InterDigital, Inc. 10-Q

Item 1. FINANCIAL STATEMENTS INTERDIGITAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share data) (unaudited) June 30, 2025 December 31, 2024 Assets Current assets: Cash and cash equivalents $ 517,894 $ 527,360 Short-term investments 419,091 430,848 Accounts receivable 388,707 188,302 Prepaid and other current assets 60,717 84,312 Total current assets 1,386,409 1,230,822 Property and equipment, net 26,376 18,544 Patents, net 317,963 308,630 Deferred tax assets 96,468 128,133 Other non-current assets, net 157,493 149,400 Total assets $ 1,984,709 $ 1,835,529 Liabilities and Shareholders' equity Current liabilities: Current portion of long-term debt $ 455,750 $ 456,329 Accounts payable 8,046 12,206 Accrued compensation and related expenses 28,766 42,575 Deferred revenue 178,291 178,009 Dividends payable 15,507 11,557 Other accrued expenses 22,498 25,134 Total current liabilities 708,858 725,810 Long-term debt 16,566 15,443 Long-term deferred revenue 113,631 182,119 Other long-term liabilities 58,870 54,942 Total liabilities 897,925 978,314 Commitments and contingencies Shareholders' equity: Preferred Stock, $ 0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding — — Common Stock, $ 0.01 par value, 100,000 shares authorized, 70,911 and 70,577 shares issued and 25,869 and 25,682 shares outstanding 709 705 Additional paid-in capital 805,073 808,540 Retained earnings 2,039,921 1,775,823 Accumulated other comprehensive loss ( 107 ) ( 458 ) Treasury stock, 45,042 and 44,895 shares of common stock held at cost ( 1,758,812 ) ( 1,727,395 ) Total shareholders' equity 1,086,784 857,215 Total liabilities and shareholders' equity $ 1,984,709 $ 1,835,529 The accompanying notes are an integral part of these statements. 3 Table of Contents INTERDIGITAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue $ 300,596 $ 223,493 $ 511,103 $ 487,035 Operating expenses: Research and portfolio development 53,674 50,145 101,104 99,520 Licensing 23,909 25,156 41,586 121,745 General and administrative 17,586 14,286 31,154 28,126 Total operating expenses 95,169 89,587 173,844 249,391 Income from operations 205,427 133,906 337,259 237,644 Interest expense ( 9,537 ) ( 11,483 ) ( 19,408 ) ( 23,405 ) Other income, net 15,144 11,682 25,402 20,929 Income before income taxes 211,034 134,105 343,253 235,168 Income tax provision ( 30,466 ) ( 24,441 ) ( 47,083 ) ( 43,852 ) Net income $ 180,568 $ 109,664 $ 296,170 $ 191,316 Net income per common share — Basic $ 6.97 $ 4.35 $ 11.47 $ 7.54 Weighted average number of common shares outstanding — Basic 25,917 25,207 25,829 25,359 Net income per common share — Diluted $ 5.35 $ 3.93 $ 8.81 $ 6.80 Weighted average number of common shares outstanding — Diluted 33,725 27,910 33,615 28,125 Cash dividends declared per common share $ 0.60 $ 0.40 $ 1.20 $ 0.80 The accompanying notes are an integral part of these statements. 4 Table of Contents INTERDIGITAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net income $ 180,568 $ 109,664 $ 296,170 $ 191,316 Unrealized gain (loss) on investments, net of tax 95 ( 90 ) 351 ( 585 ) Comprehensive income $ 180,663 $ 109,574 $ 296,521 $ 190,731 The accompanying notes are an integral part of these statements. 5 Table of Contents INTERDIGITAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (in thousands, except per share data) (unaudited) Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Shareholders' Equity Shares Amount Shares Amount Balance, December 31, 2023 69,507 $ 694 $ 742,981 $ 1,462,070 $ ( 647 ) 43,927 $ ( 1,623,549 ) $ 581,549 Net income — — — 81,652 — — — 81,652 Net change in unrealized loss on short-term investments — — — — ( 495 ) — — ( 495 ) Dividends declared ($ 0.40 per share) — — 343 ( 10,490 ) — — — ( 10,147 ) Issuance of common stock, net 131 2 ( 8,637 ) — — — — ( 8,635 ) Share-based compensation — — 9,386 — — — — 9,386 Repurchase of common stock — — — — — 277 ( 29,019 ) ( 29,019 ) Balance, March 31, 2024 69,638 $ 696 $ 744,073 $ 1,533,232 $ ( 1,142 ) 44,204 $ ( 1,652,568 ) $ 624,291 Net income — — — 109,664 — — — 109,664 Net change in unrealized loss on short-term investments — — — — ( 90 ) — — ( 90 ) Dividends declared ($ 0.40 per share) — — 443 ( 10,495 ) — — — ( 10,052 ) Issuance of common stock, net 39 — ( 1,580 ) — — — — ( 1,580 ) Share-based compensation — — 9,655 — — — — 9,655 Repurchase of common stock — — — — — 344 ( 35,111 ) ( 35,111 ) Settlement of the 2024 Notes 324 3 ( 3 ) — — — — — Settlement of the 2024 Hedges — — 37,120 — — 324 ( 37,120 ) — Balance, June 30, 2024 70,001 $ 699 $ 789,708 $ 1,632,401 $ ( 1,232 ) 44,872 $ ( 1,724,799 ) $ 696,777 Common Stock Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Total Shareholders' Equity Shares Amount Shares Amount Balance, December 31, 2024 70,577 $ 705 $ 808,540 $ 1,775,823 $ ( 458 ) 44,895 $ ( 1,727,395 ) $ 857,215 Net income — — — 115,602 — — — 115,602 Net change in unrealized gain on short-term investments — — — — 256 — — 256 Dividends declared ($ 0.60 per share) — — 450 ( 16,027 ) — — — ( 15,577 ) Exercise of