UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q



þ☑		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the quarterly period ended September 30, 2017~~

ORFor the quarterly period ended June 30, 2022



o☐		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the transition period from~~ to

For the transition period fromto

Commission File Number 1-33579

INTERDIGITAL, INC.

(Exact Name of Registrant as Specified in Its Charter)



~~PENNSYLVANIA~~ Pennsylvania						82-4936666
(State or Other Jurisdiction of Incorporation or Organization)						~~23-1882087~~ (I.R.S. Employer Identification No.)

200 Bellevue Parkway, Suite 300, Wilmington, DE 19809-3727

(Address of Principal Executive Offices and Zip Code)

(302) 281-3600

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	IDCC	Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),; and (2) has been subject to such filing requirements for the past 90 days. Yes þ☑ No o☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes þ☑ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerR

☑

Accelerated filero

☐

Non-accelerated filero ~~(Do not check if a smaller reporting company)~~

☐

Smaller reporting companyo

☐

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Common Stock, par value $0.01 per share			~~34,711,424~~29,657,244
Title of Class			Outstanding at ~~October 24, 2017~~August 2, 2022

INDEX




			PAGES
Part I — Financial Information:			3
Item 1 Financial Statements (unaudited):			3
Condensed Consolidated Balance Sheets — ~~September 30, 2017~~June 3 0 , 2022 and December 31, ~~2016~~2021			3
Condensed Consolidated Statements of Income — Three and ~~Nine~~ Six Months Ended ~~September 30, 2017~~June 3 0 , 2022 and ~~2016~~2021			4
Condensed Consolidated Statements of Comprehensive Income — Three and ~~Nine~~ Six Months Ended ~~September 30, 2017~~June 3 0 , 2022 and ~~2016~~2021			5
Condensed Consolidated Statements of Shareholders' Equity — Three and Six Months Ended June 30, 2022 and 2021			6
Condensed Consolidated Statements of Cash Flows — ~~Nine~~Six Months Ended ~~September 30, 2017~~June 3 0 , 2022 and ~~2016~~2021			68
Notes to Condensed Consolidated Financial Statements			79
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			2625
Item 3 Quantitative and Qualitative Disclosures About Market Risk			3438
Item 4 Controls and Procedures			3439
Part II — Other Information:			40
Item 1 Legal Proceedings			3640
Item 1A Risk Factors			3640
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			3741
Item 4 Mine Safety Disclosures			41
Item 6 Exhibits			3742
SIGNATURES			3843
~~EX-31.1~~
~~EX-31.2~~
~~EX-32.1~~
~~EX-32.2~~
~~EX-101 INSTANCE DOCUMENT~~
~~EX-101 SCHEMA DOCUMENT~~
~~EX-101 CALCULATION LINKBASE DOCUMENT~~
~~EX-101 LABELS LINKBASE DOCUMENT~~
~~EX-101 PRESENTATION LINKBASE DOCUMENT~~

InterDigital^® is a registered trademark of InterDigital, Inc. All other trademarks, service marks and/or trade names appearing in this Quarterly Report on Form 10-Q are the property of their respective holders.

Table of Content s

PART I — FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

(unaudited)


	SEPTEMBER 30, 2017			DECEMBER 31, 2016				JUNE 30, 2022		DECEMBER 31, 2021
ASSETS							ASSETS
CURRENT ASSETS:							CURRENT ASSETS:
Cash and cash equivalents	$	283,557		$	404,074		Cash and cash equivalents	$	833,533	$	706,282
Short-term investments	683,655			548,687			Short-term investments	67,076		235,345
Accounts receivable, less allowances of $456 and $0	400,126			228,464
Accounts receivable, less allowances of $0 and $322							Accounts receivable, less allowances of $0 and $322	48,801		31,113
Prepaid and other current assets	52,966			39,894			Prepaid and other current assets	86,393		77,545
Total current assets	1,420,304			1,221,119			Total current assets	1,035,803		1,050,285
PROPERTY AND EQUIPMENT, NET	11,097			12,626			PROPERTY AND EQUIPMENT, NET	11,261		13,377
PATENTS, NET	310,262			310,768			PATENTS, NET	371,687		363,585
DEFERRED TAX ASSETS	157,385			149,532			DEFERRED TAX ASSETS	103,047		98,408
OTHER NON-CURRENT ASSETS	37,074			33,808
	515,818			506,734
OTHER NON-CURRENT ASSETS, NET							OTHER NON-CURRENT ASSETS, NET	95,697		102,501
Total non-current assets							Total non-current assets	581,692		577,871
TOTAL ASSETS	$	1,936,122		$	1,727,853		TOTAL ASSETS	$	1,617,495	$	1,628,156

LIABILITIES AND SHAREHOLDERS’ EQUITY							LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:							CURRENT LIABILITIES:

Accounts payable	$	11,400		$	14,050		Accounts payable	$	9,222	$	7,155
Accrued compensation and related expenses	18,033			22,065			Accrued compensation and related expenses	20,215		32,638
Deferred revenue	351,012			360,192			Deferred revenue	168,461		291,673
Taxes payable	39,300			10,660

Dividends payable	12,149			10,290			Dividends payable	10,380		10,741
Other accrued expenses	8,545			8,223			Other accrued expenses	24,673		29,354
Total current liabilities	440,439			425,480			Total current liabilities	232,951		371,561
LONG-TERM DEBT	281,774			272,021			LONG-TERM DEBT	604,245		422,745
LONG-TERM DEFERRED REVENUE	373,049			261,013			LONG-TERM DEFERRED REVENUE	45,075		19,463
OTHER LONG-TERM LIABILITIES	8,844			14,971			OTHER LONG-TERM LIABILITIES	49,980		61,470
TOTAL LIABILITIES	1,104,106			973,485			TOTAL LIABILITIES	932,251		875,239
COMMITMENTS AND CONTINGENCIES							COMMITMENTS AND CONTINGENCIES	0		0
SHAREHOLDERS’ EQUITY:							SHAREHOLDERS’ EQUITY:
Preferred Stock, $0.10 par value, 14,399 shares authorized, 0 shares issued and outstanding	—			—			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, 70,730 and 70,318 shares issued and 34,710 and 34,298 shares outstanding	707			703
Common Stock, $0.01 par value, 100,000 shares authorized, 71,912 and 71,720 shares issued and 29,657 and 30,689 shares outstanding							Common Stock, $0.01 par value, 100,000 shares authorized, 71,912 and 71,720 shares issued and 29,657 and 30,689 shares outstanding	719		717
Additional paid-in capital	675,872			683,549			Additional paid-in capital	704,370		713,599
Retained earnings	1,209,012			1,120,766			Retained earnings	1,458,674		1,441,105
Accumulated other comprehensive loss	(695		)	(514		)	Accumulated other comprehensive loss	(938)		(571)
	1,884,896			1,804,504				2,162,825		2,154,850
Treasury stock, 36,020 shares of common held at cost	1,064,795			1,064,795
Treasury stock, 42,255 and 41,031 shares of common stock held at cost							Treasury stock, 42,255 and 41,031 shares of common stock held at cost	1,484,056		1,409,611
Total InterDigital, Inc. shareholders’ equity	820,101			739,709			Total InterDigital, Inc. shareholders’ equity	678,769		745,239
Noncontrolling interest	11,915			14,659			Noncontrolling interest	6,475		7,678
Total equity	832,016			754,368			Total equity	685,244		752,917
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,936,122		$	1,727,853		TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,617,495	$	1,628,156

The accompanying notes are an integral part of these statements.

Table of Content s

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

(unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
REVENUES:
Patent licensing royalties	$	123,985	$	86,205	$	225,064	$	166,378
Technology solutions	672		1,530		911		3,720

Total Revenue	124,657		87,735		225,975		170,098

OPERATING EXPENSES:
Patent administration and licensing	45,417		40,970		87,512		77,544
Development	17,086		21,870		34,698		44,453
Selling, general and administrative	9,516		14,799		20,400		26,016
Restructuring activities	2,738		13,245		3,280		13,245
Total Operating expenses	74,757		90,884		145,890		161,258

Income (loss) from operations	49,900		(3,149)		80,085		8,840

INTEREST EXPENSE	(6,272)		(6,666)		(11,787)		(13,656)
OTHER (EXPENSE) INCOME, NET	(15,016)		3,039		(16,021)		3,763
Income (loss) before income taxes	28,612		(6,776)		52,277		(1,053)
INCOME TAX PROVISION	(8,028)		(21)		(13,989)		(1,786)
NET INCOME (LOSS)	$	20,584	$	(6,797)	$	38,288	$	(2,839)
Net loss attributable to noncontrolling interest	(485)		(8,415)		(775)		(10,028)
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC.	$	21,069	$	1,618	$	39,063	$	7,189
NET INCOME PER COMMON SHARE — BASIC	$	0.69	$	0.05	$	1.28	$	0.23
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC	30,413		30,804		30,557		30,820
NET INCOME PER COMMON SHARE — DILUTED	$	0.69	$	0.05	$	1.26	$	0.23
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED	30,710		31,189		30,992		31,192

FOR THE THREE MONTHS ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2017 2016 2017 2016
REVENUES:
Patent licensing royalties $ 92,566
$ 205,517
$ 314,113
$ 387,371
Technology solutions 4,759
2,790
13,521
4,615
97,325
208,307
327,634
391,986

OPERATING EXPENSES:
Patent administration and licensing 28,673
26,149
83,559
81,601
Development 15,924
15,560
52,228
50,438
Selling, general and administrative 11,853
9,880
36,056
31,790
56,450
51,589
171,843
163,829

Income from operations 40,875
156,718
155,791
228,157

OTHER EXPENSE (NET) (2,187 ) (3,798 ) (7,331 ) (11,641 )
Income before income taxes 38,688
152,920
148,460
216,516
INCOME TAX PROVISION (3,963 ) (49,397 ) (29,413 ) (46,813 )
NET INCOME $ 34,725

$ 103,523
$ 119,047
$ 169,703
Net loss attributable to noncontrolling interest (811 ) (943 ) (2,744 ) (2,828 )
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. $ 35,536
$ 104,466
$ 121,791
$ 172,531
NET INCOME PER COMMON SHARE — BASIC $ 1.02
$ 3.05
$ 3.52
$ 4.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC 34,709
34,280
34,589
34,607
NET INCOME PER COMMON SHARE — DILUTED $ 1.00
$ 2.99
$ 3.40
$ 4.92
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED 35,388
34,953
35,865
35,091
CASH DIVIDENDS DECLARED PER COMMON SHARE $ 0.35
$ 0.30
$ 0.95
$ 0.70

The accompanying notes are an integral part of these statements.

Table of Content s

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

FOR THE THREE MONTHS ENDED SEPTEMBER 30, FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2017 2016 2017 2016
Net income $ 34,725
$ 103,523
$ 119,047
$ 169,703
Unrealized (loss) gain on investments, net of tax (94 ) (186 ) (181 ) 202
Comprehensive income $ 34,631
$ 103,337
$ 118,866
$ 169,905
Comprehensive loss attributable to noncontrolling interest (811 ) (943 ) (2,744 ) (2,828 )
Total comprehensive income attributable to InterDigital, Inc. $ 35,442
$ 104,280
$ 121,610
$ 172,733


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Net income (loss)	$	20,584	$	(6,797)	$	38,288	$	(2,839)
Unrealized loss on investments, net of tax	(57)		(69)		(367)		(139)
Comprehensive income (loss)	$	20,527	$	(6,866)	$	37,921	$	(2,978)
Comprehensive loss attributable to noncontrolling interest	(485)		(8,415)		(775)		(10,028)
Total comprehensive income attributable to InterDigital, Inc.	$	21,012	$	1,549	$	38,696	$	7,050

The accompanying notes are an integral part of these statements.

Table of Content s

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			Non-Controlling Interest		Total Shareholders' Equity
	Shares	Amount								Shares	Amount
BALANCE, DECEMBER 31, 2020	71,389	$	714	$	738,481	$	1,413,969	$	(184)	40,573	$	(1,379,611)	$	23,197	$	796,566
Adjustment to Retained Earnings related to adoption of ASU 2020-06	—	—		(55,349)		15,587		—		—	—		—		(39,762)
Net income attributable to InterDigital, Inc.	—	—		—		5,571		—		—	—		—		5,571
Net loss attributable to noncontrolling interest	—	—		—		—		—		—	—		(1,613)		(1,613)
Noncontrolling interest distribution	—	—		—		—		—		—	—		(1,109)		(1,109)
Net change in unrealized loss on short-term investments	—	—		—		—		(70)		—	—		—		(70)
Dividends declared ($0.35 per share)	—	—		210		(10,976)		—		—	—		—		(10,766)
Exercise of common stock options	32	—		737		—		—		—	—		—		737
Issuance of common stock, net	55	—		(2,962)		—		—		—	—		—		(2,962)
Amortization of unearned compensation	—	—		2,153		—		—		—	—		—		2,153
Repurchase of common stock	—	—		—		—		—		91	(5,750)		—		(5,750)
BALANCE, MARCH 31, 2021	71,476	$	714	$	683,270	$	1,424,151	$	(254)	40,664	$	(1,385,361)	$	20,475	$	742,995
Net income attributable to InterDigital, Inc.	—	—		—		1,618		—		—	—		—		1,618
Net loss attributable to noncontrolling interest	—	—		—		—		—		—	—		(8,415)		(8,415)
Net change in unrealized loss on short-term investments	—	—		—		—		(69)		—	—		—		(69)
Dividends declared ($0.35 per share)	—	—		158		(10,925)		—		—	—		—		(10,767)
Exercise of common stock options	71	1		3,631		—		—		—	—		—		3,632
Issuance of common stock, net	41	—		(711)		—		—		—	—		—		(711)
Amortization of unearned compensation	—	—		3,775		—		—		—	—		—		3,775
Repurchase of common stock	—	—		—		—		—		82	(5,391)		—		(5,391)
BALANCE, JUNE 30, 2021	71,588	$	715	$	690,123	$	1,414,844	$	(323)	40,746	$	(1,390,752)	$	12,060	$	726,667

Table of Content s



	Common Stock			Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock			Non-Controlling Interest		Total Shareholders' Equity
	Shares	Amount								Shares	Amount
BALANCE, DECEMBER 31, 2021	71,720	$	717	$	713,599	$	1,441,105	$	(571)	41,031	$	(1,409,611)	$	7,678	$	752,917
Net income attributable to InterDigital, Inc.	—	—		—		17,994		—		—	—		—		17,994
Net loss attributable to noncontrolling interest	—	—		—		—		—		—	—		(290)		(290)
Noncontrolling interest distribution	—	—		—		—		—		—	—		(1,928)		(1,928)
Noncontrolling interest contribution	—	—		—		—		—		—	—		1,500		1,500
Net change in unrealized loss on short-term investments	—	—		—		—		(310)		—	—		—		(310)
Dividends declared ($0.35 per share)	—	—		158		(10,961)		—		—	—		—		(10,803)
Exercise of common stock options	24	—		1,226		—		—		—	—		—		1,226
Issuance of common stock, net	139	1		(5,027)		—		—		—	—		—		(5,026)
Amortization of unearned compensation	—	—		5,386		—		—		—	—		—		5,386

BALANCE, MARCH 31, 2022	71,883	$	718	$	715,342	$	1,448,138	$	(881)	41,031	$	(1,409,611)	$	6,960	$	760,666
Net income attributable to InterDigital, Inc.	—	—		—		21,069		—		—	—		—		21,069
Net loss attributable to noncontrolling interest	—	—		—		—		—		—	—		(485)		(485)
Net change in unrealized loss on short-term investments	—	—		—		—		(57)		—	—		—		(57)
Dividends declared ($0.35 per share)	—	—		153		(10,533)		—		—	—		—		(10,380)
Exercise of common stock options	—	—		—		—		—		—	—		—		—
Issuance of common stock, net	29	1		(708)		—		—		—	—		—		(707)
Amortization of unearned compensation	—	—		3,977		—		—		—	—		—		3,977
Repurchase of common stock	—	—		—		—		—		1,224	(74,445)		—		(74,445)
Net convertible note hedge transactions, net of tax	—	—		(54,257)		—		—		—	—		—		(54,257)
Net warrant transactions	—	—		39,863		—		—		—	—		—		39,863
BALANCE, JUNE 30, 2022	71,912	$	719	$	704,370	$	1,458,674	$	(938)	42,255	$	(1,484,056)	$	6,475	$	685,244

The accompanying notes are an integral part of these statements.

