or other market conditions, including the incurrence or issuance of debt and the refinancing or restructuring of existing debt.

Based on our past performance and current expectations, we believe our available sources of funds, including cash, cash equivalents, and short-term investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program, dividend program, and other contractual obligations discussed below in both the short-term over the next twelve months, and the long-term beyond twelve months.

Based on our past performance and current expectations, we believe our available sources of funds, including cash, cash equivalents, short-term investments, and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program, dividend program, and other contractual obligations discussed below in both the short-term over the next twelve months, and the long-term beyond twelve months.

Cash, cash equivalents, restricted cash, and short-term investments

As of September 30, 2024 and December 31, 2023, we had the following amounts of cash and cash equivalents, restricted cash, and short-term investments (in thousands):

September 30, 2024 December 31, 2023 Increase / (Decrease)

As of March 31, 2025 and December 31, 2024, we had the following amounts of cash and cash equivalents, restricted cash, and short-term investments (in thousands):

March 31, 2025 December 31, 2024 Increase / (Decrease)

Cash and cash equivalents $ 536,639 $ 527,360 $ 9,279

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$ 894,768 $ 982,395 $ (87,627)

The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $251.0 million and cash used in investing activities of $33.9 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $79.5 million.

The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $43.0 million, cash used in investing activities of $26.7 million, excluding sales and purchases of short-term investments, and cash used in operating activities of $20.0 million.

Refer to the sections below for further discussion of these items.

Cash flows provided by operating activities

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

Nine Months Ended September 30,

Cash flows (used in) provided by operating activities

Cash flows (used in) provided by operating activities in the first quarter 2025 and 2024 (in thousands) were as follows:

Three Months Ended March 31,

2025 2024 Change

Net cash provided by operating activities

$ 79,494 $ 237,318 $ (157,824)

Our cash flows provided by operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments.

The $157.8 million change in net cash provided by operating activities was driven by increased cash operating expenses primarily due to increased revenue share costs from new patent license agreements and lower cash receipts primarily due to cash receipts from new agreements signed in both periods and timing of cash receipts from existing patent license agreements.

The table below sets forth the significant items comprising our cash flows provided by operating activities during the nine months ended September 30, 2024 and 2023 (in thousands):

Nine Months Ended September 30,

Net cash (used in) provided by operating activities $ (19,989) $ 50,773 $ (70,762)

Our cash flows (used in) provided by operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments.

The $70.8 million change in net cash (used in) provided by operating activities was driven by lower cash receipts primarily due to large cash receipts in first quarter 2024 related to catch-up revenues from agreements signed in first quarter 2024 and due to timing of cash receipts under existing agreements.

This decrease was partially offset by lower cash operating expenses primarily due to lower revenue share and litigation costs recognized in first quarter 2025.

The table below sets forth the significant items comprising our cash flows provided by operating activities during the three months ended March 31, 2025 and 2024 (in thousands):

Three Months Ended March 31,

2025 2024 Change

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Other working capital adjustments (5,651) (8,472) 2,821

Cash flows provided by operating activities

$ 79,494 $ 237,318 $ (157,824)

Cash flows (used in) provided by operating activities $ (19,989) $ 50,773 $ (70,762)

______________________________

(a) Cash operating expenses include operating expenses less depreciation and disposals of fixed assets, amortization of patents, and non-cash compensation.

Amount includes revenue share costs of $78.7 million and $2.4 million in first nine months 2024 and 2023, respectively.

Amount includes revenue share costs of $2.6 million and $69.0 million in first quarter 2025 and 2024, respectively.

(b) Income taxes paid include foreign withholding taxes.

Cash flows from investing and financing activities

Net cash provided by investing activities for first nine months 2024 was $139.4 million, a $213.6 million change from $74.3 million of net cash used in investing activities in first nine months 2023.

During first nine months 2024, we sold $173.2 million of short-term marketable securities, net of purchases, and capitalized $35.4 million of patent costs and property and equipment purchases.