common stock options 100 1 7,314 — — — — 7,315 Issuance of common stock, net 218 2 ( 32,178 ) — — — — ( 32,176 ) Share-based compensation — — 9,498 — — — — 9,498 Repurchase of common stock — — — — — 24 ( 5,249 ) ( 5,249 ) Balance, March 31, 2025 70,895 $ 708 $ 793,624 $ 1,875,398 $ ( 202 ) 44,919 $ ( 1,732,644 ) $ 936,884 Net income — — — 180,568 — — — 180,568 Net change in unrealized gain on short-term investments — — — — 95 — — 95 Dividends declared ($ 0.60 per share) — — 538 ( 16,045 ) — — — ( 15,507 ) Exercise of common stock options 1 — 15 — — — — 15 Issuance of common stock, net 15 1 ( 940 ) — — — — ( 939 ) Share-based compensation — — 11,836 — — — — 11,836 Repurchase of common stock — — — — — 123 ( 26,168 ) ( 26,168 ) Balance, June 30, 2025 70,911 $ 709 $ 805,073 $ 2,039,921 $ ( 107 ) 45,042 $ ( 1,758,812 ) $ 1,086,784 The accompanying notes are an integral part of these statements. 6 Table of Contents INTERDIGITAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Six Months Ended June 30, 2025 2024 Cash flows from operating activities: Net income $ 296,170 $ 191,316 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,678 34,616 Non-cash interest income, net ( 2,426 ) ( 6,429 ) Non-cash change in investments 584 ( 150 ) Change in deferred revenue ( 71,206 ) ( 54,408 ) Deferred income taxes 31,572 29,495 Share-based compensation 21,334 19,041 Increase in assets: Receivables ( 200,405 ) ( 106,348 ) Deferred charges and other assets ( 14,044 ) ( 41,151 ) Increase (Decrease) in liabilities: Accounts payable 801 ( 611 ) Customer deposit — ( 63,100 ) Accrued compensation and other expenses ( 14,929 ) ( 408 ) Net cash provided by operating activities 85,129 1,863 Cash flows from investing activities: Purchases of short-term investments ( 236,016 ) ( 297,086 ) Sales of short-term investments 254,003 415,988 Purchases of property and equipment ( 15,082 ) ( 1,003 ) Capitalized patent costs ( 25,125 ) ( 21,595 ) Long-term investments — 1,194 Net cash (used in) provided by investing activities ( 22,220 ) 97,498 Cash flows from financing activities: Payments on long-term debt ( 1,284 ) ( 139,069 ) Repurchase of common stock ( 31,417 ) ( 63,670 ) Net proceeds from exercise of stock options 7,331 — Taxes withheld upon restricted stock unit vestings ( 33,116 ) ( 10,215 ) Dividends paid ( 27,134 ) ( 20,373 ) Net cash used in financing activities ( 85,620 ) ( 233,327 ) Net decrease in cash, cash equivalents and restricted cash ( 22,711 ) ( 133,966 ) Cash, cash equivalents and restricted cash, beginning of period 551,547 442,961 Cash, cash equivalents and restricted cash, end of period $ 528,836 $ 308,995 Refer to Note 1, " Basis of Presentation, " for additional supplemental cash flow information. Additionally, refer to Note 3, " Cash, Concentration of Credit Risk and Fair Value of Financial Instruments " for a reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets. The accompanying notes are an integral part of these statements. 7 Table of Contents INTERDIGITAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2025 (unaudited) 1. 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, 2025, the results of our operations for the three and six months ended June 30, 2025 and 2024 and our cash flows for the six months ended June 30, 2025 and 2024. 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”). The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP for year-end financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (our “2024 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February 6, 2025. Definitions of capitalized terms not defined herein appear within our 2024 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. We have one reportable segment. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Change in Accounting Policies There have been no material changes or updates to our existing accounting policies from the disclosures included in our 2024 Form 10-K, except as indicated below in " New Accounting Guidance ". Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Supplemental Cash Flow Information The following table presents additional supplemental cash flow information for the six months ended June 30, 2025 and 2024 (in thousands): Six Months Ended June 30, Supplemental cash flow information: 2025 2024 Interest paid $ 8,050 $ 9,311 Income taxes paid, including foreign withholding taxes 21,764 16,920 Non-cash investing and financing activities: Dividend payable 15,507 10,052 Right-of-use assets obtained in exchange of operating lease liabilities 880 2,189 Non-cash acquisition of patents 19,319 — Accrued capitalized patent costs and property and equipment purchases 4,961 ( 856 ) Unsettled repurchase of common stock 468 — 8 Table of Contents New Accounting Guidance Accounting Standards Update: Improvements to Income Tax Disclosures In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Updates ("ASU") No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in the ASU enhance income tax disclosures, primarily through standardization, disaggregation of rate