Table of Content s

INTERDIGITAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 119,047

$ 169,703
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 42,809
39,150
Amortization of deferred financing costs and accretion of debt discount 9,753
12,078
Deferred revenue recognized (240,331 )
(242,104 )
Increase in deferred revenue 330,387

324,122
Deferred income taxes (7,853 ) (1,780 )
Tax benefit from share-based compensation —
(9 )
Share-based compensation 13,901
15,301
Gain on disposal of assets —
3,491
Other (4 ) (225 )
(Increase) decrease in assets:
Receivables (171,662 ) (93,015 )
Deferred charges and other assets (13,316 ) (22,698 )
Increase (decrease) in liabilities:
Accounts payable (3,198 ) (7,204 )
Accrued compensation and other expenses (1,798 ) (10,099 )
Accrued taxes payable and other tax contingencies 20,606
14,153
Net cash provided by operating activities 98,341

200,864
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (813,267 ) (559,160 )
Sales of short-term investments 678,119
388,402
Purchases of property and equipment (942 )
(3,477 )
Capitalized patent costs (26,306 ) (24,274 )
Acquisition of patents —
(4,800 )
Long-term investments (3,201 ) (2,000 )
Net cash (used in) investing activities (165,597 ) (205,309 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from exercise of stock options 82
302
Payments on long-term debt —
(230,000 )
Dividends paid (31,107 )
(20,849 )
Taxes withheld upon restricted stock unit vestings (22,236 ) (3,368 )
Repurchase of common stock —
(64,685 )
Net cash (used in) financing activities (53,261 ) (318,600 )
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (120,517 ) (323,045 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 404,074
510,207
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 283,557
$ 187,162
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid 4,740
7,615
Income taxes paid, including foreign withholding taxes 29,173
58,626
Non-cash investing and financing activities:
Dividend payable 12,149
10,285
Accrued capitalized patent costs, property and equipment, and acquisition of patents (548 ) (690 )
Non-cash acquisition of patents 12,800
7,900


	For the Six Months Ended June 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	38,288	$	(2,839)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	40,436		39,550
Non-cash interest expense, net	3,058		3,861
Non-cash change in fair-value	(1,404)		(949)

Change in deferred revenue	(127,700)		(86,659)
Loss on extinguishment of debt	11,190		—
Deferred income taxes	9,850		(2,409)

Share-based compensation	9,363		5,928


Impairment of assets	2,427		11,000

(Increase) Decrease in assets
Receivables	(17,688)		4,006
Deferred charges and other assets	1,434		(6,384)
Increase (Decrease) increase in liabilities:
Accounts payable	5,701		(375)
Accrued compensation and other expenses	(26,695)		(1,831)

Net cash used in operating activities	(51,740)		(37,101)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments	(1,929)		(327,426)
Sales of short-term investments	166,729		354,165
Purchases of property and equipment	(762)		(937)

Capitalized patent costs	(21,323)		(20,228)


Long-term investments	—		(1,091)
Net cash provided by investing activities	142,715		4,483
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible senior notes	460,000		—
Purchase of convertible bond hedge	(80,500)		—
Proceeds from issuance of warrants	43,700		—
Payments on long-term debt	(282,499)		—

Proceeds from hedge unwind	11,851		—
Payment for warrant unwind	(3,837)		—
Payments of debt issuance costs	(8,726)		—
Repurchase of common stock	(74,445)		(11,141)
Net proceeds from exercise of stock options	1,226		4,369
Non-controlling interest contribution	1,500		—
Non-controlling interest distribution	—		(1,109)
Taxes withheld upon restricted stock unit vestings	(5,733)		(3,673)
Dividends paid	(21,544)		(21,525)
Net cash provided by (used in) financing activities	40,993		(33,079)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	131,968		(65,697)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	713,224		477,663
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	845,192	$	411,966

Refer to Note 1, "Basis of Presentation," for additional supplemental cash flow information. Additionally, refer to Note 6, "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.

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INTERDIGITAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September~~June 30, ~~2017~~2022

(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 ~~September~~June 30, ~~2017, and~~2022, the results of our operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 and our cash flows for the ~~nine~~six months ended~~September~~ June 30, ~~2017~~2022 and ~~2016~~.2021. The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions ~~for~~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, ~~2016~~2021 (our ~~“2016~~“2021 Form ~~10-K~~”10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February ~~23, 2017.~~17, 2022. Definitions of capitalized terms not defined herein appear within our 2021 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~~1 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 revenues and expenses during the reporting period. Actual results could differ from these estimates.

InterDigital has analyzed the impact of the ongoing Coronavirus pandemic (“COVID-19”) on its financial statements as of June 30, 2022. InterDigital has determined that the changes to its significant judgments and estimates as a result of COVID-19 did not have a material impact on its financial statements. The potential impact of COVID-19 will continue to be analyzed going forward.

Change in Accounting Policies

There have been no material changes or updates to our existing accounting policies from the disclosures included in our ~~2016~~2021 Form 10-K, except as ~~set forth~~indicated below ~~under "New Accounting Guidance.~~in "

New Accounting Guidance".

Prior Periods' Financial Statement Revision

As previously disclosed in our 2021 Form 10-K filed with the SEC on February 17, 2022, during the fourth quarter of 2021, we determined that in our first quarter 2021 adoption of ASU 2020-06, Accounting for Convertible Debt, we incorrectly accounted for the adoption by increasing debt and decreasing retained earnings by $50.2 million, which resulted in a $10.4 million understatement of deferred taxes, $65.8 million understatement of retained earnings and $55.4 million overstatement of additional paid-in capital as of March 31, 2021. While we concluded that this error did not result in our previously issued 2021 interim financial statements being materially misstated, we have corrected the misstatement by revising the accompanying Condensed Consolidated Statement of Shareholder’s Equity as of and for the three and six months ended March 31, 2021 and June 30, 2021, respectively. We will prospectively revise our previously issued financial statements as of and for the interim period ended September 30, 2021 in connection with our third quarter 2022 quarterly filing on Form 10-Q. The accompanying annual footnotes have also been adjusted to reflect such correction.

Reclassifications

Certain reclassifications have been made to prior year amounts to conform to the current year presentation.

Table of Content s

Supplemental Cash Flow Information

The following table presents additional supplemental cash flow information for the six months ended June 30, 2022 and 2021 (in thousands):


	For the Six Months Ended June 30,
SUPPLEMENTAL CASH FLOW INFORMATION:	2022		2021
Interest paid	$	3,938	$	4,000
Income taxes paid, including foreign withholding taxes	4,363		4,793
Non-cash investing and financing activities:
Dividend payable	10,380		10,794
Accrued debt issuance costs	1,233		—
Right-of-use assets obtained in exchange of operating lease liabilities	417		—
Non-cash acquisition of patents	30,100		—
Non-cash distribution of patents	1,928		—
Accrued capitalized patent costs and property and equipment purchases	3,634		3,561

New Accounting Guidance

Accounting Standards Update: ~~Stock Compensation~~Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options

In ~~March 2016,~~May 2021, the ~~Financial Accounting Standards Board (the "FASB")~~FASB issued ASU No. ~~2016-09, "Stock Compensation (Topic 718): Improvements~~2021-04. The amendments in this ASU are intended to ~~Employee Share-Based Payment Accounting." ASU 2016-09 simplifies several aspects of the~~clarify and reduce diversity in an issuer’s accounting for ~~employee share-based payment transactions~~modifications or exchanges of freestanding equity-classified written call options, including warrants, that remain equity classified after modification or exchange. ASU 2021-04 is effective for ~~both public~~fiscal years beginning after December 15, 2021, with early adoption allowed. We adopted this guidance as of January 1, 2022 and ~~nonpublic entities, including~~ the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. We applied the standard beginning in first quarter 2017. Certain elements of our accounting for compensation costs associated with share-based transactions changed upon adoption of ASU 2016-09. We no longer account for these costs net of estimated award forfeitures. Instead, we adjust expense recognized to date in the event of canceled awards as they occur. The elimination of estimated forfeitures did not have a material impact on our financial statements for first nine months 2017. Additionally, tax windfalls and shortfalls related to the tax effects of employee share-based compensation no longer reside within additional paid-in-capital. Rather, these windfalls and shortfalls are included in our tax provision. We also adjusted our disclosures included within our condensed consolidated statements of cash flows. Tax windfalls and shortfalls related to employee share-based compensation awards are included within operating activities on a prospective basis and cash paid to tax authorities for shares withheld is included within financing activities retrospectively. Although these changes have no impact on the amount of share-based compensation expense we ultimately recognize, the inclusion of windfalls and shortfalls in the tax provision could increase our earnings volatility between periods. Refer to the Note 2, "~~Income Taxes,~~"~~for detail regarding the impact of these changes on our financial statements for first nine months 2017.~~

In May 2017, the FASB issued ASU 2017-09, "Stock Compensation (Topic 718): Scope of Modification Accounting." ASU 2017-09 provides clarity and reduces complexity in applying the guidance in Topic 718 to a change to the terms or conditions of a share-based payment award. We adopted this guidance early during second quarter 2017, and it had no immediate impact on our consolidated financial statements.

~~Accounting Standards Update:~~

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2. REVENUE

Disaggregated Revenue ~~Recognition~~

~~In May 2014,~~The following table presents the ~~FASB issued guidance on~~disaggregation of our revenue for the three and six months ended June 30, 2022 and 2021 (in thousands):


	Three months ended June 30,
	2022		2021		Increase/(Decrease)
Variable patent royalty revenue	$	7,673	$	7,323	$	350	5	%
Fixed-fee royalty revenue	91,756		69,296		22,460		32	%
Current patent royalties a	99,429		76,619		22,810		30	%
Non-current patent royalties b	24,556		9,586		14,970		156	%
Total patent royalties	123,985		86,205		37,780		44	%
Current technology solutions revenue a	672		1,530		(858)		(56)	%

Total revenue	$	124,657	$	87,735	$	36,922	42	%


	Six months ended June 30,
	2022		2021		Increase/(Decrease)
Variable patent royalty revenue	$	16,718	$	14,419	$	2,299	16	%
Fixed-fee royalty revenue	181,599		138,592		43,007		31	%
Current patent royalties a	198,317		153,011		45,306		30	%
Non-current patent royalties b	26,747		13,367		13,380		100	%
Total patent royalties	225,064		166,378		58,686		35	%
Current technology solutions revenue a	911		3,720		(2,809)		(76)	%

Total revenue	$	225,975	$	170,098	$	55,877	33	%

a. Recurring revenues are comprised of current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The underlying principle is that an entity will recognize revenue to depict the ~~transfer~~tables above.

b. Non-recurring revenues are comprised of ~~goods or services to customers at an amount that~~non-current patent royalties, which include past patent royalties and royalties from static agreements, as well as patent sales from the ~~entity expects to be entitled to in exchange for those goods or services. The guidance also requires enhanced disclosures regarding~~tables above.

During the ~~nature, amount, timing~~

~~and uncertainty~~six months ended June 30, 2022, we recognized $164.0 million of revenue ~~and cash flows arising from an entity’s contracts with customers. The guidance is effective for the interim and annual periods beginning on or after December 15, 2017 (early adoption is permitted~~that had been included in deferred revenue as of ~~annual reporting periods~~the beginning ~~after~~of the period. As of June 30, 2022, we had contract assets of $24.5 million and $7.8 million included within "Accounts receivable" and "Other non-current assets, net" in the condensed consolidated balance sheet, respectively. As of December ~~15, 2016, including interim reporting periods~~31, 2021, we had contract assets of $18.9 million and $8.3 million included within ~~those annual periods). The guidance permits~~"Accounts receivable" and "Other non-current assets, net" in the ~~use~~condensed consolidated balance sheet, respectively.

Contracted Revenue

Based on contracts signed and committed as of ~~either a retrospective or cumulative effect transition method.~~

~~The new guidance will affect our recognition of~~June 30, 2022, we expect to recognize the following revenue from ~~both our~~dynamic fixed-fee ~~and per-unit license agreements. For accounting purposes under this new guidance, we will separate our fixed-fee license agreements into two categories: (i) those agreements that provide rights,~~royalty payments over the term of such contracts (in thousands):


	Revenue
Remainder of 2022	$	148,513
2023	129,365
2024	80,951
2025	68,573
2026 and thereafter	5,181
Total Revenue	$	432,583

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3.INCOME TAXES

In the ~~license, to future technologies that are highly interdependent or highly interrelated to~~six months ended June 30, 2022 and 2021, the ~~technologies provided at~~Company had an effective tax rate of 26.8% and (169.6)%, respectively. The effective tax rate in both periods was impacted by losses in certain jurisdictions where the inception of the agreement (“Dynamic Fixed-Fee Agreements”) and (ii) those agreements that do not provide for rights to such future technologies (“Static Fixed-Fee Agreements”). Under our current accounting practices, after the fair value allocation between the past and future components of the agreement, we recognize the future components of revenue from all fixed-fee license agreements onCompany presently has recorded a ~~straight-line basis over the term of~~valuation allowance against the related license agreement. Upon adoption of the new guidance, we expect to continue to recognize revenue from Dynamic Fixed-Fee Agreements on a straight-line basis over the term of the related license agreement, while we expect to recognize most or all of the revenue from Static Fixed-Fee Agreements in the quarter the license agreement is signed. Regardless of the transition method we use, we will not recognize any revenue post adoption from Static Fixed-Fee Agreements already in existence at the time the guidance is adopted. Based on our preliminary classifications of fixed-fee license agreements as either “Dynamic” or "Static," in first nine months 2017, approximately 69% of our fixed-fee revenue was derived from Dynamic Fixed-Fee Agreements, with the remainder coming from Static Fixed-Fee Agreements. Additionally, in the event a significant financing component is determined to exist in any of our agreements, we may recognize more or less revenue and corresponding interest expense or income, as appropriate. We are currently evaluating whether any of our agreements include a significant financing component and, if so, what effect such a component will have on our consolidated financial statements.

In addition, under our current accounting practices, we recognize revenue from our per-unit license agreements in the period in which we receive the related royalty report, generally one quarter in arrears from the period in which the underlying sales occur. Upon adoption of the new guidance, we will be required to record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur. Because we do not expect to receive the per-unit licensee royalty reports for sales during a given quarter within the time frame necessary to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we expect to accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts. As a result of accruing revenue for the quarter based on such estimates, adjustments will likely be required in the following quarter to true-up revenue to the actual amounts reported by our licensees. In addition, to the extent we receive prepayments related to per-unit license agreements thatdo not provide rights, over the term of the license, to future technologies that are highly interdependent or highly interrelated to the technologies provided at the inception of the agreement, we will recognize such prepayments as revenue in the period in which all remaining revenue recognition criteria have been met.

~~We currently expect to adopt the new guidance effective January 1, 2018, using the cumulative effect transition method.~~

~~Accounting Standards Update: Leases~~

In February 2016, the FASB issued new guidance related to leases that outlines a comprehensive lease accounting model and supersedes the current lease guidance. The new guidance requires lessees to recognize lease liabilities and corresponding right-of-use assets for all leases with lease terms of greater than 12 months. It also changes the definition of a lease and expands the disclosure requirements of lease arrangements. The new guidance must be adopted using the modified retrospective approach and will be effective for the Company starting in the first quarter of 2020. Early adoption is permitted. We are in the process of determining the effect the adoption will have on the Company's consolidated financial statements.

~~Accounting Standards Update: Clarifying the Definition of a Business~~

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business." ASU 2017-01 narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The guidance requires an entity to evaluate whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the "set") is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs, as defined by the ASU. The Company adoptedtax benefit. Excluding this ~~guidance early during first quarter 2017, and it had no immediate impact on the Company’s consolidated financial statements.~~

~~Accounting Standards Update: Simplifying the Test for Goodwill Impairment~~

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates the requirement to calculate the implied fair value of goodwill to measure a

goodwill impairment charge (Step 2) from the goodwill impairment test. Instead, an impairment charge will equal the amount by which a reporting unit’s carrying amount exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The Company adopted this guidance early during first quarter 2017, and it had no immediate impact on the Company’s consolidated financial statements.

~~Accounting Standards Update: Statement of Cash Flows~~

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments," which eliminates the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted this guidance early during second quarter 2017, and it had no immediate impact on the Company’s consolidated financial statements.

~~Accounting Standards Update: Financial Instruments~~

In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," which amends certain measurement, presentation, and disclosure requirements for financial instruments. The new guidance must be adopted by means of a cumulative-effect adjustment to the balance sheet in the year of adoption and will be effective for the Company starting in first quarter 2018. Early adoption is permitted. We are in the process of determining the effect the adoption will have on the Company's consolidated financial statements.

2.~~INCOME TAXES~~

~~In first nine months 2017, based on the statutory federal tax rate net of discrete federal and state taxes,~~valuation allowance, our effective tax rate ~~was~~for the six months ended June 30, 2022 and 2021 would have been 23.2% and 104.3% respectively. During both the six months ended June 30, 2022 and 2021, the Company recorded a ~~provision~~discrete net benefit of ~~19.8%.~~ $2.2 million and $0.6 million, respectively, primarily related to extinguishment of long-term debt and share-based compensation.

The effective tax rate ~~for first nine months 2017 was favorably impacted~~reported in any given year will continue to be influenced by ~~our current year adoption~~a variety of ~~ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” as discussed above in Note 1, "Basis~~factors, including timing differences between the recognition of ~~Presentation." In conjunction with our adoption~~book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the ~~standard, we recorded~~Company’s customers, and any discrete benefits of $12.1 million for excess tax benefits related to share-based compensation. We also recorded discrete benefits of $9.1 million primarily related to the reversal of uncertain tax positions associated with domestic production activities refund claims. The effective rate would have been a provision of 34.2% not including these discrete benefits. This is compared to an effective tax rate benefit of 21.6% based on the statutory federal tax rate net of discrete federal and state taxes during first nine months 2016. The first nine months 2016 effective tax rate included a $24.0 million discrete net benefit related to domestic production activities refund claims for prior years.items that may occur.

During ~~first nine~~the six months ~~2017~~ended June 30, 2022 and ~~2016, we~~2021, the Company paid approximately ~~$11.7~~$3.5 million and ~~$50.0~~$4.0 million, respectively, ofin foreign source creditable withholding tax. Additionally, as of September 30, 2017 and December 31, 2016, we have included $39.3 million and $10.7 million, respectively, of foreign source withholding tax within our taxes payable and deferred tax asset balances. These amounts are related to receivables from foreign licensees.