During first nine months 2023, we purchased $43.7 million of short-term marketable securities, net of sales, and capitalized $31.2 million of patent costs and property and equipment purchases.

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

This change was primarily attributable to a $236.0 million decrease in share repurchases, of which $203.4 million was related to the Company's modified "Dutch auction" tender offer in first quarter 2023.

This change was partially offset by $139.1 million of payments on our long-term debt, of which $126.2 million was related to the maturity of the 2024 Notes.

Our combined short-term and long-term deferred revenue balance as of September 30, 2024 was approximately $373.6 million, a net decrease of $3.9 million from December 31, 2023.

Net cash provided by investing activities for first quarter 2025 was $59.5 million, a $42.7 million change from $16.8 million in first quarter 2024.

During first quarter 2025, we sold $86.2 million of short-term marketable securities, net of purchases, and capitalized $26.7 million of patent costs and property and equipment purchases.

During first quarter 2024, we sold $24.6 million of short-term marketable securities, net of purchases, and capitalized $9.4 million of patent costs and property and equipment purchases.

Net cash used in financing activities for first quarter 2025 was $43.0 million, a change of $6.4 million from $49.3 million the first quarter 2024.

This change was primarily attributable to a $23.5 million increase of taxes withheld on restricted stock unit vestings primarily due to the increased share price at vesting, partially offset by a $23.6 million decrease in share repurchases and $7.3 million of proceeds from the exercise of stock options.

Our combined short-term and long-term deferred revenue balance as of March 31, 2025 was approximately $324.4 million, a net decrease of $35.8 million from December 31, 2024.

This decrease in deferred revenue was primarily due amortization of deferred revenue recognized in the period, partially offset by cash receipts on new and existing patent license agreements.

Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the September 30, 2024 deferred revenue balance of $373.6 million by $156.9 million over the next twelve months.

Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the March 31, 2025 deferred revenue balance of $324.4 million by $175.3 million over the next twelve months.

Convertible Notes

See Note 5, “ Obligations ” to the Notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for definitions of capitalized terms below.

The 2024 Notes matured on June 1, 2024 resulting in 0.3 million of common shares being issued.

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

A portion of the 2024 Warrant Transactions settled during third quarter 2024 resulting in the issuance of 0.1 million shares related to the 2024 Warrant Transactions.

As of September 30, 2024, 1.1 million warrants at an initial strike price of approximately $109.43 per share, subject to adjustment, remain outstanding and will settle during the period October 1, 2024 to December 17, 2024 on a net-share basis.

From the period January 1, 2024 through December 31, 2024, the holders of the 2027 Notes have the right, but not the obligation, to convert any portion of the principal amount of the 2027 Notes.

From the period January 1, 2024 through June 30, 2025, the holders of the 2027 Notes have the right, but not the obligation, to convert any portion of the principal amount of the 2027 Notes.

Our 2027 Notes are included in the dilutive earnings per share calculation using the if-converted method.

Under the if-converted method, we must assume that conversion of convertible securities occurs at the beginning of the reporting period.

The 2027 Notes are convertible into cash up to the aggregate principal amount to be converted.

Any remaining obligation of the 2027 Notes may be settled in cash, shares of the Company’s common stock or a combination thereof.

The 2027 Notes are convertible into cash up to the aggregate principal amount of the 2027 Notes to be converted and any remaining obligations may be settled in cash, shares of the Company’s common stock or a combination thereof.

As the principal amount must be paid in cash and only the conversion spread is settled in shares, we only include the net number of incremental shares that would be issued upon conversion.

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Under the if-converted method, changes in the price per share of our common stock can have a significant impact on the number of shares that we must include in the fully diluted earnings per share calculation.

As described in Note 5, " Obligations, " the 2027 Notes are convertible into cash up to the aggregate principal amount to be converted and any remaining obligation may be settled in cash, shares of the Company’s common stock or a combination thereof ("net share settlement").