reconciliation categories, and income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption allowed. We adopted this guidance as of January 1, 2025, and we will include the necessary disclosures in our annual Form 10-K. The disclosures are required on an annual basis so there was no impact to this Form 10-Q. Accounting Standards Update: Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024-03, "Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in the ASU require disclosures about specific types of expenses included in the expense captions presented on the Consolidated Statements of Income, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption allowed. We are currently evaluating the impact of adoption on our financial disclosures. Accounting Standards Update: Induced Conversions of Convertible Debt Instruments In November 2024, the FASB issued ASU No. 2024-04, "Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments". The amendments in the ASU require disclosures for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for fiscal years beginning after December 15, 2025, with early adoption allowed. We are currently evaluating the impact of adoption on our consolidated financial statements. 9 Table of Contents 2. REVENUE Disaggregated Revenue The following table presents the disaggregation of our revenue for the three and six months ended June 30, 2025 and 2024 (in thousands): Three Months Ended June 30, 2025 2024 Increase/(Decrease) Smartphone $ 235,084 $ 199,225 $ 35,859 18 % CE, IoT/Auto 65,331 23,729 41,602 175 % Other 181 539 ( 358 ) ( 66 ) % Total Revenue $ 300,596 $ 223,493 $ 77,103 34 % Catch-up revenue (a) , included above $ 162,328 $ 127,551 $ 34,777 27 % Six Months Ended June 30, 2025 2024 Increase/(Decrease) Smartphone $ 419,075 $ 279,505 $ 139,570 50 % CE, IoT/Auto 91,598 206,272 ( 114,674 ) ( 56 ) % Other 430 1,258 ( 828 ) ( 66 ) % Total Revenue $ 511,103 $ 487,035 $ 24,068 5 % Catch-up revenue (a) , included above $ 247,113 $ 294,229 $ ( 47,116 ) ( 16 ) % (a) Catch-up revenue represents revenue associated with reporting periods prior to the execution of the license agreement. During the six months ended June 30, 2025, we recognized $ 108.5 million of revenue that had been included in deferred revenue as of the beginning of the period. As of June 30, 2025, we had contract assets of $ 343.8 million included within " Accounts receivable " and $ 9.0 million included within " Other non-current assets, net " in the condensed consolidated balance sheet. As of December 31, 2024, we had contract assets of $ 162.8 million included within " Accounts receivable " in the condensed consolidated balance sheet. Contracted Revenue Based on contracts signed and committed as of June 30, 2025, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands): Revenue (a) Remainder of 2025 $ 259,231 2026 425,298 2027 413,782 2028 322,625 2029 268,989 Thereafter 232,500 Total Revenue $ 1,922,425 (a) This table includes estimated revenue related to our Lenovo arbitration. In accordance with ASC 606, this estimate is limited to the amount of revenue we expect to recognize only to the extent we believe it is probable that a subsequent change in the estimate would not result in a significant revenue reversal. 10 Table of Contents 3. CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS Cash, Cash Equivalents, and Restricted Cash Cash, cash equivalents, and restricted cash currently consist of money market and demand accounts. The following table provides a reconciliation of total cash, cash equivalents, and restricted cash as of June 30, 2025, December 31, 2024, and June 30, 2024 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands): June 30, December 31, June 30, 2025 2024 2024 Cash and cash equivalents $ 517,894 $ 527,360 $ 299,762 Restricted cash included within prepaid and other current assets 10,942 24,187 9,233 Total cash, cash equivalents, and restricted cash $ 528,836 $ 551,547 $ 308,995 Concentration of Credit Risk and Fair Value of Financial Instruments 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. Our accounts receivable and contract assets are derived principally from patent license and technology solutions agreements. Three licensees comprised 90 % and 84 % of our accounts receivable balances of June 30, 2025 and December 31, 2024, respectively. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values. Fair Value Measurements We use various valuation techniques and assumptions when measuring the fair value of our assets and liabilities. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. This guidance established a hierarchy that prioritizes fair value measurements based on the types of input used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below: Level 1 Inputs — Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 2 Inputs — Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data, including market interest rate curves, referenced credit spreads and pre-payment rates. Level 3 Inputs — Level 3 includes financial instruments for which fair value is derived from valuation techniques including pricing models and discounted cash flow models in which one or more significant inputs are unobservable, including the Company’s own assumptions. The pricing models incorporate transaction details such as contractual terms, maturity and, in certain instances, timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of marketplace participants. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. We use quoted market prices for similar assets to estimate the fair value of our Level 2 investments. 11 Table of Contents Recurring Fair Value Measurements 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, 2025 and December 31, 2024 (in thousands): Fair Value as of June 30, 2025 Level 1 Level 2 Level 3 Total Assets: Money market and demand accounts (a) $ 527,341 $ — $ — $ 527,341 Commercial paper (b) — 73,055 — 73,055 U.S. government securities — 217,899 — 217,899 Corporate bonds, asset backed and other securities (c) — 129,164 — 129,164 Total $ 527,341 $ 420,118 $ — $ 947,459 Fair Value as of December 31, 2024 Level 1 Level 2 Level 3 Total Assets: Money market and demand accounts (a) $ 535,745 $ — $ — $ 535,745 Commercial paper (b) — 78,870 — 78,870 U.S. government securities — 230,561 — 230,561 Corporate bonds, asset backed and other securities (c) — 137,219 — 137,219 Total $ 535,745 $ 446,650 $ — $ 982,395 ______________________________ (a) Primarily included within cash and cash equivalents. (b) As of December 31, 2024, $ 4.1 million of commercial paper was included within cash and cash equivalents, respectively. (c) As of June 30, 2025 and December 31, 2024, $ 1.0 million and $ 11.7 million of corporate bonds, asset backed and other securities was included within cash and cash equivalents, respectively. 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 June 30, 2025 and December 31, 2024 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, 2025 December 31, 2024 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value 2027 Senior Convertible Long-Term Debt $ 460,000 $ 455,750 $ 1,340,725 $ 460,000 $ 454,739 $ 1,166,155 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, 2025 and December 31, 2024 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, 2025 December 31, 2024 Carrying Value Fair Value Carrying Value Fair Value Technicolor Patent Acquisition Long-Term Debt $ 16,566 $ 15,585 $ 17,033 $ 17,102 12 Table of Contents 4. OTHER ASSETS AND LIABILITIES The amounts included in " Prepaid and other current assets " in the condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024 were as follows (in thousands): June 30, 2025 December 31, 2024 Tax receivables $ 23,837 $ 16,691 Prepaid assets 22,096 38,952 Restricted cash 10,942 24,187 Other current assets 3,842 4,482 Total Prepaid and other current assets $ 60,717 $ 84,312 The amounts included in " Other non-current assets, net " in the condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024 were as follows (in thousands): June 30, 2025 December 31, 2024 Tax receivables $ 93,943 $ 88,619 Goodwill 22,421 22,421 Right-of-use assets 14,741 15,218 Long-term investments 12,947 19,851 Contract asset 9,000 — Other non-current assets 4,441 3,291 Total Other non-current assets, net $ 157,493 $ 149,400 The amounts included in " Other accrued expenses " in the condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024 were as follows (in thousands): June 30, 2025 December 31, 2024 Accrued legal fees $ 13,107 $ 9,571 Other accrued expenses 9,391 15,563 Total Other accrued expenses $ 22,498 $ 25,134 The amounts included in " Other long-term liabilities " in the condensed consolidated balance sheet as of June 30, 2025 and December 31, 2024 were as follows (in thousands): June 30, 2025 December 31, 2024 Deferred compensation liabilities $ 23,627 $ 19,969 Operating lease liabilities 15,289 15,772 Other long-term liabilities 19,954 19,201 Total Other long-term liabilities $ 58,870 $ 54,942 5. OBLIGATIONS 2027 Notes, and Related Note Hedge and Warrant Transactions On May 27, 2022, we issued $ 460.0 million in aggregate principal amount of 3.50 % Senior Convertible Notes due in 2027 (the "2027 Notes"). The net proceeds from the issuance of the 2027 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $ 450.0 million. The 2027 Notes bear interest at a rate of 3.50 % per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2022, and mature on June 1, 2027, unless earlier redeemed, converted or repurchased. 