3.4.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.~~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,
	2022		2021		2022		2021
Net income applicable to InterDigital, Inc.	$	21,069	$	1,618	$	39,063	$	7,189
Weighted-average shares outstanding:
Basic	30,413		30,804		30,557		30,820
Dilutive effect of stock options, RSUs, convertible securities and warrants	297		385		435		372
Diluted	30,710		31,189		30,992		31,192
Earnings per share:
Basic	$	0.69	$	0.05	$	1.28	$	0.23
Dilutive effect of stock options, RSUs, convertible securities and warrants	—		—		(0.02)		—
Diluted	$	0.69	$	0.05	$	1.26	$	0.23

Table of Content s

For the Three Months Ended September 30,
2017 2016
Basic Diluted Basic Diluted
Numerator:
Net income applicable to InterDigital, Inc. $ 35,536
$ 35,536
$ 104,466
$ 104,466
Denominator:
Weighted-average shares outstanding: Basic 34,709
34,709
34,280
34,280
Dilutive effect of stock options, RSUs, convertible securities and warrants 679
673
Weighted-average shares outstanding: Diluted 35,388
34,953
Earnings Per Share:
Net income: Basic $ 1.02
$ 1.02
$ 3.05
$ 3.05
Dilutive effect of stock options, RSUs, convertible securities and warrants (0.02 ) (0.06 )
Net income: Diluted $ 1.00
$ 2.99

For the Nine Months Ended September 30,
2017 2016
Basic Diluted Basic Diluted
Numerator:
Net income applicable to InterDigital, Inc. $ 121,791
$ 121,791
$ 172,531
$ 172,531
Denominator:
Weighted-average shares outstanding: Basic 34,589
34,589
34,607
34,607
Dilutive effect of stock options, RSUs, convertible securities and warrants 1,276
484
Weighted-average shares outstanding: Diluted 35,865
35,091
Earnings Per Share:
Net income: Basic $ 3.52
$ 3.52
$ 4.99
$ 4.99
Dilutive effect of stock options, RSUs, convertible securities and warrants (0.12 ) (0.07 )
Net income: Diluted $ 3.40
$ 4.92

~~Certain shares~~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):


	For the Three Months Ended September 30,		For the Nine Months Ended September 30,			Three months ended June 30,		Six months ended June 30,
	2017	2016	2017	2016		2022	2021	2022	2021
Restricted stock units and stock options	25	13	18	103	Restricted stock units and stock options	529	30	471	205
Convertible securities	—	4,366	—	4,366

Warrants	4,386	4,366	—	7,261	Warrants	5,880	4,921	5,400	4,921
Total	4,411	8,745	18	11,730	Total	6,409	4,951	5,871	5,126

Convertible Notes and Warrants

Refer to Note 7, "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 ~~1.50% Senior Convertible Notes due 2020 (for purposes of this discussion, the "Convertible Notes") ($72.12 per share as of September 30, 2017)~~convertible notes, or above the strike price of ~~our~~the Company's outstanding warrants, ~~($88.03 per share as of September 30, 2017),~~ 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 ~~treasury stock~~if-converted method, the Company calculates the number of shares issuable under the terms of the ~~Convertible Notes~~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. ~~See Note 7, "Long-Term Debt," for additional information about the Convertible Notes and warrants.~~


4.	5. LITIGATION ~~AND LEGAL PROCEEDINGS~~

~~ARBITRATIONS~~ AND LEGAL PROCEEDINGS

COURT PROCEEDINGS ~~(OTHER THAN DE DISTRICT COURT ACTIONS RELATED TO USITC PROCEEDINGS)~~

~~Huawei China Proceedings~~Lenovo

On February 21, 2012, InterDigital was served with two complaints filed by Huawei Technologies Co., Ltd. in the Shenzhen Intermediate People's Court in China on December 5, 2011. The first complaint named as defendants InterDigital, Inc. and its wholly owned subsidiaries InterDigital Technology Corporation and InterDigital Communications, LLC (now InterDigital Communications, Inc.), and alleged that InterDigital had abused its dominant market position in the market for the licensing of essential patents owned by InterDigital by engaging in allegedly unlawful practices, including differentiated pricing, tying and refusal to deal. The second complaint named as defendants the Company's wholly owned subsidiaries InterDigital Technology Corporation, InterDigital Communications, LLC (now InterDigital Communications, Inc.), InterDigital Patent Holdings, Inc. and IPR Licensing, Inc. and alleged that InterDigital had failed to negotiate on FRAND terms with Huawei. Huawei asked the court to determine the FRAND rate for licensing essential Chinese patents to Huawei and also sought compensation for its costs associated with this matter.

On February 4, 2013, the Shenzhen Intermediate People's Court issued rulings in the two proceedings. With respect to the first complaint, the court decided that InterDigital had violated the Chinese Anti-Monopoly Law by (i) making proposals for royalties from Huawei that the court believed were excessive, (ii) tying the licensing of essential patents to the licensing of non-essential patents, (iii) requesting as part of its licensing proposals that Huawei provide a grant-back of certain patent rights to InterDigital and (iv) commencing a USITC action against Huawei while still in discussions with Huawei for a license. Based on these findings, the court ordered InterDigital to cease the alleged excessive pricing and alleged improper bundling of InterDigital's Chinese essential and non-essential patents, and to pay Huawei 20.0 million RMB (approximately $3.2 million) in damages related to attorneys’ fees and other charges, without disclosing a factual basis for its determination of damages. The court dismissed Huawei's remaining allegations, including Huawei's claim that InterDigital improperly sought a worldwide license and improperly sought to bundle the licensing of essential patents on multiple generations of technologies. With respect to the second complaint, the court determined that, despite the fact that the FRAND requirement originates from ETSI's Intellectual Property Rights policy, which refers to French law, InterDigital's license offers to Huawei should be evaluated under Chinese law. Under Chinese law, the court concluded that the offers did not comply with FRAND. The court further ruled that the royalties to be paid by Huawei for InterDigital's 2G, 3G and 4G essential Chinese patents under Chinese law should not exceed 0.019% of the actual sales price of each Huawei product.

On March 11, 2013, InterDigital filed notices of appeal with respect to the judgments in both proceedings, seeking reversal of the court’s February 4, 2013 rulings. On October 16, 2013, the Guangdong Province High Court issued a ruling affirming the ruling of the Shenzhen Intermediate People's Court in the second proceeding, and on October 21, 2013, issued a ruling affirming the ruling of the Shenzhen Intermediate People's Court in the first proceeding.

InterDigital believes that the decisions are seriously flawed both legally and factually. For instance, in determining a purported FRAND rate, the Chinese courts applied an incorrect economic analysis by evaluating InterDigital’s lump-sum 2007 patent license agreement with Apple (the “2007 Apple PLA”) in hindsight to posit a running royalty rate. Indeed, the ALJ in USITC Inv. No. 337-TA-800 rejected that type of improper analysis. Moreover, the Chinese courts had an incomplete record and applied incorrect facts, including with respect to the now-expired and superseded 2007 Apple PLA, which had been found in an arbitration between InterDigital and Apple to be limited in scope.

On April 14, 2014, InterDigital filed a petition for retrial of the second proceeding with the Chinese Supreme People’s Court (“SPC”), seeking dismissal of the judgment or at least a higher, market-based royalty rate for a license to InterDigital’s Chinese standards-essential patents (“SEPs”). The petition for retrial argues, for example, that (1) the lower court improperly determined a Chinese FRAND running royalty rate by using as a benchmark the 2007 Apple lump sum fixed payment license agreement, and looking in hindsight at the unexpectedly successful sales of Apple iPhones to construct an artificial running royalty rate that neither InterDigital nor Apple could have intended and that would have varied significantly depending on the relative success or failure in hindsight of Apple iPhone sales; (2) the 2007 Apple PLA was also an inappropriate benchmark because its scope of product coverage was significantly limited as compared to the license that the

court was considering for Huawei, particularly when there are other more comparable license agreements; and (3) if the appropriate benchmarks had been used, and the court had considered the range of royalties offered by other similarly situated SEP holders in the wireless telecommunications industry, the court would have determined a FRAND royalty that was substantially higher than 0.019%, and would have found, consistent with findings of the ALJ’s initial determination in the USITC 337-TA-800 proceeding, that there was no proof that InterDigital’s offers to Huawei violated its FRAND commitments.

The SPC held a hearing on October 31, 2014, regarding whether to grant a retrial and requested that both parties provide additional information regarding the facts and legal theories underlying the case. The SPC convened a second hearing on April 1, 2015 regarding whether to grant a retrial. If the retrial is granted, the SPC will likely schedule one or more additional hearings before it issues a decision on the merits of the case. The SPC retrial proceeding was excluded from the dismissal provisions of the August 2016 patent license agreement between Huawei and InterDigital, and a decision in this proceeding is still pending.

~~ZTE China Proceedings~~

On July 10 and 11, 2014, InterDigital was served with two complaints filed by ZTE Corporation in the Shenzhen Intermediate People's Court in China on April 3, 2014. The first complaint names as defendants the Company's wholly owned subsidiaries InterDigital Technology Corporation, InterDigital Communications, Inc., InterDigital Patent Holdings, Inc. and IPR Licensing, Inc. This complaint alleges that InterDigital has failed to comply with its FRAND obligations for the licensing of its Chinese standards-essential patents. ZTE is asking the court to determine the FRAND rate for licensing InterDigital’s standards-essential Chinese patents to ZTE and also seeks compensation for its litigation costs associated with this matter. The second complaint names as defendants InterDigital, Inc. and its wholly owned subsidiaries InterDigital Technology Corporation and InterDigital Communications, Inc. This complaint alleges that InterDigital has a dominant market position in China and the United States in the market for the licensing of essential patents owned by InterDigital, and abused its dominant market position in violation of the Chinese Anti-Monopoly Law by engaging in allegedly unlawful practices, including excessively high pricing, tying, discriminatory treatment, and imposing unreasonable trading conditions. ZTE seeks relief in the amount of 20.0 million RMB (approximately $3.0 million based on the exchange rate as of September 30, 2017), an order requiring InterDigital to cease the allegedly unlawful conduct and compensation for its litigation costs associated with this matter.UK Proceeding

On August ~~7, 2014, InterDigital filed petitions challenging~~27, 2019, the jurisdiction of the Shenzhen Intermediate People's Court to hear the actions. On August 28, 2014, the court denied InterDigital’s jurisdictional challenge with respect to the anti-monopoly law case. InterDigital filed an appeal of this decision on September 26, 2014. On September 28, 2014, the court denied InterDigital’s jurisdictional challenge with respect to the FRAND case, and InterDigital filed an appeal of that decision on October 27, 2014. On December 18, 2014, the Guangdong High Court issued decisions on both appeals upholding the Shenzhen Intermediate Court’s decisions that it had jurisdiction to hear these cases. On February 10, 2015, InterDigital filed a petition for retrial with the Supreme People’s Court regarding its jurisdictional challenges to both cases.

The Shenzhen Court held hearings on the anti-monopoly law case on May 11, 13, 15 and 18, 2015. At the May hearings, ZTE withdrew its claims alleging discriminatory treatment and the imposition of unfair trading conditions and increased its damages claim to 99.8 million RMB (approximately $15.0 million based on the exchange rate as of September 30, 2017). The Shenzhen Court held hearings in the FRAND case on July 29-31, 2015 and held a second hearing on the anti-monopoly law case on October 12, 2015. Both cases remain pending. It is possible that the court may schedule further hearings in these cases before issuing its decisions.

~~The~~ Company has not recorded any accrual at September 30, 2017 for contingent losses associated with these matters based on its belief that losses, while reasonably possible, are not probable in accordance with accounting guidance.

~~Pegatron Actions~~

~~In first quarter 2015, we learned that on or about February 3, 2015, Pegatron Corporation (“Pegatron”) filed a civil suit in Taiwan Intellectual Property Court against InterDigital, Inc.~~ and certain of its subsidiaries ~~alleging breach~~filed a claim in the UK High Court against Lenovo Group Limited and certain of its subsidiaries. The claim, as amended, alleges infringement of five of the ~~Taiwan Fair Trade Act (the “Pegatron Taiwan Action”). Pegatron~~Company's patents relating to 3G and/or 4G/LTE standards: European Patent (UK) Nos. 2,363,008; 2,421,318; 2,485,558; 2,557,714; and ~~InterDigital~~3,355,537. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

The UK High Court held case management conferences on October 6, 2020, and December 16, 2020, a disclosure hearing on January 19, 2021, and pre-trial review hearings for the first trial on January 28, 2021, and February 8, 2021. At those hearings, the UK High Court entered ~~into~~ a ~~patent license agreement in April 2008 (the “Pegatron PLA”). Pegatron~~schedule for the technical and non-technical FRAND proceedings. Two technical trials were scheduled for March 2021 and June 2021, and the non-technical FRAND trial was ~~a subsidiary~~scheduled for January 2022. There are three additional technical trials scheduled for the remaining patents following the FRAND trial. The first and second technical trials were completed, and on July 29, 2021, the UK High Court issued its decision regarding the first technical trial finding European Patent (UK) No. 2,485,558 valid, infringed, and essential to Release 8 of ~~Asustek Computer Incorporated until~~LTE. Lenovo is appealing this decision. On January 6, 2022, the ~~completion~~UK High Court issued its decision regarding the second technical trial finding European Patent (UK) No. 3,355,537 invalid, but essential and infringed but for the finding of invalidity. On June 10, 2022, the Company sought permission from the Court of Appeal to appeal the second technical trial decision as legally erroneous. The FRAND trial commenced on January 11, 2022 and concluded on February 11, 2022. The third technical trial commenced on May 10, 2022 and concluded on May 18, 2022. The fourth technical trial is scheduled to commence on October 3, 2022 and expected to be completed by October 17, 2022.

District of Delaware Patent Proceeding

On August 28, 2019, the Company and certain of its spin-off from Asustek in June 2010. On May 26, 2015, InterDigital, Inc. received a copy of the civil complaint filed by Pegatron in the Taiwan Intellectual Property Court. The complaint named as defendants InterDigital, Inc. as well as InterDigital’s wholly owned subsidiaries InterDigital Technology Corporation and IPR Licensing, Inc. (together, for purposes of this discussion, “InterDigital”). The complaint alleged that InterDigital abused its market power by improperly setting, maintaining or changing the royalties Pegatron is required to pay under the Pegatron PLA, and engaging in unreasonable discriminatory

treatment and other unfair competition activities in violation of the Taiwan Fair Trade Act. The complaint sought minimum damages in the amount of approximately $52 million, which amount could be expanded during the litigation, and that the court order multiple damages based on its claim that the alleged conduct was intentional. The complaint also sought an order requiring InterDigital to cease enforcing the royalty provisions of the Pegatron PLA, as well as all other conduct that allegedly violates the Fair Trade Act.

On June 5, 2015 InterDigital filed an Arbitration Demand with the American Arbitration Association’s International Centre for Dispute Resolution (“ICDR”) seeking declaratory relief denying all of the claims in Pegatron’s Taiwan Action and for breach of contract. On or about June 10, 2015, InterDigital filed a complaint in the United States District Court for the ~~Northern~~ District of ~~California, San Jose Division~~Delaware (the ~~“CA Northern~~“Delaware District Court”) ~~seeking a Temporary Restraining Order, Preliminary Injunction,~~against Lenovo Holding Company, Inc. and ~~Permanent Anti-suit Injunction against Pegatron prohibiting Pegatron from prosecuting the Pegatron Taiwan Action. The complaint also seeks specific performance by Pegatron~~certain of ~~the dispute resolution procedures set forth in the Pegatron PLA~~its subsidiaries alleging that Lenovo infringes eight of InterDigital’s U.S. patents-U.S. Patent Nos. 8,085,665; 8,199,726; 8,427,954; 8,619,747; 8,675,612; 8,797,873; 9,203,580; and ~~compelling arbitration of the disputes in the Pegatron Taiwan Action. On June 29, 2015, the court granted InterDigital’s motion~~9,456,449-by making, using, offering for a temporary restraining order and preliminary injunction requiring Pegatron take immediate steps to dismiss the Taiwan Action without prejudice. On July 1, 2015, InterDigital was informed that Pegatron had withdrawn its complaint in the Taiwan Intellectual Property Court and that the case had been dismissed without prejudice.