Assuming net share settlement upon conversion, the following tables illustrate how, based on the $460.0 million aggregate principal amount of the 2027 Notes outstanding as of September 30, 2024, and the approximately 5.9 million warrants related to the 2027 Notes, changes in our stock price would affect (i) the number of shares issuable upon conversion of the 2027 Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the 2027 Warrant Transactions, (iii) the number of additional shares deemed outstanding with respect to the 2027 Notes, after applying the if-converted method, for purposes of calculating diluted earnings per share ("Total If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the 2027 Note Hedge Transactions and (v) the number of shares issuable upon concurrent conversion of the 2027 Notes, exercise of the warrants subject to the 2027 Warrant Transactions, and settlement of the 2027 Note Hedge Transactions (in thousands):

2027 Notes 2024 Warrants

Market Price Per Share Shares Issuable Upon Conversion of the 2027 Notes Shares Issuable Upon Exercise of the 2027 Warrant Transactions Total If-Converted Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2027 Note Hedge Transactions Incremental Shares Issuable (a)

Shares Issuable Upon Exercise of the 2024 Warrant Transactions

As described in Note 5, " Obligations, " the 2027 Notes are convertible into cash up to the aggregate principal amount to be converted and any remaining obligations may be settled in cash, shares of the Company’s common stock or a combination thereof ("net share settlement").

Assuming net share settlement upon conversion, the following tables illustrate how, based on the $460.0 million aggregate principal amount of the 2027 Notes outstanding as of March 31, 2025, and the approximately 5.9 million warrants related to the 2027 Notes, changes in our stock price would affect (i) the number of shares issuable upon conversion of the 2027 Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the 2027 Warrant Transactions, (iii) the number of additional shares deemed outstanding with respect to the 2027 Notes, after applying the if-converted method, for purposes of calculating diluted earnings per share ("Total If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the 2027 Note Hedge Transactions and (v) the number of shares issuable upon concurrent conversion of the 2027 Notes, exercise of the warrants subject to the 2027 Warrant Transactions, and settlement of the 2027 Note Hedge Transactions (in thousands):

Per Share Shares Issuable Upon Conversion of the 2027 Notes Shares Issuable Upon Exercise of the 2027 Warrant Transactions Total If-Converted Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2027 Note Hedge Transactions Incremental Shares Issuable (a)

$106 1,616 — 1,616 (1,616) —

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$210 3,765 2,949 6,714 (3,765) 2,949

$220 3,864 3,085 6,949 (3,864) 3,085

$230 3,955 3,210 7,165 (3,955) 3,210

$240 4,038 3,324 7,362 (4,038) 3,324

$250 4,115 3,430 7,545 (4,115) 3,430

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(a) Represents incremental shares issuable upon concurrent conversion of convertible notes, exercise of warrants and settlement of the hedge agreements.

RESULTS OF OPERATIONS

Third Quarter 2024 Compared to Third Quarter 2023

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

Three Months Ended September 30,

First Quarter 2025 Compared to First Quarter 2024

The following table compares first quarter 2025 revenues to first quarter 2024 revenues (in thousands):

Three Months Ended March 31,

2025 2024 Increase/(Decrease)

Recurring revenues:

Smartphone $ 183,991 $ 80,280 $ 103,711 129 %

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Other 249 719 (470) (65) %

Total recurring revenues 98,634 104,476 (5,842) (6) %

Catch-up revenues a

30,045 35,630 (5,585) (16) %

Total Revenues

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

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

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

In third quarter 2024 and 2023, 83% and 78%, respectively, of our total revenue was attributable to licensees that individually accounted for 10% or more of our total revenue.