13 Table of Contents The 2027 Notes will be convertible into cash up to the aggregate principal amount of the 2027 Notes to be converted and in respect of the remainder, if any, of the Company’s obligation in excess of the aggregate principal amount of the 2027 Notes being converted, pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination thereof, at the Company’s election, at an initial conversion rate of 12.9041 shares of Common Stock per $1,000 principal amount of the 2027 Notes (which is equivalent to an initial conversion price of approximately $ 77.49 per share). From the period January 1, 2024 through September 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. As such, the 2027 Notes are included in " Current portion of long-term debt " in our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024. The 2027 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with any of the Company’s current and any future senior unsecured indebtedness. The 2027 Notes are effectively subordinated to all of the Company’s future secured indebtedness, if any, to the extent of the value of the related collateral, and the 2027 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries. On May 24 and May 25, 2022, in connection with the offering of the 2027 Notes, we entered into convertible note hedge transactions ("2027 Note Hedge Transactions") that cover, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2027 Notes, subject to adjustment, and are exercisable upon any conversion of the 2027 Notes. Also, on May 24 and May 25, 2022, we entered into privately negotiated warrant transactions ("2027 Warrant Transactions"), whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock. As of June 30, 2025, the warrants under the 2027 Warrant Transactions had a weighted average strike price of $ 106.06 per share, subject to adjustment, and mature beginning September 2027 through April 2028. 2024 Notes, and Related Note Hedge and Warrant Transactions On June 3, 2019, we issued $ 400.0 million in aggregate principal amount of Senior Convertible Notes due in 2024 (the "2024 Notes") that bore interest at a rate of 2.00 % per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2019, and matured on June 1, 2024. In connection with the offering of the 2024 Notes, we entered into convertible note hedge transactions (collectively, the "2024 Note Hedge Transactions") that covered, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock, in the aggregate, at a strike price that corresponded to the conversion price of the 2024 Notes, subject to adjustment, and were exercisable upon any conversion of the 2024 Notes. We also entered into privately negotiated warrant transactions (collectively, the "2024 Warrant Transactions" and, together with the 2024 Note Hedge Transactions, the "2024 Call Spread Transactions"), whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock at an initial strike price of approximately $ 109.43 per share, subject to adjustment. During second quarter 2022, we repurchased $ 273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes. In connection with the partial repurchase of the 2024 Notes, we entered into partial unwind agreements that amended the terms of the 2024 Call Spread 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 3.3 million shares of common stock in the aggregate that were covered under each of the 2024 Note Hedge Transactions and the 2024 Warrant Transactions were unwound. On June 1, 2024, the 2024 Notes matured and we repaid the remaining $ 126.2 million in aggregate principal in cash and issued 0.3 million common shares to settle the remaining obligation. This issuance was effectively offset by our receipt of 0.3 million shares from the settlement of the 2024 Note Hedge Transactions. Additionally, the 2024 Warrant Transactions settled, on a net-share basis, during September through December 2024 resulting in the issuance of 0.5 million shares. The following table reflects the carrying value of our Convertible Notes long-term debt as of June 30, 2025 and December 31, 2024 (in thousands): June 30, 2025 December 31, 2024 3.50 % Senior Convertible Notes due 2027 $ 460,000 $ 460,000 Less: Deferred financing costs ( 4,250 ) ( 5,261 ) Net carrying amount of the Convertible Notes 455,750 454,739 Less: Current portion of long-term debt ( 455,750 ) ( 454,739 ) Long-term net carrying amount of the Convertible Notes $ — $ — 14 Table of Contents 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, 2025 and 2024 relating to the contractual interest coupon and the amortization of deferred financing costs of the Convertible Notes (in thousands): Three Months Ended June 30, 2025 2024 2027 Notes 2027 Notes 2024 Notes Total Contractual coupon interest $ 4,025 $ 4,025 $ 428 $ 4,453 Amortization of deferred financing costs 509 471 101 572 Total $ 4,534 $ 4,496 $ 529 $ 5,025 Six Months Ended June 30, 2025 2024 2027 Notes 2027 Notes 2024 Notes Total Contractual coupon interest $ 8,050 $ 8,050 $ 1,059 $ 9,109 Amortization of deferred financing costs 1,011 936 252 1,188 Total $ 9,061 $ 8,986 $ 1,311 $ 10,297 Technicolor Patent Acquisition Long-Term Debt On July 30, 2018, we completed our acquisition of the patent licensing business of Technicolor SA ("Technicolor"), a worldwide technology leader in the media and entertainment sector (the "Technicolor Patent Acquisition"). In conjunction with the Technicolor Patent Acquisition, we assumed Technicolor’s rights and obligations under a joint licensing program with Sony relating to digital televisions and standalone computer display monitors, which commenced in 2015 (the "Madison Arrangement"). An