On August 3, 2015, Pegatron filed an answer and counterclaims to InterDigital’s CA Northern District Court complaint. Pegatron accused InterDigital of violating multiple sections of the Taiwan Fair Trade Act, violating Section Two of the Sherman Act, breaching ETSI, IEEE, and ITU contracts, promissory estoppel (pled in the alternative), violating Section 17200 of the California Business & Professions Code, and violating the Delaware Consumer Fraud Act. These counterclaims stem from Pegatron’s accusation that InterDigital violated FRAND obligations.sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities. As relief, ~~Pegatron seeks a declaration regarding the appropriate FRAND terms and conditions for InterDigital’s “declared essential patents,”~~InterDigital is seeking: (a) a declaration that ~~InterDigital’s standard essential patents are unenforceable due to patent misuse, an order requiring~~ InterDigital ~~to grant Pegatron a license on FRAND terms, an order enjoining InterDigital’s alleged ongoing breaches~~is not in breach of its relevant FRAND commitments, and damages in the amount of allegedly excess non-FRAND royalties Pegatron has paid to InterDigital, plus interest and treble damages. On August 7, 2015, Pegatron responded to InterDigital’s arbitration demand, disputing the arbitrability of Pegatron’s claims. On September 24, 2015, InterDigital moved to compel arbitration and dismiss Pegatron’s counterclaims or, in the alternative, stay the counterclaims pending the parties’ arbitration. Pegatron’s opposition to this motion was filed on October 22, 2015, and InterDigital’s reply was filed on November 12, 2015. On January 20, 2016, the court granted InterDigital’s motion to compel arbitration of Pegatron’s counterclaims and to stay the counterclaims pending the arbitrators’ determination of their arbitrability. On January 27, 2016, the parties stipulated to stay all remaining aspects of the CA Northern District case pending such an arbitrability determination. On the same day, the court granted the stay and administratively closed the case.

On October 14, 2016, Pegatron filed in the arbitration a motion to dismiss for lack of jurisdiction, arguing that Pegatron’s counterclaims and InterDigital’s corresponding declaratory judgment claims were not arbitrable. Following briefing and an oral argument, on September 18, 2017, the tribunal issued a Partial Final Award and determined by majority decision that none of Pegatron’s counterclaims, nor InterDigital’s related claim for declaratory relief, are arbitrable. The arbitration remains pending with respect to InterDigital’s breach of contract claim.

In light of the arbitral award regarding jurisdiction, Pegatron’s claims are pending before the CA Northern District Court. The schedule for this matter has not yet been entered, except that a case management conference is currently scheduled for December 6, 2017.

~~Asustek Actions~~

On April 15, 2015, Asustek Computer Incorporated (“Asus”) filed a complaint in the CA Northern District Court against InterDigital, Inc., and its subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc., and InterDigital Patent Holdings, Inc. The complaint asserted the following causes of action: violation of Section Two of the Sherman Act, violation of Section 17200 of the California Business and Professions Code, breach of contract resulting from ongoing negotiations, breach of contract leading to and resulting in the parties’ April 2008 patent license agreement (the “2008 Asus PLA”), promissory estoppel, waiver, and fraudulent inducement to contract. Among other allegations, Asus alleged that InterDigital breached its FRAND commitment. As relief, Asus sought a judgment that the 2008 Asus PLA is void or unenforceable, damages in the amount of excess royalties Asus paid under the 2008 Asus PLA plus interest, a judgment setting the proper FRAND terms and conditions for InterDigital’s patent portfolio, an order requiring InterDigital to grant Asus a license on FRAND terms and conditions, and punitive damages and other relief.

In response, on May 30, 2015, InterDigital filed an Arbitration Demand with the ICDR. InterDigital claimed that Asus breached the 2008 Asus PLA’s dispute resolution provision by filing its CA Northern District Court lawsuit and sought

declaratory relief that it is not liable for any of the claims in Asus’s complaint. On June 2, 2015, InterDigital filed in the CA Northern District Court a motion to compel arbitration on each of Asus’s claims. On August 25, 2015, the court granted InterDigital’s motion for all of Asus’s claims except its claim for breach of contract resulting from ongoing negotiations. Aside from this claim, the court ruled that the issue of arbitrability should be decided by an arbitrator, and stayed the proceedings pending that determination.

Asus asserted counterclaims in the arbitration that mirrored its CA Northern District Court claims, except that it did not assert the breach of contract claim that the court determined was not arbitrable and it added a claim of violation of the Delaware Consumer Fraud Act. Asus also contended that its counterclaims were not arbitrable. InterDigital added a claim for breach of the 2008 Asus PLA’s confidentiality provision.

On July 14, 2016, Asus filed a motion to lift the stay in the CA Northern District Court proceeding along with a notice of the arbitral tribunal’s decision on arbitrability, informing the court of the arbitrators’ decision that, other than InterDigital’s breach of contract claims and Asus’s fraudulent inducement claim, no other claim or counterclaim is arbitrable. Asus then filed in the CA Northern District Court an amended complaint on August 18, 2016. This amended complaint includes all of the claims in Asus’s first CA Northern District Court complaint except fraudulent inducement and adds a claim of violation of the Delaware Consumer Fraud Act. It seeks the same relief as its first CA Northern District Court complaint, but also seeks a ruling that each of InterDigital’s patents “declared [to standards-setting organizations] to be essential or potentially essential” is unenforceable and any contracts InterDigital entered into in furtherance of its unlawful conduct are void. On September 8, 2016, InterDigital filed its answer and counterclaims to Asus’s amended complaint. It denied Asus’s claims and filed a counterclaim for declaratory judgment that Asus’s tort claims are invalid or preempted as applied under the First Amendment to the U.S. Constitution, the Patent Clause of the U.S. Constitution, and Title 35 of the U.S. Code. On September 28, 2016, Asus answered and denied InterDigital’s counterclaims. On December 16, 2016, the court set a case schedule that includes a May 2019 trial date.

With respect to its arbitration counterclaim for fraudulent inducement, Asus stated in its pleadings that it was seeking return of excess royalties (which totaled close to $63 million as of the August 2016 date referenced in the pleadings and has increased with additional royalty payments made by Asus since such time), plus interest, costs and attorneys’ fees. The evidentiary hearing in the arbitration was held in January 2017, and the parties presented oral closing arguments on March 22, 2017. On August 2, 2017, the arbitral tribunal issued its Final Award. The tribunal fully rejected Asus’s counterclaim, finding that InterDigital did not fraudulently induce Asus to enter into the 2008 Asus PLA. Accordingly, the tribunal dismissed Asus’s fraudulent inducement counterclaim in its entirety. The tribunal also dismissed InterDigital’s claims that Asus breached the confidentiality provisions and the dispute resolution provisions of the 2008 Asus PLA. On October 20, 2017, InterDigital and Asus jointly moved to confirm both the tribunal’s Final Award and the Interim Award on Jurisdiction in the CA Northern District.

~~REGULATORY PROCEEDINGS~~

~~Investigation by Taiwan Fair Trade Commission~~

On December 6, 2013, InterDigital received notice from the Taiwan Fair Trade Commission (“TFTC”) that the TFTC had initiated an investigation to examine alleged anti-competitive behavior under Taiwan’s Fair Trade Act (FTA). Companies found to violate the FTA may be ordered to cease and rectify the unlawful conduct, take other necessary corrective action, and/or pay an administrative fine. During second quarter 2016, InterDigital was informed by its local counsel that the staff of the TFTC has completed its investigation and has forwarded its recommendations to the Commission. On October 24, 2017, InterDigital received notice from the TFTC that the Commission did not find that InterDigital had violated the FTA and has closed its investigation.

~~Investigation by National Development and Reform Commission of China~~

On September 23, 2013, counsel for InterDigital was informed by China’s National Development and Reform Commission (“NDRC”) that the NDRC had initiated a formal investigation into whether InterDigital has violated China’s Anti-Monopoly Law (“AML”) with respect to practices related to the licensing of InterDigital’s standards-essential patents to Chinese companies. Companies found to violate the AML may be subject to a cease and desist order, fines and disgorgement of any illegal gains. On March 3, 2014, the Company submitted to NDRC, pursuant to a procedure set out in the AML, a formal application for suspension of the investigation that included proposed commitments by the Company. On May 22, 2014, NDRC formally suspended its investigation of the Company based on the commitments proposed by the Company. The Company’s commitments with respect to Lenovo; (b) to the ~~licensing of its~~extent Lenovo does not agree to negotiate a worldwide patent ~~portfolio for wireless mobile standards to Chinese manufacturers of cellular terminal units (“Chinese Manufacturers”) are as follows:~~

Whenever InterDigital engages with a Chinese Manufacturer to license InterDigital’s patent portfolio for 2G, 3G and 4G wireless mobile standards, InterDigital will offer such Chinese Manufacturer the option of taking a worldwide portfolio license of only its standards-essential wireless patents, and comply with F/RAND principles when negotiating and entering into such licensing agreements with Chinese Manufacturers.


2.	~~As part of its licensing offer, InterDigital will~~license, does not ~~require that a Chinese Manufacturer~~ agree ~~to a royalty-free, reciprocal cross-license of such Chinese Manufacturer's similarly categorized standards-essential wireless patents.~~

Prior to commencing any action against a Chinese Manufacturer in which InterDigital may seek exclusionary or injunctive relief for the infringement of any of its wireless standards-essential patents, InterDigital will offer such Chinese Manufacturer the option to enter into expedited binding arbitration under fair and reasonable procedures to resolve the royalty rate and other terms of a worldwide license under InterDigital's wireless standards-essential patents. If the Chinese Manufacturer accepts InterDigital's binding arbitration offer or otherwise enters into an agreement with InterDigital on a binding arbitration mechanism, InterDigital will, in accordance with the terms of the arbitration agreement and patent license agreement, refrain from seeking exclusionary or injunctive relief against such company.

~~The commitments contained in item 3 above will expire five years from the effective date of the suspension of the investigation, or May 22, 2019.~~

~~USITC PROCEEDINGS AND RELATED DELAWARE DISTRICT COURT PROCEEDINGS~~

~~2013 USITC Proceeding (337-TA-868) and Related ZTE Delaware District Court Proceeding~~

~~USITC Proceeding (337-TA-868)~~

On January 2, 2013, the Company’s wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing, Inc. and InterDigital Holdings, Inc. filed a complaint with the United States International Trade Commission (the “USITC” or “Commission”) against Samsung Electronics Co., Ltd., Samsung Electronics America, Inc. and Samsung Telecommunications America, LLC, Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd., Huawei Device USA, Inc. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-868 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G and 4G wireless devices (including WCDMA-, cdma2000- and LTE-capable mobile phones, USB sticks, mobile hotspots, laptop computers and tablets and components of such devices) that infringe one or more of up to seven of InterDigital’s U.S. patents. The complaint also extended to certain WCDMA and cdma2000 devices incorporating Wi-Fi functionality. InterDigital’s complaint with the USITC sought an exclusion order that would bar from entry into the United States infringing 3G or 4G wireless devices (and components), including LTE devices, that are imported by or on behalf of the 337-TA-868 Respondents, and also sought a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. Certain of the asserted patents were also asserted against Nokia, Huawei and ZTE in earlier pending USITC proceedings (including the Nokia, Huawei and ZTE 2011 USITC Proceeding (337-TA-800) and the Nokia 2007 USITC Proceeding (337-TA-613), as set forth below) and therefore were not asserted against those 337-TA-868 Respondents in this investigation.

~~On December 23, 2013, InterDigital and Huawei reached a settlement agreement~~ to enter into binding international arbitration to ~~resolve their global~~set the terms of a FRAND license, and does not agree to be bound by the FRAND terms to be set by the UK High Court in the separately filed UK proceedings described above, an injunction prohibiting Lenovo from continued infringement; (c) damages, including enhanced damages for willful infringement and supplemental damages; and (d) attorneys’ fees and costs.

Table of Content s

On September 16, 2020, the Delaware District Court entered a schedule for the case, setting a patent ~~licensing disputes. Pursuant to~~jury trial.On March 8, 2021, the ~~settlement agreement, InterDigital~~Delaware District Court held a claim construction hearing, and ~~Huawei moved to dismiss all litigation matters pending between~~the court issued its order on May 10, 2021, construing various disputed terms. On March 24, 2021, the Delaware District Court consolidated the antitrust proceeding discussed below with this patent proceeding. Trial for the consolidated proceedings is scheduled for March 6, 2023. On April 25, 2022, the parties ~~except~~filed a stipulation to stay only the ~~action filed by Huawei in China~~claims relating to set a fair, reasonable and non-discriminatory (“FRAND”) rate for the licensing of InterDigital’s Chinese standards-essential patents (discussed above under “Huawei China Proceedings”), the decision in which InterDigital is permitted to further appeal. As a result, effective February 12, 2014, the Huawei Respondents were terminated from the 337-TA-868 investigation.

From February 10 to February 20, 2014, ALJ Essex presided over the evidentiary hearing in this investigation. The patents in issue in this investigation as of the hearing were U.S. Patent Nos. 7,190,966 (the “’966 patent”) and 7,286,847 (the “’847 patent”) asserted against ZTE and Samsung, and U.S. Patent No. ~~7,941,151 (the “’151 patent”) asserted against ZTE, Samsung and Nokia.~~8,199,726.

~~On June 3, 2014, InterDigital and Samsung filed a joint motion to terminate the investigation as to Samsung on the basis~~District of ~~settlement. The ALJ granted the joint motion by initial determination issued on June 9, 2014, and the USITC determined not to review the initial determination on June 30, 2014.~~

On June 13, 2014, the ALJ issued an Initial Determination (“ID”) in the 337-TA-868 investigation. In the ID, the ALJ found that no violation of Section 337 had occurred in connection with the importation of 3G/4G devices by ZTE or Nokia, on the basis that the accused devices do not infringe asserted claims 1-6, 8-9, 16-21 or 23-24 of the ’151 patent, claims 1, 3, 6, 8, 9, or 11 of the ’966 patent, or claims 3 or 5 of the ’847 patent. The ALJ also found that claim 16 of the ’151 patent was invalid as indefinite. Among other determinations, the ALJ further determined that InterDigital did not violate any FRAND obligations, a conclusion also reached by the ALJ in the 337-TA-800 investigation, and that Respondents have engaged in patent “hold out.”

On June 30, 2014, InterDigital filed a Petition for Review with the USITC seeking review and reversal of certain of the ALJ’s conclusions in the ID. On the same day, Respondents filed a Conditional Petition for Review urging alternative grounds for affirmance of the ID’s finding that Section 337 was not violated and a Conditional Petition for Review with respect to FRAND issues.

~~In June 2014, Microsoft Mobile Oy (“MMO”) was added as a respondent in the investigation.~~

~~On August 14, 2014, the Commission determined to review in part the June 13, 2014 ID but terminated the investigation with a finding of no violation.~~

On October 10, 2014, InterDigital filed a petition for review with the U.S. Court of Appeals for the Federal Circuit (the “Federal Circuit”), appealing certain of the adverse determinations in the Commission’s August 8, 2014 final determination including those related to the ’966 and ’847 patents. On June 2, 2015, InterDigital moved to voluntarily dismiss the Federal Circuit appeal, because, even if it were to prevail, it did not believe there would be sufficient time following the court’s decision and mandate for the USITC to complete its proceedings on remand such that the accused products would be excluded before the ’966 and ’847 patents expire in June 2016. The court granted the motion and dismissed the appeal on June 18, 2015.

~~Related~~ Delaware ~~District Court~~Antitrust Proceeding

On ~~January 2, 2013, the Company’s wholly owned subsidiaries InterDigital Communications, Inc., InterDigital Technology Corporation, IPR Licensing,~~April 9, 2020, Lenovo (United States) Inc. and ~~InterDigital Holdings, Inc.~~Motorola Mobility LLC filed ~~four related district court actions~~a complaint in the Delaware District Court against the ~~337-TA-868 Respondents.~~Company and certain of its subsidiaries. The ~~proceedings against Huawei, Samsung and Nokia were subsequently dismissed, as discussed below. The remaining~~ complaint alleges that ~~ZTE infringes~~ the ~~same~~Company defendants have violated Sections 1 and 2 of the Sherman Act in connection with, among other things, their licensing of 3G and 4G standards essential patents ("SEPs"). The complaint further alleges that the Company defendants have violated their commitment to the ETSI with respect to the ~~same products alleged in the complaint filed by InterDigital in USITC Proceeding (337-TA-868).~~licensing of 3G and 4G SEPs on FRAND terms and conditions. The complaint seeks, ~~a permanent injunction~~among other things (i) rulings that the Company defendants have violated Sections 1 and ~~compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement,~~2 of the Sherman Act and ~~recovery of reasonable attorneys’ fees and costs.~~

~~On January 31, 2013, ZTE filed its answer and counterclaims to InterDigital’s Delaware District Court complaint; ZTE asserted counterclaims~~are liable for breach of ~~contract, equitable estoppel, waiver of right~~their ETSI FRAND commitments, (ii) a judgment that the plaintiffs are entitled to ~~enjoin~~a license with respect to the Company's 3G and ~~declarations that InterDigital has not offered ZTE licenses~~4G SEPs on FRAND terms ~~declarations seeking~~and conditions, and (iii) injunctions against any demand for allegedly excessive royalties or enforcement of the ~~determination of FRAND terms~~Company defendants' 3G and ~~declarations of noninfringement, invalidity and unenforceability. In addition to~~4G U.S. SEPs against the declaratory relief specified in its counterclaims, ZTE seeks specific performance of InterDigital's purported contracts with ZTE and standards-setting organizations, appropriate damages in an amount to be determined at trial, reasonable attorneys’ fees and such other relief as the court may deem appropriate. plaintiffs or their customers via patent infringement proceedings.