In third quarter 2024 and 2023, the following licensees accounted for 10% or more of our total revenue:

Three Months Ended

September 30,

Operating Expenses

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

Three Months Ended September 30,

2024 2023 Increase/(Decrease)

Research and portfolio development $ 48,331 $ 50,253 $ (1,922) (4) %

Licensing 27,467 21,522 5,945 28 %

General and administrative 13,539 14,678 (1,139) (8) %

Total Operating expenses $ 89,337 $ 86,453 $ 2,884 3 %

Operating expenses increased to $89.3 million in third quarter 2024 from $86.5 million in third quarter 2023.

The $2.9 million increase in total operating expenses was primarily due to changes in the following items (in thousands):

Increase/(Decrease)

Revenue share

Performance-based compensation

Net litigation fee reimbursement (1,161)

Total increase in operating expenses $ 2,884

Operating expenses were relatively flat compared to third quarter 2023.

Revenue share costs increased $6.1 million primarily due to the TPV and Samsung TV agreements signed in 2024, which are subject to the Madison revenue share arrangement.

This increase was offset by a $1.4 million decrease in performance-based compensation mostly due to one-time performance-based compensation costs recognized in third quarter 2023 and $1.2 million net litigation fee reimbursements due to litigation successes.

Research and portfolio development expense:

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

Licensing expense:

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

General and administrative expense:

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

Non-Operating Income, net

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

Three Months Ended September 30,

2024 2023 Increase/(Decrease)

Interest expense $ (10,681) $ (12,683) $ 2,002 16 %

Interest and investment income 9,175 11,763 (2,588) (22) %

Other income, net 3,379 2,962 417 14 %

Total non-operating income, net $ 1,873 $ 2,042 $ (169) (8) %

Non-operating income, net was relatively flat with decreased interest expense mostly offsetting the decreased interest and investment income that is based on lower investment balances compared to third quarter 2023.

The change in Other income, net was primarily due to a foreign currency translation net gain arising from translation of our foreign subsidiaries of $2.8 million in third quarter 2024, compared to a $2.2 million net loss in third quarter 2023 and due to fair value adjustments of our investments resulting in a $1.1 million net gain in third quarter 2024, compared to a $5.6 million net gain in third quarter 2023.

In third quarter 2024 and 2023, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 17.0% and 15.3%, respectively.

The change in effective tax rate is due to a decrease in the amount of Foreign Derived Intangible Income deduction benefit available to the Company.

In addition, the Company is subject to an increase in the Global Intangible Low-Tax Income inclusion derived from the increase in revenue in certain foreign jurisdictions.

The effective tax rate in the three months ended September 30, 2023 was impacted by losses in certain jurisdictions where the Company recorded a valuation allowance against the related tax benefit.

Excluding this valuation allowance, our effective tax rate for the three months ended September 30, 2023 would have been 14.4%.

First Nine Months 2024 Compared to First Nine Months 2023

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

Nine Months Ended September 30,

2024 2023 Increase/(Decrease)

Recurring revenues:

Smartphone $ 221,738 $ 260,882 $ (39,144) (15) %

CE, IoT/Auto 67,824 43,177 24,647 57 %

Other 1,878 1,063 815 77 %

Total recurring revenues 291,440 305,122 (13,682) (4) %

Catch-up revenues a

$ 210,507 $ 263,542 $ (53,035) (20) %

Total revenues $ 615,714 $ 444,070 $ 171,644 39 %

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

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

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

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

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

Nine Months Ended September 30,

Catch-up revenues (a) , included above

$ 84,785 $ 166,678 $ (81,893) (49) %

(a) Catch-up revenues represent revenue associated with reporting periods prior to the execution of the license agreement.

Total revenues of $210.5 million decreased $53.0 million from first quarter 2024 primarily due to catch-up revenues from the Samsung TV agreement recognized in first quarter 2024, partially offset by catch-up revenues recognized from the new agreement with vivo Mobile signed in first quarter 2025.

Additionally, the decrease was partially offset by revenues from seven new patent license agreements signed in the last twelve months, including the vivo Mobile agreement and the previously announced OPPO agreement and the Lenovo arbitration agreement.