affiliate of CPPIB Credit Investments Inc. ("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement. CPPIB Credit made certain payments to Technicolor and Sony and agreed to contribute cash to fund certain capital reserve obligations under the arrangement in exchange for a percentage of future revenue, specifically through September 11, 2030 in regard to the Technicolor patents. Upon our assumption of Technicolor’s rights and obligations under the Madison Arrangement, our relationship with CPPIB Credit meets the criteria in ASC 470-10-25 - Sales of Future Revenues or Various Other Measures of Income ("ASC 470"), which relates to cash received from an investor in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent, or contractual right for a defined period. Under this guidance, we recognized the fair value of our contingent obligation to CPPIB Credit, as of the acquisition date, as long-term debt in our condensed consolidated balance sheet. 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, 2025 and December 31, 2024 is disclosed within Note 3, " Cash, Concentration of Credit Risk and Fair Value of Financial Instruments. " Our repayment obligations are contingent upon future royalty revenue generated from the Madison Arrangement and there are no minimum or maximum payments under the arrangement. Under ASC 470, amounts recorded as debt are amortized under the interest method. At each reporting period, we will review the discounted expected future cash flows over the life of the obligation. The Company made an accounting policy election to utilize the catch-up method when there is a change in the estimated future cash flows, whereby we will adjust the carrying amount of the debt to the present value of the revised estimated future cash flows, discounted at the original effective interest rate, with a corresponding adjustment recognized as interest expense within “ Interest Expense ” in the condensed consolidated statements of income. The effective interest rate as of the acquisition date was approximately 14.5 %. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt as of the acquisition date and is used to compute the amount of interest to be recognized each period based on the estimated life of the future revenue streams. During the three and six months ended June 30, 2025, we recognized $ 0.6 million and $ 0.8 million, respectively, of interest expense related to this debt, compared to $ 1.0 million and $ 1.6 million during the three and six months ended June 30, 2024, respectively. This was included within “ Interest Expense ” in the condensed consolidated statements of income. Any future payments made to CPPIB Credit, or additional proceeds received from CPPIB Credit, will decrease or increase the long-term debt balance accordingly. We made $ 1.3 million in payments to CPPIB Credit during the six months ended June 30, 2025 and $ 12.9 million in payments were made during the six months ended June 30, 2024. 15 Table of Contents Technicolor Contingent Consideration As part of the Technicolor Patent Acquisition, we entered into a revenue-sharing arrangement with Technicolor that created a contingent consideration liability. 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, 2025, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements. 6. LITIGATION AND LEGAL PROCEEDINGS ARBITRATIONS AND COURT PROCEEDINGS Lenovo In fourth quarter 2024, the Company reached an agreement with Lenovo Group Limited and certain of its subsidiaries (“Lenovo”) to enter into binding arbitration to determine the final terms of a new patent license agreement, which will be effective from January 1, 2024. In November 2024, the Company filed a request for arbitration with the International Chamber of Commerce. In March 2025, the International Chamber of Commerce confirmed the full tribunal for the arbitration. Samsung The Company reached an agreement with Samsung Electronics Co. Ltd. (“Samsung”) to enter into binding arbitration to determine the final terms of a renewed patent license agreement to certain of the Company ’s patents, to be effective from January 1, 2023. The Company and Samsung also agreed not to initiate certain claims against the other during the arbitration. In March 2023, the Company filed a request for arbitration with the International Chamber of Commerce. The arbitration hearing was held in July 2024 , and closing arguments were held in October 2024. On July 28, 2025, a panel of International Chamber of Commerce arbitrators determined the royalties of the patent license between the Company and Samsung covering Samsung’s products other than digital televisions and computer display monitors, which have been licensed under a separate agreement. The panel set the total royalties at $ 1.05 billion for the eight-year patent license. Tesla In December 2023, Tesla and certain of its subsidiaries filed a claim in the UK High Court against the Company and Avanci. The claim alleges invalidity of three of the Company’s patents relating to 5G standards: European Patent (UK) Nos. 