On ~~March 21, 2013, pursuant to stipulation,~~June 22, 2020, the Delaware District Court granted InterDigital leave to file an amended complaint against ZTE to assert allegations of infringement of the ’244 patent. On March 22, 2013, ZTE filed its answer and counterclaims to InterDigital’s amended Delaware District Court complaint. On April 9, 2013, InterDigitalCompany filed a motion to dismiss ~~ZTE’s counterclaims relating~~Lenovo's Sherman Act claims with prejudice, and to its FRAND allegations. On July 12, 2013, the Delaware District Court held a hearing on InterDigital’s motion to dismiss. By order issued the same day, the Delaware District Court granted InterDigital’s motion, dismissing ZTE's counterclaims for equitable estoppel and waiver of the right to injunction or exclusionary relief with prejudice. It further dismissed the counterclaims fordismiss Lenovo's breach of contract ~~and declaratory relief related to InterDigital’s FRAND commitments~~claim with leave to ~~amend.~~

On August 6, 2013, ZTE filed its answer and amended counterclaims for breach of contract and for declaratory judgment seeking determination of FRAND terms. The counterclaims also continue to seek declarations of noninfringement, invalidity, and unenforceability. On August 30, 2013, InterDigital filedre-file as a ~~motion to dismiss the declaratory judgment~~ counterclaim relating to the request for determination of FRAND terms. On May 28, 2014, the court granted InterDigital’s motion and dismissed ZTE's FRAND-related declaratory judgment counterclaim, ruling that such declaratory judgment would serve no useful purpose.

On December 30, 2013, InterDigital and Huawei filed a stipulation of dismissal on account of the confidential settlement agreement and agreement to arbitrate their disputes in this action. On the same day, the Delaware District Court granted the stipulation of dismissal and dismissed the action against Huawei.

On February 11, 2014, the Delaware District Court judge entered an InterDigital, Nokia, and ZTE stipulated Amended Scheduling Order that bifurcated issues relating to damages, FRAND-related affirmative defenses, and any FRAND-related counterclaims.

On August 28, 2014, the court granted in part a motion by InterDigital for summary judgment that the asserted ’151 patent is not unenforceable by reason of inequitable conduct, holding that only one of the references forming the basis of defendants’ allegations would remain in issue, and granted a motion by InterDigital for summary judgment that the asserted claims of the ’966 and ’847 patents are not invalid for lack of enablement.

On August 5, 2014, InterDigital and Samsung filed a stipulation of dismissal in light of the parties’ settlement agreement. On the same day, the court granted the stipulation of dismissal and dismissed the action against Samsung with prejudice.

~~By order dated August 28, 2014, MMO was joined~~ in the ~~case~~Company's legal proceeding against ~~Nokia as a defendant.~~

The ZTE trial addressing infringement and validity of the ’966, ’847, ’244 and ’151 patents was held from October 20 to October 27, 2014. During the trial, the judge determined that further construction of certain claim language of the ’151 patent was required, and the judge decided to hold another trial as to ZTE's infringement of the ’151 patent at a later date. On October 28, 2014, the jury returned a unanimous verdict in favor of InterDigital, finding that the ’966, ’847 and ’244 patents are all valid and infringed by ZTE 3G and 4G cellular devices. The court issued formal judgment to this effect on October 29, 2014.

On November 26, 2014, ZTE filed a motion for judgment as a matter of law that the asserted claims of the ’966, ’847 and ’244 patents are not infringed and, in the alternative, for a new trial. InterDigital filed an opposition on December 15, 2014, and ZTE filed a reply on January 7, 2015.

The ZTE trial addressing infringement of the ’151 patent was held from April 20 to April 22, 2015. On April 22, 2015, the jury returned a verdict in favor of ZTE, finding that the ’151 patent is not infringed by ZTE 3G and 4G cellular devices.

~~On May 29, 2015, the court entered a new scheduling order for damages and FRAND-related issues, scheduling the ZTE trial related to damages and FRAND-related issues for October 2016.~~

On September 14, 2015, a panel of Administrative Law Judges of the United States Patent and Trademark Office Patent Trial and Appeal Board (the “PTAB”) issued a final written decision in two Inter Partes Review (“IPR”) cases concerning the ’244 patent. These IPR proceedings were commenced on petitions filed by ZTE Corporation and ZTE (USA) Inc. and by Microsoft Corporation, respectively. Specifically, the panel determined that a number of claims of the ’244 patent are unpatentable as obvious. IPR Licensing, Inc. appealed to the Federal Circuit seeking review of the PTAB’s decision. Oral argument in the appeal was heard on April 7, 2017. On April 20, 2017, the Federal Circuit affirmed the PTAB’s decision that most of the challenged claims of the ’244 patent are unpatentable as obvious. However, the court vacated and remanded the PTAB’s obviousness finding as to claim 8, which returned the matter to the PTAB for further proceedings as to that claim. The PTAB remand proceeding as to claim 8 remains pending. On July 28, 2017, IPR Licensing, Inc., filed a petition for a writ of certiorari with the U.S. Supreme Court seeking to appeal the Federal Circuit decision, arguing that the petition should be held pending the Supreme Court’s decision in ~~Oil States Energy Services, LLC v. Greene’s Energy Group, LLC~~, which will determine whether the IPR process as a whole is unconstitutional. On October 2, 2017, ZTE filed a response to the petition for a writ of certiorari in which ZTE agreed that the petition should be held pending the Court’s decision in ~~Oil States~~ ~~and then disposed of as appropriate in light of that decision. The petition for a writ of certiorari remains pending.~~

On December 21, 2015, the court entered another scheduling order that vacated the October 2016 date for the ZTE trial related to damages and FRAND-related issues as set forth in the May 2015 scheduling order.

On March 18, 2016, the court denied ZTE’s motion for judgment as a matter of law, or in the alternative for a new trial, with respect to the ’966 and ’847 patents. The court postponed its ruling on ZTE’s motion as to the ’244 patent pending the Federal Circuit’s decision on InterDigital’s appeal of the September 14, 2015 PTAB ruling and administratively closed that portion of the motion. On April 8, 2016, the court set a new schedule for the FRAND/damages portion of the ZTE case with a target trial date in February 2018.

On April 18, 2016, ZTE filed a stipulated request for dismissal with prejudice of its counterclaims for breach of contract and patent unenforceability based on FRAND and withdrew its corresponding FRAND-related affirmative defenses. The court granted this request the same day. Also on April 18, 2016, ZTE filed a motion under Federal Rule of Civil Procedure 54(b) seeking certification of partial final judgment on the claims for infringement of the ’966 and ’847 patents to allow ZTE to file an immediate appeal as to those patents. The motion was granted on June 7, 2016, and a partial final judgment was entered on June 20, 2016. On July 18, 2016, ZTE filed its notice of appeal with the Federal Circuit regarding the Delaware District Court’s judgment against ZTE with respect to the ’966 and ’847 patents. Oral argument on ZTE’s appeal was heard on October 4, 2017, and a decision remains pending. As a result, InterDigital’s damages claims are currently effectively stayed pending the appeal.

On May 9, 2017, InterDigital entered into a Settlement Agreement and Release of Claims (the “Microsoft Settlement Agreement”) with Microsoft Corporation, Microsoft Mobile, Inc., and MMO, pursuant to which the parties agreed to terms for resolving all of their existing disputes and entered into a framework for future discussions for a patent license agreement and regarding technology collaboration in key areas. InterDigital and Microsoft also agreed to terms for dismissal by them and Nokia Corporation of all outstanding litigation and other proceedings among these companies and their affiliates. On May 15, 2017, InterDigital and Nokia/MMO filed a stipulation of dismissal of the case against MMO, Nokia Corporation and Nokia, Inc. pursuant to the Microsoft Settlement Agreement. On May 16, 2017, the Delaware District Court granted the stipulation and dismissed the case against MMO, Nokia Corporation and Nokia, Inc. with prejudice.

~~The case against ZTE remains pending.~~

~~2011 USITC Proceeding (337-TA-800) and Related ZTE and LG Delaware District Court Proceeding~~

~~USITC Proceeding (337-TA-800)~~

On July 26, 2011, InterDigital’s wholly owned subsidiaries InterDigital Communications, LLC (now InterDigital Communications, Inc.), InterDigital Technology Corporation and IPR Licensing, Inc. filed a complaint with the USITC against Nokia Corporation and Nokia Inc., Huawei Technologies Co., Ltd. and FutureWei Technologies, Inc. d/b/a Huawei Technologies (USA) and ZTE Corporation and ZTE (USA) Inc. (collectively, the “337-TA-800 Respondents”), alleging violations of Section 337 of the Tariff Act of 1930 in that they engaged in unfair trade practices by selling for importation into the United States, importing into the United States and/or selling after importation into the United States certain 3G wireless devices (including WCDMA- and cdma2000-capable mobile phones, USB sticks, mobile hotspots and tablets and components of such devices) that infringe several of InterDigital’s U.S. patents. The action also extended to certain WCDMA and cdma2000 devices incorporating WiFi functionality. InterDigital’s complaint with the USITC sought an exclusion order that would bar from entry into the United States any infringing 3G wireless devices (and components) that are imported by or on behalf of the 337-TA-800 Respondents, and also sought a cease-and-desist order to bar further sales of infringing products that have already been imported into the United States. In May 2012, Huawei Device USA, Inc. was added as a 337-TA-800 Respondent.

The ALJ held an evidentiary hearing from February 12-21, 2013. The patents in issue as of the hearing were U.S. Patent Nos. 8,009,636 (the “’636 patent”), 7,706, 830 (the “’830 patent”), 7,502,406 (the “’406 patent”), 7,616,970 (the “’970 patent”), 7,706,332 (the “’332 patent”), 7,536,013 (the “’013 patent”) and 7,970,127 (the “’127 patent”). The ALJ’s Initial Determination (“ID”) issued on June 28, 2013, finding no violation because the asserted patents were not infringed and/or invalid. Among other determinations, with respect to the 337-TA-800 Respondents’ FRAND and other equitable defenses, the ALJ found that Respondents had failed to prove either that InterDigital violated any FRAND obligations, that InterDigital failed to negotiate in good faith, or that InterDigital’s licensing offers were discriminatory. The ALJ also found that InterDigital is not precluded from seeking injunctive relief based on any alleged FRAND commitments.

Petitions for review of the ID to the Commission were filed by InterDigital and the 337-TA-800 Respondents on July 15, 2013. On September 4, 2013, the Commission determined to review the ID in its entirety.

On December 19, 2013, the Commission issued its final determination. The Commission adopted, with some modification, the ALJ’s finding of no violation of Section 337 as to Nokia, Huawei, and ZTE. The Commission did not rule on any other issue, including FRAND and domestic industry, and stated that all other issues remain under review.

On December 20, 2013, InterDigital filed in the Federal Circuit a petition for review seeking reversal of the Commission’s final determination. On February 18, 2015, the Federal Circuit issued a decision affirming the USITC’s determinations that the claims of the ’830, ’636, ’406 and ’332 patents were not infringed, that the claims of the ’970 patent are invalid, and that the Respondents did not violate Section 337. On April 6, 2015, InterDigital filed a combined petition for

~~panel rehearing and rehearing en banc~~ ~~as to the ’830 and ’636 patents. The petition was denied on May 12, 2015, and the court’s mandate issued on May 19, 2015.~~

~~Related Delaware District Court Proceeding~~

On July 26, 2011, the same date that InterDigital filed USITC Proceeding (337-TA-800), it filed a parallel action in the United States District Court for the District of Delaware against the 337-TA-800 Respondents alleging infringement of the same asserted patents identified in USITC Proceeding (337-TA-800). The Delaware District Court complaint seeks a permanent injunction and compensatory damages in an amount to be determined, as well as enhanced damages based on willful infringement, and recovery of reasonable attorneys' fees and costs. On September 23, 2011, the defendantsLenovo in the Delaware District Court ~~complaint filed a~~discussed above. Oral argument on the Company's motion to ~~stay~~dismiss was held on October 27, 2020.

On March 24, 2021, the Delaware District Court ~~action pending~~ruled on the ~~parallel proceedings in the USITC. Because the USITC has instituted USITC Proceeding (337-TA-800), the defendants have a statutory right~~Company’s motion to ~~a mandatory stay of the~~dismiss.The Delaware District Court dismissed the Sherman Act Section 1 claim without prejudice, denied the motion to dismiss the Sherman Act Section 2 claim, and consolidated the Section 2 and breach of contract claims with Company’s Delaware patent proceeding ~~pending~~discussed above.

China Proceedings

On April 10, 2020, Lenovo (Beijing) Ltd. and certain of its affiliates filed a ~~final determination~~complaint against the Company and certain of its subsidiaries in the ~~USITC.~~Beijing Intellectual Property Court (the “Beijing IP Court”) seeking a determination of the FRAND royalty rates payable for the Company's Chinese 3G, 4G and 5G SEPs. On ~~October 3, 2011, InterDigital amended~~February 20, 2021, the ~~Delaware District~~Company filed an application challenging the jurisdiction of the Beijing IP Court to take up Lenovo’s complaint. On November 15, 2021, the Beijing IP Court denied the jurisdictional challenge, and the Company filed an appeal with the Supreme People’s Court of the People’s Republic of China (SPC) on December 14, 2021. The appeal remains pending.

On November 26, 2021, the Company was informed that Lenovo had purportedly filed an additional complaint ~~adding LG as~~against the Company in the Wuhan Intermediate People’s Court (the “Wuhan Court”) seeking a ~~defendant~~determination of a global FRAND royalty rate for the period from 2024 to 2029 for the Company’s 3G, 4G, and ~~adding~~5G SEPs. On April 16, 2022, the ~~same additional~~Company filed an application challenging, among other things, process of service and the jurisdiction of the Wuhan Court. That application remains pending.

Germany Proceedings

On March 25, 2022, March 28, 2022, and April 6, 2022, the Company and certain of its subsidiaries filed patent ~~that InterDigital requested be added~~infringement claims in the Munich and Mannheim Regional Courts against Lenovo and certain of its affiliates, alleging infringement of European Patent Nos. 2,449,782; 2,452,498; 3,624,447 and 3,267,684 relating to ~~USITC~~HEVC standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

Oppo, OnePlus and realme

UK Proceeding ~~(337-TA-800).~~

On ~~October 11, 2011,~~December 20, 2021, the ~~Delaware District~~Company filed a patent infringement claim in the UK High Court ~~granted~~against Guangdong Oppo Mobile Telecommunications Corp., Ltd. (“Oppo”) and certain of its affiliates, OnePlus Technology (Shenzhen) Co., Ltd. (“OnePlus”) and certain of its affiliates, and realme Mobile Telecommunications (Shenzhen) Co., Ltd. (“realme”) and certain of its affiliates, alleging infringement of European Patent (UK) Nos. 2,127,420; 2,421,318; 2,485,558; and 3,355,537 relating to cellular 3G, 4G/LTE or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the ~~defendants' motion to stay. The case is currently stayed through December 11, 2017.~~asserted patents.

On January ~~14, 2014, InterDigital and Huawei~~19, 2022, Oppo filed a ~~stipulation~~jurisdictional challenge with the UK High Court which is scheduled for a two-day hearing starting October 25, 2022.

Table of ~~dismissal~~Content s

India Proceeding

On December 20, 2021 and December 22, 2021, the Company and certain of ~~their disputes~~its subsidiaries filed patent infringement claims in ~~this action on account~~the Delhi High Court in New Delhi, India against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme Mobile Telecommunication (India) Private Limited, alleging infringement of Indian Patent Nos. 262910, 295912, 313036, 320182, 319673, 242248, 299448, and 308108 relating to cellular 3G, 4G/LTE, and/or 5G, and HEVC standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the ~~confidential settlement agreement mentioned above. On the same day, the Delaware District Court granted the stipulation of dismissal.~~asserted patents.

Germany Proceeding

On ~~May 15, 2017, InterDigital~~December 20, 2021, a subsidiary of the Company filed three patent infringement claims, two in the Munich Regional Court and ~~Nokia~~one in the Mannheim Regional Court, against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme and certain of its affiliates, alleging infringement of European Patent Nos. 2,485,558; 2,127,420; and 2,421,318 relating to cellular 3G, 4G/LTE and/or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. The Munich Regional Court has scheduled hearings for November 17, 2022, and December 14, 2022. The Mannheim Regional Court has scheduled a hearing for December 16, 2022.

China Proceeding

On January 19, 2022, the Company was informed that Oppo had purportedly filed a ~~stipulation~~complaint against the Company in the Guangzhou Intellectual Property Court (the “Guangzhou IP Court”) seeking a determination of ~~dismissal~~a global FRAND royalty rate for the Company’s 3G, 4G, 5G, 802.11 and HEVC SEPs. On May 20, 2022, the Company filed an application challenging, among other things, process of ~~their dispute pursuant~~service and the jurisdiction of the Guangzhou IP Court. That application remains pending.

Spain Proceeding

On March 1, 2022, a subsidiary of the Company filed patent infringement claims in the Barcelona Commercial Courts against Oppo and certain of its affiliates, OnePlus and certain of its affiliates, and realme and certain of its affiliates. The Company filed its amended complaint on April 25, 2022, alleging infringement of European Patent Nos. 3,355,537; 2,485,558; 2,421,318; and 2,557,715 relating to cellular 3G, 4G/LTE and/or 5G standards. The Company is seeking, among other relief, injunctive relief to prevent further infringement of the Microsoft Settlement Agreement discussed above. On May 16, 2017, the Delaware District Court granted the stipulation and dismissed the case with prejudice with respect to Nokia Corporation and Nokia Inc.

~~The case remains pending with respect to ZTE and LG.~~asserted patents.

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 theiragreements 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 ~~above~~preceding matters have met the requirements for accrual or disclosure of a potential range as of ~~September~~June 30, ~~2017.~~2022.