In first quarter 2025 and 2024, 71% and 84%, respectively, of our total revenue was attributable to licensees that individually accounted for 10% or more of our total revenue.

In first quarter 2025 and 2024, the following licensees accounted for 10% or more of our total revenue:

Three Months Ended

Operating Expenses

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

Nine Months Ended September 30,

The following table summarizes the changes in operating expenses between first quarter 2025 and first quarter 2024 by category (in thousands):

Three Months Ended March 31,

2025 2024 Increase/(Decrease)

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Total Operating expenses $ 78,675 $ 159,804 $ (81,129) (51) %

Operating expenses increased 37% to $338.7 million in first nine months 2024 from $247.8 million in first nine months 2023.

The $90.9 million increase in total operating expenses was primarily due to changes in the following items (in thousands):

Operating expenses decreased to $78.7 million in first quarter 2025 from $159.8 million in first quarter 2024.

The $81.1 million decrease in total operating expenses was primarily due to changes in the following items (in thousands):

Increase/(Decrease)

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Intellectual property enforcement (12,766)

Performance-based compensation 6,033

Net litigation fee reimbursement (11,898)

Other (2,044)

Total increase in operating expenses $ 90,948

The $90.9 million increase in operating expenses was driven by a $76.3 million increase in revenue share costs primarily related to the TPV and Samsung TV agreements and a $6.0 million increase in performance-based compensation due to higher accrual rates driven by licensing successes.

Additionally, intellectual property enforcement costs increased $23.3 million due to costs associated with the Lenovo and Oppo proceedings, as well as the Samsung arbitration.

These increases were partially offset by a change in the net litigation reimbursement contra expense of $4.4 million recorded in first nine months 2024 compared to $7.5 million of expense recorded in first nine months 2023.

Total decrease in operating expenses $ (81,129)

Operating expenses decreased $81.1 million primarily due to revenue share costs related to the catch-up revenues recognized from the Samsung TV agreement signed in first quarter 2024.

Additionally, intellectual property enforcement costs decreased $12.8 million primarily due to our fourth quarter 2024 resolution of the OPPO and Lenovo proceedings, as well as the Samsung arbitration.

Research and portfolio development expense:

Research and portfolio development expense was flat compared to first nine months 2023.

Research and portfolio development expense was relatively flat compared to first quarter 2024.

Licensing expense:

Licensing expense increased by $89.7 million primarily driven by the above-noted increased revenue share costs and intellectual property enforcement costs, partially offset by the one-time net litigation fee reimbursement.

Licensing expense decreased $78.9 million primarily driven by the above-noted decreases in revenue share costs and intellectual property enforcement costs.

General and administrative expense:

The $3.0 million increase in general and administrative expense primarily resulted from the above-noted increases in performance-based compensation costs.

Non-Operating (Expense) Income, net

The following table compares first nine months 2024 non-operating expense, net to first nine months 2023 non-operating income, net (in thousands):

Nine Months Ended September 30,

General and administrative expense was relatively flat compared to first quarter 2024.

Non-Operating Income (expense), net

The following table compares first quarter 2025 non-operating income, net to first quarter 2024 non-operating expense, net (in thousands):

Three Months Ended March 31,

2025 2024 Increase/(Decrease)

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Interest and investment income 9,264 11,778 (2,514) (21) %

Other income, net

2,405 8,606 (6,201) (72) %

Total non-operating (expense) income, net $ (603) $ 5,392 $ (5,995) (111) %

Interest expense and interest and investment income were relatively flat compared to first nine months 2023, with the decreased interest and investment income mostly offset by the decreased interest expense.

Other income, net changed primarily due to fair value adjustments of our investments resulting in a $4.6 million net gain in first nine months 2024, compared to a $10.5 million net gain in first nine months 2023.

In first nine months 2024 and 2023, we had an effective tax rate of 18.4% and 14.7%, respectively.