3,718,369, 3,566,413, and 3,455,985. Tesla sought, among other relief, a declaration that the patents at issue are invalid, not essential, and not infringed, revocation of the patents at issue, a declaration that the terms of the Avanci 5G Connected Vehicle platform license are not FRAND, and a determination of FRAND terms for a license between Tesla and Avanci covering its Avanci’s 5G Connected Vehicle platform. In March 2024, the Company filed a jurisdiction challenge; the jurisdiction challenge was heard during May and June 2024, and in July 2024 the UK High Court issued a judgment dismissing Tesla’s FRAND claims against the Company and Avanci, and maintaining Tesla’s patent claims against the Company. The patent claims against the Company were further stayed by the UK High Court. Tesla sought permission to appeal the decision; the Company also sought permission to appeal on two limited grounds conditionally, should Tesla’s request for an appeal be granted . The appeal hearing was held in December 2024, and the UK Court of Appeal upheld the lower court's decision and refused Tesla’s request for permission to appeal. Tesla filed an application for permission to appeal to the Supreme Court. In July 2025, the Supreme Court granted Tesla’s request for permission to appeal the issues of whether pool licenses are arguably required to be FRAND, whether all members of the Avanci 5G Platform must be joined to the case, and whether Tesla’s claim advances the possibility of a bilateral license from the Company. Disney US Central District of California Proceedings In February 2025, the Company and certain of its subsidiaries filed a claim in the Federal District Court of the Central District of California against The Walt Disney Co. and certain of its subsidiaries (“Disney”). The claim alleges infringement of certain of the Company’s patents relating to video coding and video streaming technologies. The Company is seeking, among other relief, damages to prevent further infringement of the asserted patents. In March 2025, Disney filed an answer and asserted multiple counterclaims against the Company. In April 2025 Disney filed a motion for an anti-suit injunction to prevent enforcement of any potential injunctive relief in Brazil, which the court denied. A trial is scheduled for September 2026. 16 Table of Contents Brazil Proceedings In February 2025, the Company and certain of its subsidiaries filed a claim in the Regional Business Court of Rio de Janeiro against The Walt Disney Co. and certain of its subsidiaries . The claim alleges infringement of certain of the Company’s patents relating to video coding technologies . The Company is seeking , among other relief, damages and injunctive relief to prevent further infringement of the asserted patents. In March 2025, Disney filed an answer and asserted a rate-setting counterclaim. In May 2025 the Company requested an anti-interference injunction to prevent Disney from continuing with its anti-suit injunction in California. Germany Proceedings In February and April of 2025, the Company and certain of its subsidiaries filed patent infringement claims in four separate proceedings in the Munich Regional Court against The Walt Disney Co. and certain of its subsidiaries. The claims allege infringement of certain of the Company’s patents relating to video coding and video streaming technologies . The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. In May 2025, the Company filed a request for an anti-interference injunction to prevent interference with the proceedings in Munich by an anti-suit injunction. The court issued the anti-interference injunction against Disney. UPC Proceedings In February and April of 2025, the Company and certain of its subsidiaries filed patent infringement claims in four separate proceedings in the Mannheim Local Divisional Court and Dusseldorf Local Divisional Court of the Unified Patent Court (“the UPC”) against The Walt Disney Co. and certain of its subsidiaries. The claims allege infringement of certain of the Company’s patents relating to video coding and video streaming technologies. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. In May 2025, the Company filed a request for an anti-interference injunction to prevent interference with the proceedings at the UPC by an anti-suit injunction. The Mannheim Local Division granted the anti-interference injunction against Disney. OTHER 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, 2025, except as noted above. 7. INCOME TAXES In the six months ended June 30, 2025 and 2024, the Company had an estimated effective tax rate of 13.7 % and 18.6 %, respectively. The change in effective tax rate is due to an increase in the amount of Foreign Derived Intangible Income ("FDII") 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 decrease in French revenue. During the six months ended June 30, 2025 and 2024, the Company recorded discrete net benefits of $ 5.6 million and $ 2.4 million, respectively, primarily related to share-based compensation. The One Big Beautiful Bill Act (the “Act”) was signed into law on July 4th, 2025. The Act contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that will impact the Company relate to the timing and amount of certain tax deductions including FDII, depreciation expense, R& D expenditures and interest expense. The Company will implement the tax law changes in the third quarter of 2025. The Company is still in the process of evaluating the Act and an estimate of the financial impact cannot be made at this time. 