5.~~EQUITY TRANSACTIONS~~

~~Changes in shareholders’ equity for the~~ ~~nine months endedSeptember 30, 2017~~ ~~and September 30, 2016 were as follows (in thousands):~~

For the Nine Months Ended September 30,
2017 2016
Balance beginning of period, December 31 $ 739,709
$ 510,519
Net income attributable to InterDigital, Inc. 121,791
172,531
Unrealized (loss) gain on investments, net (181 ) 202
Cash dividends declared (32,966 ) (24,069 )
Repurchase of common stock —
(64,685 )
Exercise of common stock options 82
302
Taxes withheld upon vesting of restricted stock units (22,235 ) (3,368 )
Tax benefit from share-based compensation —
(9 )
Share-based compensation 13,901
15,301
Total InterDigital, Inc. shareholders’ equity end of period $ 820,101
$ 606,724
Noncontrolling Interest Balance beginning of period, December 31 14,659
11,376
Net loss attributable to noncontrolling interest (2,744 ) (2,828 )
Noncontrolling interest 11,915
8,548
Total Equity end of period $ 832,016
$ 615,272

~~Repurchase of Common Stock~~

In June 2014, our Board of Directors authorized a $300 million share repurchase program (the “2014 Repurchase Program”). In June 2015, our Board of Directors authorized a $100 million increase to the program, and in September 2017, our Board of Directors authorized another $100 million increase to the program, bringing the total amount of the 2014 Repurchase Program to $500 million. The Company may repurchase shares under the 2014 Repurchase Program through open market purchases, pre-arranged trading plans or privately negotiated purchases.

The table below sets forth the number of shares repurchased and the dollar value of shares repurchased under the 2014 Repurchase Program during 2016, 2015 and 2014, in thousands. We did not repurchase any shares of common stock in first nine months 2017.

2014 Repurchase Program
# of Shares Value
2016 1,304
$ 64,685
2015 1,836
96,410
2014 3,554
152,625
Total 6,694
$ 313,720

~~Dividends~~

~~Cash dividends on outstanding common stock declared in~~ ~~2017~~ ~~and~~ ~~2016~~ ~~were as follows (in thousands, except per share data):~~

2017 Per Share Total Cumulative by Fiscal Year
First quarter $ 0.30
$ 10,404
$ 10,404
Second quarter 0.30
$ 10,413
20,817
Third quarter 0.35
$ 12,149
32,966
$ 0.95
$ 32,966

2016 Per Share Total Cumulative by Fiscal Year
First quarter $ 0.20
$ 6,923
$ 6,923
Second quarter 0.20
6,861
13,784
Third quarter 0.30
10,285
24,069
Fourth quarter 0.30
10,290
34,359
$ 1.00
$ 34,359

In September 2017, we announced that our Board of Directors had approved an increase in the Company’s quarterly cash dividend to $0.35 per share. We currently expect to continue to pay dividends comparable to our quarterly $0.35 per share cash dividend in the future; however, continued payment of cash dividends and changes in the Company's dividend policy will depend on the Company's earnings, financial condition, capital resources and capital requirements, alternative uses of capital, restrictions imposed by any existing debt, economic conditions and other factors considered relevant by our Board of Directors.

~~Common Stock Warrants~~

On March 5 and March 9, 2015, we sold warrants to acquire approximately 3.8 million and approximately 0.6 million shares of our common stock, respectively, subject to customary anti-dilution adjustments. As of September 30, 2017, the warrants had a strike price of approximately $88.03 per share, as adjusted. The warrants become exercisable and expire in daily tranches over a three and a half month period starting in June 2020. As consideration for the warrants issued on March 5 and March 9, 2015, we received approximately $37.3 million and approximately $5.6 million, respectively.

6.CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL ~~ASSETS AND FINANCIAL LIABILITIES~~INSTRUMENTS

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash currently consists of money market and demand accounts. The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of June 30, 2022, December 31, 2021 and June 30, 2021 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):


	June 30,		December 31,		June 30,
	2022		2021		2021
Cash and cash equivalents	$	833,533	$	706,282	$	410,144
Restricted cash included within prepaid and other current assets	10,578		5,861		741
Restricted cash included within other non-current assets	1,081		1,081		1,081
Total cash, cash equivalents and restricted cash	$	845,192	$	713,224	$	411,966

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.

Table of Content s

Our accounts receivable and contract assets are derived principally from patent license and technology solutions agreements. At ~~September~~As of June 30, ~~2017~~2022 three licensees comprised 84% and as of December 31, ~~2016,~~2021 four licensees comprised ~~95% and 91%~~66% of our net accounts receivable ~~balance, respectively.~~balance. 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.

Table of Content s

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 ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 (in thousands):


	Fair Value as of June 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	845,192	$	—	$	—	$	845,192
Commercial paper (b)	—		9,993		—		9,993
U.S. government securities	—		43,188		—		43,188
Corporate bonds, asset backed and other securities	—		13,895		—		13,895
Total	$	845,192	$	67,076	$	—	$	912,268


	Fair Value as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	705,725	$	—	$	—	$	705,725
Commercial paper(b)	—		158,452		—		158,452
U.S. government securities	—		51,301		—		51,301
Corporate bonds, asset backed and other securities	—		33,091		—		33,091
Total	$	705,725	$	242,844	$	—	$	948,569

(a)Primarily included within cash and cash equivalents.

(b)As of June 30, 2022 and December 31, 2021, $0.0 million and $7.5 million, respectively, of commercial paper was included within cash and cash equivalents.

Non-Recurring Fair Value Measurements

Investments in Other Entities

During the second quarter 2022 and 2021, we recognized $1.6 million and $1.0 million, respectively, of gains resulting from observable price changes of our long-term strategic investments, which were included within “Other (expense) income, net” in the condensed consolidated statement of income.

Patents

During second quarter 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patent assets, which were classified as held-for sale. These patents held for sale are recorded at fair value on June 30, 2022 and are included within "Prepaid and other current assets" in the condensed consolidated balance sheet. We determined the fair value based upon evaluation of market conditions and recognized an $11.0 million patent impairment during the second quarter 2021.

During fourth quarter 2021, we renewed our multi-year, worldwide, non-exclusive patent license agreement with Sony Corporation of America ("Sony"). A portion of the consideration for the agreement was in the form of patents, which we received in March 2022. We have determined the fair value of the patents for determining the transaction price for revenue recognition purposes, which was estimated to be $30.1 million utilizing the income and market approaches. The value is amortized as a non-cash expense over the patents' estimated useful lives.

Table of Content s

Fair Value as of September 30, 2017
Level 1 Level 2 Level 3 Total
Assets:
Money market and demand accounts (a) $ 261,780
$ —
$ —
$ 261,780
Commercial paper (b) —
81,866
—
81,866
U.S. government securities —
480,336
—
480,336
Corporate bonds, asset backed and other securities —
143,230
—
143,230
$ 261,780
$ 705,432
$ —
$ 967,212


~~(a)~~	~~Included within cash and cash equivalents.~~


~~(b)~~	~~Includes~~ ~~$21.8 million~~ ~~of commercial paper that is included within cash and cash equivalents.~~

Fair Value of Long-Term Debt

Convertible Notes

Fair Value as of December 31, 2016
Level 1 Level 2 Level 3 Total
Assets:
Money market and demand accounts (a) $ 404,074
$ —
$ —
$ 404,074
Commercial paper —
113,490
—
113,490
U.S. government securities —
224,330
—
224,330
Corporate bonds, asset backed and other securities —
210,867
—
210,867
$ 404,074
$ 548,687
$ —
$ 952,761


~~(a)~~	~~Included within cash and cash equivalents.~~

The principal amount, carrying value and related estimated fair value of the Company's ~~senior convertible~~Convertible Notes reported in the condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021 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, 2022						December 31, 2021
	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
2027 Senior Convertible Long-Term Debt	$	460,000	$	450,183	$	467,452	$	—	$	—	$	—
2024 Senior Convertible Long-Term Debt	$	126,174	$	125,065	$	123,259	$	400,000	$	395,632	$	437,760

Technicolor Patent Acquisition Long-term Debt

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported in the condensed consolidated balance sheets as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~ ~~are~~2021 was as follows (in thousands):

September 30, 2017 December 31, 2016

Principal
Amount

Carrying
Value

Fair
Value

Principal
Amount
Carrying
Value
Fair
Value
Total Long-Term Debt $ 316,000
$ 281,774
$ 370,115
$ 316,000
$ 272,021
$ 428,575

. The aggregate fair value of the ~~principal amount of the~~Technicolor Patent Acquisition long-term debt ~~(Level 2 Notes as defined in Note 7 “Long-Term Debt~~”) was calculated using inputs such as actual trade data, benchmark yields, broker/dealer quotes and other similar data, which were obtained from independent pricing vendors, quoted market prices or other sources.is a Level 3 fair value measurement.


	June 30, 2022				December 31, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Technicolor Patent Acquisition Long-Term Debt	$	28,997	$	28,103	$	27,113	$	28,569

7. ~~LONG-TERM DEBT~~OBLIGATIONS

~~2020 Senior Convertible~~2027 Notes, and ~~related~~Related Note Hedge and Warrant Transactions

On ~~March 11, 2015,~~May 27, 2022 we issued ~~$316.0~~$460.0 million in aggregate principal amount of ~~1.50%~~3.50% Senior Convertible Notes due ~~2020~~2027 (the ~~“2020 Notes”~~"2027 Notes"). The ~~2020~~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 ~~1.50%~~3.50% per year, payable in cash on ~~March~~June 1 and ~~September~~December 1 of each year, commencing ~~September~~on December 1, ~~2015,~~2022, and mature on ~~March~~June 1, ~~2020,~~2027, unless earlier redeemed, converted or repurchased.

The ~~2020~~2027 Notes will be convertible into cash up to the aggregate principal amount of the 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 notes being converted, pay or deliver, as the case may be, cash, shares of ~~our~~the Company’s common stock or a combination thereof, at ~~our~~the Company’s election, at ~~a current~~an initial conversion rate of ~~13.8664~~12.9041 shares of ~~common stock~~Common Stock per $1,000 principal amount of ~~2020~~ Notes (which is equivalent to aan initial conversion price of approximately ~~$72.12~~$77.49 per share)~~, as adjusted pursuant to the terms of the indenture for the 2020 Notes (the "Indenture")~~. The conversion rate, and thus the conversion price, may be adjusted under certain circumstances, including in connection with conversions made following ~~certain~~ fundamental changes and under other circumstances as set forth in the ~~Indenture. It is our current intent and policy to settle all conversions through combination settlement~~indenture governing the 2027 Notes.

Table of ~~cash and shares of common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of the 2020 Notes and any remaining amounts in shares.~~Content s

Prior to 5:00 p.m., New York City time, on the business day immediately preceding ~~December~~March 1, ~~2019,~~2027, the ~~2020 Notes~~notes will be convertible only under ~~certain circumstances as set forth in~~ the ~~indenture to the 2020 Notes, including~~following circumstances: (1) on any date during any calendar quarter (and only during such calendar quarter) beginning after September 30, 2022 if the closing sale price of ~~our common stock~~the Common Stock was more than 130% of the applicable conversion price ~~(approximately $93.76 based on the current conversion price)~~ on each applicable trading day for at least 20 trading days (whether or not consecutive) in the period of the 30 consecutive trading days ending on the last trading day of the immediately preceding calendar ~~quarter.~~

quarter; (2) if the Company distributes to all or substantially all holders of the Common Stock any rights, options or warrants (other than in connection with a stockholder rights plan prior to separation of such rights from the shares of the Common Stock) entitling them to purchase, for a period of 45 calendar days or less from the issuance date for such distribution, shares of Common Stock at a price per share less than the average closing sale price for the 10 consecutive trading day period ending on, and including, the trading day immediately preceding the declaration date for such distribution; (3) if the Company distributes to all or substantially all holders of the Common Stock any cash or other assets, debt securities or rights to purchase the Company’s securities (other than pursuant to a rights plan), which distribution has a per share value exceeding 10% of the closing sale price of the Common Stock on the trading day immediately preceding the declaration date for such distribution; (4) if the Company engages in certain corporate transactions as described in the indenture governing the 2027 Notes; (5) if the Company calls the notes for redemption, at any time prior to the close of business on the second scheduled trading day immediately preceding the redemption date; (6) during a specified period if a fundamental change (as defined in the indenture governing the 2027 Notes) occurs; or (7) during the 5 consecutive business day period following any 5 consecutive trading day period in which the trading price for the notes for each day during such 5 trading day period was less than 98% of the closing sale price of the Common Stock multiplied by the applicable conversion rate on each such trading day. Commencing on ~~December~~March 1, ~~2019,~~2027, the ~~2020 Notes~~notes will be convertible in multiples of $1,000 principal amount, at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date of the ~~2020 Notes.~~notes.

The Company may not redeem the ~~2020 Notes~~notes prior to ~~their maturity~~June 5, 2025. The Company may redeem for cash all or any portion of the notes, at the Company’s option, on or after June 5, 2025, if the last reported sale price of the Common Stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on and including the trading day preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus any accrued and unpaid interest to, but excluding the redemption date.

If a fundamental change (as defined in the indenture governing the 2027 Notes) occurs, holders may require the Company to purchase all or a portion of their Notes for cash at a repurchase price equal to 100% of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

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, including its 2.00% senior convertible notes due 2024 (the “2024 Notes” and together with the 2027 Notes, the "Convertible Notes"). The 2027 Notes are effectively subordinated to all of the Company’s future secured indebtedness 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 ~~March 5~~May 24 and ~~March 9, 2015,~~May 25, 2022, in connection with the offering of the ~~2020~~2027 Notes, we entered into convertible note hedge transactions (collectively, the “2027 Note Hedge Transactions”) that cover, subject to customary anti-dilution adjustments, approximately ~~3.8 million and approximately 0.6~~5.9 million shares of ~~our~~ common stock, ~~respectively,~~in the aggregate, at a strike price that initially corresponds ~~initially~~ to the initial conversion price of the ~~2020~~2027 Notes, subject to adjustment, and are exercisable upon any conversion of the ~~2020~~2027 Notes.

The aggregate cost of the ~~March 5~~2027 Note Hedge Transactions was $80.5 million.

Also on May 24 and ~~March 9, 2015 convertible note hedge~~May 25, 2022, we also entered into privately negotiated warrant transactions ~~was approximately $51.7 million~~(collectively, the “2027 Warrant Transactions” and, ~~approximately $7.7 million, respectively.~~

~~On March 5 and March 9, 2015,~~together with the 2027 Note Hedge Transactions, the “2027 Call Spread Transactions”), whereby we sold warrants to acquire, ~~approximately 3.8 million and approximately 0.6 million, respectively, of common stock,~~ subject to customary anti-dilution ~~adjustments. As~~adjustments, approximately 5.9 million shares of ~~September 30, 2017, the warrants had a~~common stock at an initial strike price of ~~approximately $88.03~~$106.37 per share, ~~as adjusted. The warrants become exercisable and expire in daily tranches over a three and a half month period starting in June 2020.~~subject to adjustment. As consideration for the ~~warrants issued on March 5 and March 9, 2015,~~2027 Warrant Transactions, we received ~~approximately $37.3 million and approximately $5.6 million, respectively.~~

aggregate proceeds of $43.7 million. The ~~Company also repurchased 0.8 million shares of our common stock at $53.61 per share, the closing price~~net cost of the ~~stock on March 5, 2015, from institutional investors through one~~2027 Call Spread Transactions was $36.8 million, which was funded out of the ~~initial purchasers and its affiliate, as our agent, concurrently with the pricing of~~net proceeds from the offering of the ~~2020~~2027 Notes.

Accounting Treatment of the ~~2020~~2027 Notes and ~~related~~Related Convertible Note Hedge and Warrant Transactions

The offering of the 2020 Notes on March 5, 2015 was for $275.0 million and included an overallotment option that allowed the initial purchasers to purchase up to an additional $41.0 million aggregate principal amount of 2020 Notes. The initial purchasers exercised their overallotment option on March 9, 2015, bringing the total amount of 2020 Notes issued on March 11, 2015 to $316.0 million.

In connection with the offering of the 2020 Notes, as discussed above, InterDigital entered into convertible note hedge transactions with respect to its common stock. The $59.4 million cost of the convertible note hedge transactions was partially offset by the proceeds from the sale of the warrants described above, resulting in a net cost of $16.5 million. Both the convertible note hedge and warrants2027 Call Spread Transactions were classified as ~~equity.~~

~~The Company bifurcated the proceeds from the offering of the 2020 Notes between liability and~~ equity components. On the date of issuance, the liability and equity components were calculated to be approximately $256.7 million and $59.3 million, respectively. The initial $256.7 million liability component was determined based on the fair value of similar debt instruments excluding the conversion feature. The initial $59.3 million ($38.6 million net of tax) equity component represents the difference between the fair value of the initial $256.7 million in debt and the ~~$316.0 million of gross proceeds.~~2027 Notes were classified as long-term debt. The ~~related~~

~~initial debt discount of $59.3 million is being amortized using the effective interest method over the life of the 2020 Notes. An~~ effective interest rate ~~of 5.89% was used to calculate the debt discount on the 2020 Notes.~~is approximately 4.02%.