The change in effective tax rate is due to a decrease in the amount of Foreign Derived Intangible Income deduction benefit available to the Company.

In addition, the Company is subject to an increase in the Global Intangible Low-Tax Income inclusion derived from the increase in revenue in certain foreign jurisdictions.

The effective tax rate in first nine months 2023 was impacted by losses in certain jurisdictions where the Company recorded a valuation allowance against the related tax benefit.

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

In the nine months ended 2024 and 2023, we recorded a net discrete tax benefit of $4.3 million and $2.9 million, respectively, primarily related to share-based compensation.

Other income (expense), net 994 (2,531) 3,525 139 %

Total non-operating income (expense), net $ 387 $ (2,675) $ 3,062 114 %

The change in non-operating income (expense), net was primarily due to a foreign currency translation net gain arising from translation of our foreign subsidiaries of $2.2 million in first quarter 2025, compared to a $2.4 million net loss in first quarter 2024.

In first quarter 2025 and 2024, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 12.6% and 19.2%, 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 and tax benefits related to share-based compensation.

In addition, the Company is subject to a decrease in the Global Intangible Low-Tax Income inclusion derived from the increase in revenue in certain foreign jurisdictions.

STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 — FORWARD-LOOKING STATEMENTS

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These risks and uncertainties include, but are not limited to, the risks and uncertainties described in Part I, Item 1A of our 2024 Form 10-K and the risks and uncertainties set forth below:

• unanticipated delays, difficulties or accelerations in the execution of patent license agreements;

• our ability to leverage our strategic relationships and secure new patent license agreements on acceptable terms;

• our ability to enter into sales and/or licensing partnering arrangements for certain of our patent assets;

• our ability to enter into partnerships with leading inventors and research organizations;

• our ability to identify and pursue strategic acquisitions of technology and patent portfolios and other strategic growth opportunities;

• our ability to commercialize our technologies and enter into customer agreements;

• the failure of the markets for our current or new technologies to materialize to the extent or at the rate that we expect;

• unexpected delays or difficulties related to the development of our technologies;

• changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act, as well as further guidance that may be issued regarding such act;

• risks related to the potential impact of new accounting standards on our financial position, results of operations or cash flows;

• failure to accurately forecast the impact of our restructuring activities on our financial statements and our business;

• the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional legal proceedings, changes in the schedules or costs associated with legal proceedings or adverse rulings in such proceedings;

• unanticipated delays or difficulties in the execution of patent license agreements on acceptable terms or at all;

• our ability to expand our revenue opportunities by entering into licensing arrangements with streaming and cloud-based service providers;

• the resolution of legal proceedings, including any awards or judgments relating to such proceedings, and changes in the schedules or costs associated therewith;

• our ability to maintain a strong patent portfolio and make strategic decisions related to our intellectual property protection;

• the failure of markets for our technologies to materialize to the extent that we expect;

• our continued ability to develop new technologies;

• changes in our interpretations of, and assumptions and calculations with respect to the impact on us of, the 2017 Tax Cuts and Jobs Act and other U.S.

• the timing and impact of potential regulatory, administrative and legislative matters;

• changes or inaccuracies in market projections;

• our ability to obtain liquidity through debt and equity financings;

• the potential effects that macroeconomic uncertainty could have on our financial position, results of operations and cash flows

• changes in our business strategy;

• changes or inaccuracies in our expectations with respect to royalty payments by our customers;

• risks related to our assumptions and application of relevant accounting standards, including with respect to revenue recognition.

• the potential effects of macroeconomic conditions or trade conflicts;

• our ability to hire and retain key personnel;

• operational risks, including cybersecurity events, human failures or other difficulties with our information technology systems;

• risks related to any new accounting standards or our assumptions and application of relevant accounting standards, including with respect to revenue recognition.

You should carefully consider these factors before making any investment decision with respect to our common stock.

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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 2. Management’s Discussion and Analysis