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, 2025 and 2024, the Company paid approximately $ 14.5 million and $ 13.4 million, respectively, in foreign source creditable withholding tax. 17 Table of Contents 8. 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"). 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, 2025 2024 2025 2024 Net income $ 180,568 $ 109,664 $ 296,170 $ 191,316 Weighted-average shares outstanding: Basic 25,917 25,207 25,829 25,359 Dilutive effect of stock options and RSUs 1,035 794 1,154 841 Dilutive effect of warrants 2,982 38 2,901 19 Dilutive effect of convertible securities 3,791 1,871 3,731 1,906 Diluted 33,725 27,910 33,615 28,125 Earnings per share: Basic $ 6.97 $ 4.35 $ 11.47 $ 7.54 Dilutive effect of stock options and RSUs ( 0.22 ) ( 0.11 ) ( 0.40 ) ( 0.20 ) Dilutive effect of warrants ( 0.62 ) ( 0.01 ) ( 0.99 ) ( 0.01 ) Dilutive effect of convertible securities ( 0.78 ) ( 0.30 ) ( 1.27 ) ( 0.53 ) Diluted $ 5.35 $ 3.93 $ 8.81 $ 6.80 Shares of common stock issuable upon the exercise or conversion of certain securities have been excluded from our computation of EPS because the strike price or conversion rate, as applicable, of such securities was greater than the average market price of our common stock and, as a result, the effect of such exercise or conversion would have been anti-dilutive. 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, 2025 2024 2025 2024 Warrants 2,980 7,462 3,058 7,475 Convertible Notes and Warrants Refer to Note 5, " Obligations ," for information about the Company's convertible notes and warrants and related conversion and strike prices. During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Company's convertible notes, or above the strike price of the Company's outstanding warrants, the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted EPS. As a result, in periods where the average market price of the Company's common stock is above the conversion price or strike price, as applicable, under the if-converted method, the Company calculates the number of shares issuable under the terms of the convertible notes and the warrants based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period. 18 Table of Contents 9. SEGMENT PERFORMANCE MEASURES AND EXPENSES Our chief operating decision maker (“CODM”), who is our Chief Executive Officer, assesses company-wide performance and allocates resources based on consolidated financial information. Consequently, we view the entire organization as one reportable segment and the strategic purpose of all operating activities is to support that one segment. Our CODM evaluates company-wide performance based on multiple performance measures, including, but not limited to, net income. Our CODM does not generally evaluate our performance using asset or historical cash flow information. The table below provides the calculation of net income, which is the performance measure that is most consistent with GAAP, and the significant operating expenses included in this performance measure (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenue $ 300,596 $ 223,493 $ 511,103 $ 487,035 Less: Departmental expenses (a) 49,355 44,485 90,692 88,951 Depreciation and amortization 19,465 17,376 37,678 34,616 Intellectual property enforcement 11,963 15,345 18,941 35,089 Share-based compensation 11,836 9,655 21,334 19,041 Revenue share costs 2,550 2,726 5,199 71,694 Other non-operating (income) expense, net (b) ( 5,607 ) ( 199 ) ( 5,994 ) 2,476 Income tax provision 30,466 24,441 47,083 43,852 Net income $ 180,568 $ 109,664 $ 296,170 $ 191,316 (a) Includes personnel costs, consulting costs, outside services, administrative costs, and other operating expenses. (b) Includes interest income, interest expense, and other non-operating income and expenses 10. OTHER INCOME, NET The amounts included in " Other income, net " in the condensed consolidated statements of income for the three and six months ended June 30, 2025 and 2024 were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest and investment income $ 8,828 $ 10,125 $ 18,092 $ 21,903 Other 6,316 1,557 7,310 ( 974 ) Other income, net $ 15,144 $ 11,682 $ 25,402 $ 20,929 The change in Other was primarily due to a foreign currency translation net gains arising from translation of our foreign subsidiaries of $ 3.6 million and $ 5.8 million in the three and six months ending June 30, 2025, respectively, compared to losses of $ 0.9 million and $ 3.3 million in the three and six months ending June 30, 2024, respectively. 19 Table of Contents