In connection with the above-noted transactions, the Company incurred ~~$9.3~~approximately $10.0 million of directly related costs. The initial purchasers' transaction fees and related offering expenses were allocated to the liability and equity components in proportion to the allocation of proceeds and accounted for as debt and equity issuance costs, ~~respectively. We allocated $7.0 million of debt issuance costs to the liability component,~~ which were capitalized as deferred financing ~~costs.~~costs and as a reduction of long-term debt. These costs are being amortized toas interest expense over the term of the debt using the effective interest method.

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2024 Notes, and Related Note Hedge and Warrant Transactions

On June 3, 2019, we issued $400.0 million in aggregate principal amount of 2024 Notes. The net proceeds from the issuance of the 2024 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $391.6 million. The 2024 Notes (i) bear 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 (ii) mature on June 1, 2024, unless earlier redeemed, converted or repurchased. The effective interest rate of the 2024 Notes is 2.46%.

The 2024 Notes are convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 12.3018 shares of our common stock per $1,000 principal amount of 2024 Notes (which is equivalent to an initial conversion price of approximately $81.29 per share), as adjusted pursuant to the terms of the indenture governing the 2024 Notes. The conversion rate of the 2024 Notes, and thus the conversion price, may be adjusted in certain circumstances, including in connection with a conversion of the 2024 Notes made following certain fundamental changes and under other circumstances set forth in the indenture governing the 2024 Notes. As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock.

The 2024 Notes are senior unsecured obligations of the Company and rank equally in right of payment with any of our current and any future senior unsecured indebtedness. The 2024 Notes are effectively subordinated to all of our future secured indebtedness to the extent of the value of the related collateral, and the 2024 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of our subsidiaries.

On May 29 and May 31, 2019, in connection with the offering of the 2024 Notes, we entered into convertible note hedge transactions (collectively, the "2024 Note Hedge Transactions") that cover, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2024 Notes, subject to adjustment, and are exercisable upon any conversion of the 2024 Notes. On May 29 and May 31, 2019, 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, the Company repurchased $273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes. We specifically negotiated the repurchase of the 2024 Notes with investors who concurrently purchased the 2027 Notes, such that their purchase of the 2027 Notes funded our repurchase of the 2024 Notes. As a result of the partial repurchase of the 2024 Notes, $126.2 million in aggregate principal amount of the 2024 Notes remained outstanding as of June 30, 2022. Additionally, in connection with the partial repurchase of the 2024 Notes, the Company entered into partial unwind agreements that amend the terms of the 2024 Note Hedge Transactions to reduce the number of options corresponding to the principal amount of the repurchased 2024 Notes. The unwind agreements also reduce the number of warrants exercisable under the 2024 Warrant Transactions. As a result of the partial unwind transactions, approximately 1.6 million shares of common stock in the aggregate were covered under each of the 2024 Note Hedge Transactions and the 2024 Warrant Transactions as of June 30, 2022. As of June 30, 2022, the warrants under the 2024 Warrant Transactions had a strike price of approximately $109.43 per share, as adjusted. Proceeds received from the unwind of the 2024 Note Hedge Transactions were $11.9 million, and consideration paid for the unwind of the 2024 Warrant Transactions was $3.8 million, resulting in net proceeds received of $8.0 million for the combined unwind transactions.

Because the concurrent redemption of the 2024 Notes and a portion of issuance of the 2027 Notes were executed with the same investors, we evaluated the transaction as a debt restructuring, on a creditor by creditor basis. The accounting conclusion was based on whether the exchange was a contemporaneous exchange of cash between the same debtor and creditor in connection with the issuance of a new debt obligation and satisfaction of an existing debt obligation by the debtor and if it was determined to have substantially different terms. All creditors involved in the repurchase transaction also purchased 2027 Notes in approximately the same or greater amount as the 2024 Notes principal repurchased. Additionally, the repurchase of the 2024 Notes and issuance of the 2027 Notes were deemed to have substantially different terms on the basis that the fair value of the conversion feature increased by more than 10% of the carrying value of the 2024 Notes, and therefore, the repurchase of the 2024 Notes was accounted for as a debt extinguishment. We recognized a $11.2 million loss on extinguishment of debt during second quarter 2022 in connection with this repurchase, which is included within "Other (expense) income, net" in the condensed consolidated statement of income. The loss on extinguishment represents the difference between the fair value of consideration paid to reacquire the 2024 Notes and the carrying amount of the debt, including any unamortized debt issuance costs attributable to the 2024 Notes redeemed. The remaining ~~$2.4~~unamortized debt issuance costs of $1.2 million ~~of costs allocated~~will continue to be amortized throughout the ~~equity component were recorded as a reduction~~remaining life of the ~~equity component.~~2024 Notes.

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The following table reflects the carrying value of ~~the 2020~~our Convertible Notes long-term debt as of ~~September~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021 (in thousands):


	June 30, 2022						December 31, 2021
	2027 Notes		2024 Notes		Total		2024 Notes
Principal	$	460,000	$	126,174	$	586,174	$	400,000
Less:
Deferred financing costs	(9,817)		(1,109)		(10,926)		(4,368)
Net carrying amount of the Convertible Notes	$	450,183	$	125,065	$	575,248	$	395,632

September 30, 2017 December 31, 2016
Principal $ 316,000
$ 316,000
Less:
Unamortized interest discount (30,868 ) (39,578 )
Deferred financing costs (3,358 ) (4,401 )
Net carrying amount of 2020 Notes $ 281,774
$ 272,021

The following table presents the amount of interest cost recognized, which is included within ~~Other Expense~~"Interest Expense" in our condensed consolidated statements of income, for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~September 30, 2016~~2021 relating to the contractual interest coupon ~~accretion of the debt discount,~~ and the amortization of deferred financing costs of the Convertible Notes (in thousands):


	Three months ended June 30,
	2022						2021
	2027 Notes		2024 Notes		Total		2024 Notes
Contractual coupon interest	$	1,476	$	1,498	$	2,974	$	2,000
Amortization of deferred financing costs	142		318		460		402
Total	$	1,618	$	1,816	$	3,434	$	2,402


	Six months ended June 30,
	2022						2021
	2027 Notes		2024 Notes		Total		2024 Notes
Contractual coupon interest	$	1,476	$	3,498	$	4,974	$	4,000
Amortization of deferred financing costs	142		742		884		800
Total	$	1,618	$	4,240	$	5,858	$	4,800

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 and is referred to as the "Madison Arrangement." An affiliate of CPPIB Credit Investments Inc. ("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement. CPPIB Credit has made certain payments to Technicolor and Sony and has agreed to contribute cash to fund certain capital reserve obligations under the arrangement in exchange for a percentage of future revenues, 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, 2022 and December 31, 2021 is disclosed within Note 6, "Cash, Concentration of Credit Risk and Fair Value of Financial Instruments." Our repayment obligations are contingent upon future royalty revenues generated from the Madison Arrangement and there are no minimum or maximum payments under the arrangement.

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For the Three Months Ended September 30,
2017 2016
Contractual coupon interest $ 1,185
$ 1,185
Accretion of debt discount 2,947
2,772
Amortization of deferred financing costs 348
347
Total $ 4,480
$ 4,304
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, 2022, we recognized $1.0 million and $1.9 million, respectively, of interest expense related to this debt, compared to $0.8 million and $1.6 million during the three and six months ended June 30, 2021, 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.

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

For the Nine Months Ended September 30,
2017 2016
Contractual coupon interest $ 3,555
$ 4,992
Accretion of debt discount 8,710
10,710
Amortization of deferred financing costs 1,043
1,368
Total $ 13,308
$ 17,070

8. VARIABLE INTEREST ENTITIES

As further discussed below, we are the primary beneficiary of ~~two~~3 variable interest entities. As of ~~September~~June 30, ~~2017,~~2022, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were ~~$22.4~~$19.7 million and ~~$5.7~~$0.5 million, respectively. Assets included ~~$12.0~~$6.5 million of cash and cash equivalents, $4.0 million of accounts receivable and ~~$10.4~~prepaid and other current assets, and $9.1 million of patents, net. As of December 31, ~~2016,~~2021, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were ~~$28.9~~$27.1 million and ~~$2.3~~$2.5 million, respectively. Assets included ~~$20.3~~$5.1 million of cash and cash equivalents, $4.0 million of accounts receivable and ~~$8.0~~prepaid and other current assets, and $18.0 million of patents, net. ~~The impact of consolidating these variable interest entities on our condensed consolidated statements of income was not significant.~~

Convida Wireless

~~In September 2015, we renewed and expanded our joint venture with Sony, Convida Wireless, to include 5G technologies.~~ Convida Wireless was launched in 2013 and most recently renewed in 2021 to combine Sony's consumer electronics expertise with our pioneering ~~Internet of Things (“IoT”)~~IoT expertise to drive IoT communications and connectivity. Based on the terms of the agreement, the parties will contribute funding and resources for additional research and platform development, which we will perform. ~~SCP IP Investment LLC, an affiliate of Stephens Inc., is a minority investor in Convida Wireless.~~

Convida Wireless is a variable interest entity. Based on our provision of research and platform development services to Convida Wireless, we have determined that we remain the primary beneficiary for accounting purposes and will continue to consolidate Convida Wireless. For the three and six months ended ~~September~~June 30, ~~2017 and 2016,~~2022, we ~~have~~ allocated approximately ~~$0.8~~$0.5 million and ~~$0.9~~$0.8 million, respectively, of Convida Wireless's net loss to noncontrolling interests held by other ~~parties. For~~parties and for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2021, we allocated $6.2 million and ~~2016,~~$7.7 million, respectively.

Chordant

On January 31, 2019, we launched the Company’s Chordant™ business as a standalone company. Chordant is a variable interest entity, and we have determined that we are the primary beneficiary for accounting purposes and consolidate Chordant. For each of the three and six months ended June 30, 2022, we allocated ~~approximately $2.7~~$0.0 million ~~and $2.8 million, respectively,~~ of ~~Convida Wireless's~~Chordant's net loss to noncontrolling interests held by other ~~parties.~~parties, and for the three and six months ended June 30, 2021, we allocated $2.2 million and $2.3 million, respectively. Chordant ceased operations during 2021.

Signal Trust for Wireless Innovation

During 2013, we announced the establishment of the Signal Trust for Wireless Innovation (the ~~“Signal Trust”~~“Trust”), the goal of which iswas to monetize a ~~large InterDigital~~ patent portfolio primarily related to ~~cellular infrastructure.~~

~~The more than 500 patents and patent applications transferred from InterDigital to the Signal Trust focus primarily on~~ 3G and LTE ~~technologies,~~cellular infrastructure. During fourth quarter 2021, the Trust was fully dissolved and all remaining assets were ~~developed by InterDigital's engineers and researchers over more than a decade, with a number of the innovations contributed~~transferred to ~~the worldwide standards process.~~us as majority beneficiary.

~~InterDigital is the primary beneficiary of the Signal Trust.~~ The ~~distributions from the Signal~~ Trust ~~will support continued research related to cellular wireless technologies. A small portion of the proceeds from the Signal Trust will be used to fund, through the Signal Foundation~~was accounted for ~~Wireless Innovation, scholarly analysis of intellectual property rights and the technological, commercial and creative innovations they facilitate.~~

~~The Signal Trust is~~as a variable interest entity. Based on the terms of the ~~Trust Agreement,~~trust agreement, we ~~have~~ determined that we ~~are~~were the primary beneficiary for accounting purposes and ~~must~~included the Trust in our consolidated financial statements up to the date of dissolution.

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9. OTHER (EXPENSE) INCOME, NET

The amounts included in "Other (expense) income, net" in the condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Interest and investment income	$	297	$	446	$	506	$	999

Loss on extinguishment of long-term debt	(11,190)		—		(11,190)		—
Other	(4,123)		2,593		(5,337)		2,764
Other (expense) income, net	$	(15,016)	$	3,039	$	(16,021)	$	3,763

The change in Other (expense) income, net for the three and six months ended June 30, 2022 and 2021 was $18.1 million and $19.8 million, respectively. The changes between both the three months ended June 30, 2022 and 2021 and the six months ended June 30, 2022 and 2021 were primarily due to the $11.2 million loss on extinguishment of the 2024 Notes, as described further in Note 7, "Obligations", and due to a foreign currency translation loss in the three and six months ended June 30, 2022 arising from euro translation of our foreign subsidiaries.

Additionally, Other included gains resulting from observable price changes of our long-term strategic investments, which were $1.6 million recognized in second quarter 2022 and $1.0 million recognized in second quarter 2021, and a $1.9 million gain on a contract termination recognized in first quarter 2021.

10. OTHER ASSETS

The amounts included in "Prepaid and other current assets" in the consolidated balance sheet as of June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30, 2022		December 31, 2021
Tax receivables	$	63,183	$	57,127
Restricted cash	10,578		5,861
Prepaid assets	6,085		5,479
Patents held for sale	4,000		4,000


Other current assets	2,547		5,078
Total Prepaid and other current assets	$	86,393	$	77,545

The amounts included in "Other non-current assets, net" in the consolidated balance sheet as of June 30, 2022 and December 31, 2021 were as follows (in thousands):


	June 30, 2022		December 31, 2021
Tax receivables	$	24,654	$	30,026
Long-term investments	22,684		21,280
Goodwill	22,421		22,421
Right-of-use assets	14,692		17,851
Other non-current assets	11,246		10,923
Total Other non-current assets, net	$	95,697	$	102,501

11. RESTRUCTURING ACTIVITIES

During second quarter 2021, the Company began the process of a strategic review and undertook certain actions in order to increase focus on core technologies and markets.

On June 10, 2021, the Company announced that, as a result of a strategic review of its research and innovation priorities, it commenced the process of a collective economic layoff in which it proposed a reduction in force of its research and innovation unit. All notices of termination have been issued to the impacted employees.

Table of Content s

During 2021, Chordant ceased operations. The Company implemented a reduction in workforce action in second quarter 2021.

Additionally, in June 2021, a non-controlled subsidiary that we consolidate for financial statement purposes approved a plan to sell certain patents. The proceeds from the ~~Signal Trust.~~sale of these patents will contribute to funding the non-controlled subsidiary's operations. These assets were evaluated as a separate asset group and reclassified as assets held for sale. We determined the fair value based upon evaluation of market conditions. The patents held for sale are included within "Prepaid and other current assets" in the consolidated balance sheet.

In October 2021, we expanded our restructuring efforts to include general and administrative functions largely centered in the U.S., which resulted in a further reduction in force as well as cuts to our non-labor expenses. These employees were provided notification of termination during fourth quarter 2021.

As part of the Company’s ongoing evaluation of its flexible work policy and the impact of returning to the office, the Company has evaluated its current office space footprint and its expected needs going forward. As the result of this evaluation, during the second quarter 2022, we recognized a $2.4 million impairment, comprised of $0.4 million of property and equipment and $2.0 million of right of use assets, related to the abandonment of portions of three of our leased properties, which was included within “Restructuring activities” in the condensed consolidated statement of income.

Restructuring charges are estimated based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts incurred for such activities may differ from amounts initially estimated. The Company may also incur additional costs not currently contemplated due to events that may occur as a result of, or that are associated with, the reduction in force or other restructuring activities.

As of June 30, 2022, the Company's restructuring liability was $8.8 million, of which $0.6 million was included in "Accounts payable", $0.9 million was included in "Accrued compensation and related expenses", and $7.3 million was included in "Other accrued expenses" on our condensed consolidated balance sheet. As of December 31, 2021, the Company's restructuring liability was $18.3 million, of which $12.5 million was included in "Other accrued expenses" and $5.8 million was included in "Other long-term liabilities" on our condensed consolidated balance sheet. The following table presents the change in our restructuring liability during the period (in thousands):



Balance as of December 31, 2021	$	18,281
Accrual	542
Cash payments	(4,519)
Other	42
Balance as of March 31, 2022	$	14,346
Accrual	310
Cash payments	(5,199)
Other	(639)
Balance as of June 30, 2022	$	8,818

The restructuring expenses included in "Restructuring activities" in the condensed consolidated statements of income for the three and six months ended June 30, 2022 and 2021 were as follows (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Asset impairment	$	2,427	$	11,000	$	2,427	$	11,000
Severance and other benefits	(221)		11,086		305		11,086
Outside services and other associated costs	532		1,199		548		1,199
Reimbursement arrangements	—		(10,040)		—		(10,040)
Total	$	2,738	$	13,245	$	3,280	$	13,245

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

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 ~~2016~~2021 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 ~~“past sales.~~“non-recurring revenues.” Recurring revenues are comprised of “current patent royalties” and “current technology solutions revenue.” ~~Past sales~~Non-recurring revenues are comprised of ~~“past~~“non-current patent ~~royalties”~~royalties,” which include past patent royalties and ~~“past technology solutions revenue.~~royalties from static agreements, as well as “patent sales.”

~~Huawei Patent Transfer~~2027 Senior Convertible Notes

~~During third quarter 2016,~~On May 27, 2022, we issued the $460.0 million aggregate principal 2027 Notes. The net proceeds from the offering were approximately $450.0 million after deducting the initial purchasers' fees and estimated offering expenses. Additionally, on May 24 and May 25, 2022, in connection with the offering of the 2027 Notes, we entered into ~~a multi-year, worldwide, non-exclusive, royalty-bearing patent license agreement with Huawei Investment & Holding Co., Ltd. ("Huawei") (the "Huawei PLA"). A portion~~the 2027 Call Spread Transactions.

The net proceeds from the issuance of the ~~consideration~~2027 Notes, after deducting fees and offering expenses, were used for the ~~agreement~~following: (i) $282.5 million was used to repurchase $273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes (ii) $74.4 million was used to repurchase shares of common stock at $60.78 per share, the closing price of the stock on May 24, 2022; and (iii) $36.8 million, in addition to the proceeds from the 2027 Warrant Transactions, was used to fund the cost of the 2027 Call Spread Transactions.

The 2027 Notes will be convertible into cash up to the aggregate principal amount of the 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 notes being converted, pay or deliver, as the case may be, cash, shares of the Company’s common stock (“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 Notes (which is equivalent to an initial conversion price of approximately $77.49 per share).

Refer to Note 7, “Obligations” in the ~~form~~Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of ~~patents from Huawei. We received the first portion~~this Quarterly Report on Form 10-Q for further discussion of the ~~patents as of September 30, 2016,~~2027 Notes and ~~the remaining patents during third quarter 2017. At the completion of the transfer process during third quarter 2017, we recognized $9.1 million of additional revenue~~ related ~~to this transfer, including additional past sales.~~2027 Call Spread Transactions.

Share Repurchase Program

On ~~September 4, 2017, we announced~~May 6, 2022, the Board of Directors authorized a ~~$100~~$100.0 million increase to ~~our~~the Company’s existing ~~$400 million~~ share repurchase program (the "2014 Repurchase Program"), bringing the total ~~program~~authorized amount of the 2014 Repurchase Program to ~~$500~~$800.0 million. ~~We did not repurchase any~~In connection with the issuance of the 2027 Notes, in May 2022 we repurchased 1.2 million shares of our common stock for $74.4 million under the ~~program during third quarter 2017.~~ share repurchase program.

Cash & Short-term Investments

As of ~~September~~June 30, ~~2017, there~~2022, we had $912.3 million of cash, cash equivalents, restricted cash and short-term investments and an additional $242.8 million of cash payments due under contracted fixed price agreements, including $26.0 million recorded in our $48.8 million accounts receivable balance. The remaining accounts receivable is primarily related to variable patent royalty revenue.

Over 90% of our revenue comes from fixed price 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. As a result, our cash receipts due in 2022 from existing agreements are expected to be lower than revenue to be recognized in 2022 from such agreements as noted in the deferred revenue amortization table below.

Table of Content s

The following table reconciles the timing differences between cash receipts and recognized revenue during the three and six months ended June 30, 2022 and 2021, including the resulting operating cash flow (in thousands):


	Three months ended June 30,				Six months ended June 30,
Cash vs. Non-cash revenue:	2022		2021		2022		2021
Fixed fee cash receipts (a)	$	3,339	$	3,050	$	47,142	$	50,362
Other cash receipts (b)	16,620		17,808		25,212		28,484
Change in deferred revenue	76,959		63,230		127,700		86,659
Change in receivables	25,163		(499)		17,688		(4,006)
Other	2,576		4,146		8,233		8,599
Total Revenue	$	124,657	$	87,735	$	225,975	$	170,098
Net cash used in operating activities	$	(33,768)	$	(27,259)	$	(51,740)	$	(37,101)

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

(b) Other cash receipts are comprised of cash receipts related to our variable patent royalty revenue, including the associated past patent royalties, current technology solutions revenue, royalties from static agreements, and patent sales.

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 June 30, 2022 (in thousands):


	Deferred Revenue
Remainder of 2022	$	137,683
2023	60,979
2024	7,738
2025	1,956
2026 and thereafter	5,180
Total Revenue	$	213,536

Revenue

Second quarter 2022 recurring revenue was ~~approximately $186~~$100.1 million, ~~remaining under the stock repurchase authorization.~~

~~Recurring Revenue~~

~~Recurring~~compared to recurring revenue of ~~$88.5 million in third quarter 2017 was relatively flat as compared to $87.9~~$78.1 million in second quarter ~~2017.~~

2021, a 28% year-over-year increase, primarily driven by two new patent license agreements. In second quarter 2022, revenues (in descending order) from Apple, Samsung, Amazon, and Xiaomi each comprised 10% or more of our consolidated revenues. Refer to ~~"Results~~"Results of Operations ~~-- First Nine Months 2017~~--Second Quarter 2022 Compared to ~~First Nine Months 2016" and "Results of Operations -- Third~~Second Quarter ~~2017 Compared to Third Quarter 2016"~~2021" for further discussion of our ~~2017~~2022 revenue.

Restructuring Activities

On June 10, 2021, we announced that, as a result of a strategic review of our research and innovation priorities, we commenced the process of a collective economic layoff in which we proposed a reduction in force of our research and innovation unit. Additionally, in October 2021, we expanded our restructuring efforts to include general and administrative functions largely centered in the U.S. All impacted employees have been provided notification of termination.

The Company does not anticipate further significant restructuring charges, however these charges are estimated based on information available at the time such charges are recorded. Due to the inherent uncertainty involved in estimating restructuring expenses, actual amounts incurred for such activities may differ from amounts initially estimated.

Table of Content s

Impact of COVID-19 Pandemic

The COVID-19 pandemic continues to significantly impact the United States and the rest of the world. Though the COVID-19 pandemic and the measures taken to reduce its transmission, such as the imposition of social distancing and orders to work-from-home and shelter-in-place, have altered our business environment and overall working conditions, we continue to believe that our strategic strengths, including talent, our strong balance sheet, stable revenue base, and the strength of our patent portfolio, will allow us to weather a rapidly changing marketplace.

While the environment in which we conduct our business and our overall working conditions have changed as a result of the COVID-19 pandemic, we experienced a limited impact on our operations and financial position during second quarter 2022. Fixed-fee royalties accounted for 89% of our recurring revenues in fiscal year 2021. These fixed-fee revenues are not directly affected by our related licensees’ success in the market or the general economic climate. To that end, in second quarter 2022, we did not experience a significant impact on our contracted revenue due to COVID-19. Meanwhile, we have taken steps to protect the health and safety of our employees and their families, with the majority of our workforce continuing to work remotely or on a hybrid basis. We returned to in-person work as of April 2022 and all of our locations are open. Despite any remote working conditions, our business activities have continued to operate with minimal interruption, and we expect them to continue to operate efficiently. Although we have resumed work-related travel, a portion of our licensing negotiations, investor presentations and participation in standards organizations and industry events have been virtually. Between March 12, 2020, when we began to work almost entirely remotely, and June 30, 2022, we successfully concluded twenty-one new patent license agreements that we estimate will result in revenues exceeding $620.0 million over their respective lives. Our financial position remains strong, we believe we have sufficient access to capital if needed, and we remain committed to our efforts around cost discipline.

Impact of Inflation and Market Factors

We have been actively monitoring the impact of the current macroeconomic environment in the U.S. and globally characterized by increasing inflation, supply chain issues, rising interest rates, labor shortages, and the potential for a recession. These market factors, as well as the impacts of the Russia and Ukraine conflict, have not had a material impact on our business to date. However, if these conditions continue or worsen, they could have an adverse effect on our operating results and our financial condition.

Comparability of Financial Results

When comparing ~~third~~second quarter ~~2017~~2022 financial results against other periods, the following items should be taken into consideration:

~~$8.8~~•Our second quarter 2022 revenue includes $24.6 million of ~~past sales primarily attributable~~non-recurring revenue related to two new agreements signed in second quarter 2022.

•In second quarter 2022, we repurchased approximately $273.8 million in aggregate principal amount of our 2024 Notes, which resulted in the ~~transfer~~recognition of ~~patents pursuant~~a $11.2 million loss on the extinguishment of debt, which was included within “Other (expense) income, net” in the condensed consolidated statement of income. For more information on this transaction, refer to Note 7, "Obligations", within the ~~Huawei PLA; and~~notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~a $9.1~~•In second quarter 2022, we recognized $2.7 million ~~discrete net benefit within our tax provision~~of restructuring expenses, primarily related to aligning our facilities with our current needs. These costs resulted from our restructuring activities as described in Note 11, "Restructuring Activities", within the ~~reversal~~notes to condensed consolidated financial statements included in Part I, Item 1 of ~~uncertain tax positions associated with domestic production~~this Quarterly Report on Form 10-Q, and are included within “Restructuring activities ~~refund claims.~~” in the condensed consolidated statement of income.

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

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our significant accounting policies are described in Note 12, "Summary of Significant Accounting Policies and New Accounting Guidance", in the ~~Notes~~notes to ~~Consolidated Financial Statements~~consolidated financial statements included in our ~~2016~~2021 Form ~~10-K~~.10-K. A discussion of our critical accounting policies, and the estimates related to them, are included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our ~~2016~~2021 Form 10-K. There have been no material changes to our existing critical accounting policies from the disclosures included in our ~~2016~~2021 Form 10-K. In addition, we have analyzed the impact of COVID-19 on our financial statements as of June 30, 2022, and we have determined that the changes to our significant judgments and estimates did not have a material impact on our financial statements. Refer to Note 1, “Basis of Presentation,” in the ~~Notes~~notes to ~~Condensed Consolidated Financial Statements~~condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for updates related to new accounting ~~pronouncements. See below for critical~~pronouncements and changes in accounting ~~estimates from the current year period.~~policies.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash, cash equivalents and short-term investments, as well as cash generated from operations. We believe we have the ability to obtain additional liquidity through debt and equity financings. 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~~short-term investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program, ~~and~~ dividend program, ~~for~~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

At ~~September~~As of June 30, ~~2017~~,2022 and December 31, ~~2016~~,2021, we had the following amounts of cash and cash equivalents, restricted cash and short-term investments (in thousands):


	September 30, 2017		December 31, 2016		Increase / (Decrease)				June 30, 2022		December 31, 2021		Increase / (Decrease)
Cash and cash equivalents	$	283,557	$	404,074	$	(120,517	)	Cash and cash equivalents	$	833,533	$	706,282	$	127,251
Restricted cash included within prepaid and other current assets								Restricted cash included within prepaid and other current assets	10,578		5,861		4,717
Restricted cash included within other non-current assets								Restricted cash included within other non-current assets	1,081		1,081		—
Short-term investments	683,655		548,687		134,968			Short-term investments	67,076		235,345		(168,269)
Total cash and cash equivalents and short-term investments	$	967,212	$	952,761	$	14,451
Total cash, cash equivalents, restricted cash and short-term investments								Total cash, cash equivalents, restricted cash and short-term investments	$	912,268	$	948,569	$	(36,301)

The net ~~increase~~decrease in cash, cash equivalents, restricted cash and short-term investments was primarily attributable to ~~$98.3~~cash used in operating activities of $51.7 million and cash used in investing activities of $22.1 million, excluding sales and purchases of short-term investments, partially offset by cash provided by ~~operating~~financing activities ~~partially offset by dividend payments~~ of ~~$31.1~~$41.0 million, ~~capitalized patent costs~~primarily consisting of ~~$26.3 million and $22.2 million~~net proceeds from the debt refinancing. Refer to the sections below for further discussion of ~~cash payments for payroll taxes upon the vesting of restricted stock units.~~these items.

Cash flows ~~from operations~~used in operating activities

~~We generated the following cash~~Cash flows ~~from our~~used in operating activities in the first ~~nine months 2017~~half 2022 and ~~2016~~2021 (in thousands): were as follows:


	Six months ended June 30,
	2022		2021		Change
Net cash used in operating activities	$	(51,740)	$	(37,101)	$	(14,639)

For the Nine Months Ended September 30,
2017
2016
Increase /
(Decrease)
Net cash provided by operating activities $ 98,341
$ 200,864
$ (102,523 )

Table of Content s

Our cash flows ~~provided by~~used in operating activities are principally derived from cash receipts from patent license and technology solutions agreements, offset by cash operating expenses and income tax payments. The ~~decrease~~$14.6 million change in net cash ~~flows provided by~~used in operating activities ~~of $102.5 million was primarily attributable to a decrease in cash receipts of $150.5 million. The decrease in cash receipts~~ was primarily driven by ~~collections~~non-cash revenue, partially offset by lower cash operating expenses benefiting from the cost-savings actions taken in first nine months 2016 of a portion of the fixed-fee royalty payments under the Huawei patent license agreement. Taxes paid decreased by $29.5 million primarily due to lower foreign withholding tax payments driven by both the timing and source of cash receipts.2021. The table below sets forth the significant items comprising our cash flows provided by operating activities during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2022 and ~~2016~~2021 (in thousands).:


	Six months ended June 30,
	2022		2021		Change
Cash Receipts:
Patent royalties	$	72,066	$	75,435	$	(3,369)
Technology solutions	288		3,412		(3,124)
Total cash receipts	72,354		78,847		(6,493)

Cash Outflows:
Cash operating expenses a	93,664		105,729		(12,065)
Income taxes paid b	4,363		4,793		(430)
Total cash outflows	98,027		110,522		(12,495)

Other working capital adjustments	(26,067)		(5,426)		(20,641)

Cash flows used in operating activities	$	(51,740)	$	(37,101)	$	(14,639)

For the Nine Months Ended September 30,
2017 2016 Increase / (Decrease)
Cash Receipts:
Current royalties ^a
$ 83,785
$ 162,415
$ (78,630 )
Fixed-fee royalty payments 146,000
226,237
(80,237 )
Prepaid royalties —
3,356
(3,356 )
Technology solutions 14,325
2,617
11,708
Total cash receipts $ 244,110
$ 394,625
$ (150,515 )

Cash Outflows:
Cash operating expenses ^b
115,133
109,378
5,755
Income taxes paid ^c
29,173
58,626
(29,453 )
Total cash outflows 144,306
168,004
(23,698 )

Other working capital adjustments (1,463 ) (25,757 ) 24,294

Cash flows provided by operating activities $ 98,341
$ 200,864
$ (102,523 )

(a) ~~Current royalties included $46.8 million and $5.8 million of past sales recognized for the nine months ended September 30, 2017, and 2016, respectively.~~

~~(b)~~ Cash operating expenses include operating expenses less depreciation of fixed assets, amortization of patents, non-cash compensation and non-cash ~~compensation.~~changes in fair value.

~~(c)~~(b) Income taxes paid include foreign withholding taxes.

~~Working capital~~

We believe that working capital adjusted to exclude cash, cash equivalents and short-term investments and to include current deferred revenue provides additional information about non-cash assets and liabilities that might affect our near-term liquidity. While we believe cash and short-term investments are important measures of our liquidity, the remaining components of our current assets and current liabilities, with the exception of deferred revenue, could affect our near-term liquidity and/or cash flow. We have no material obligations associated with our deferred revenue, and the amortization of deferred revenue has no impact on our future liquidity and/or cash flow. Our adjusted working capital, a non-GAAP financial measure, reconciles to working capital, the most directly comparable GAAP financial measure, at ~~September 30, 2017, and~~ ~~December 31, 2016~~ ~~(in thousands), as follows:~~

September 30,
2017 December 31, 2016 Increase / (Decrease)
Current assets $ 1,420,304
$ 1,221,119
$ 199,185
Less: current liabilities
440,439
425,480
14,959
Working capital 979,865
795,639
184,226
Subtract:
Cash and cash equivalents 283,557
404,074
(120,517 )
Short-term investments 683,655
548,687
134,968
Add:
Current deferred revenue 351,012
360,192
(9,180 )
Adjusted working capital $ 363,665
$ 203,070
$ 160,595

The $160.6 million net increase in adjusted working capital is primarily attributable to a net increase in accounts receivable of $171.7 million due to the timing of payments related to existing agreements. This and other increases were partially offset by an increase in accrued foreign withholding tax related to the increase in accounts receivable discussed above.

Cash flows from investing and financing activities

Net cash ~~used in~~provided by investing activities for the first ~~nine months 2017~~half 2022 was ~~$165.6~~$142.7 million, a ~~$39.7~~$138.2 million ~~decrease~~change from ~~$205.3~~$4.5 million in the first ~~nine months 2016. We purchased $135.1~~half 2021. During the first half 2022, we sold $164.8 million ~~and $170.8 million net of sales~~ of short-term marketable securities, ~~in first nine months 2017~~net of purchases, and ~~2016, respectively. Investment costs associated with~~we capitalized $22.1 million of patent costs and ~~acquisition~~property plant and equipment purchases. During the first half 2021, we sold $26.7 million of ~~patents decreased to $26.3~~short-term marketable securities, net of purchases, we capitalized $21.2 million of patent costs and property plant and equipment purchases, and invested $1.1 million in ~~first nine months 2017 from $29.1 million in first nine months 2016, primarily due to~~ a ~~$4.8 million patent acquisition in first nine months 2016.~~ new strategic investment.

Net cash provided by financing activities for the first half 2022 was $41.0 million, a change of $74.1 million from $33.1 million net cash used in financing activities for the first ~~nine months 2017 was $53.3 million, a $265.3 million decrease from $318.6 million in first nine months 2016.~~half 2021. This ~~decrease~~change was primarily attributable to net proceeds of $140.0 million from the repayment of the $230.0 million aggregate principal amount of the Company's 2.50% Senior Convertible Notes due 2016 (the "2016 Notes") in first quarter 2016 and a $64.7 million decrease in repurchases of common stock in first nine months 2017. These decreases weredebt refinancing, partially offset by ~~an $18.9~~a $63.3 million increase in payroll taxes upon the vesting of restricted stock units and a $10.3 million increase in dividends paid in first nine months 2017. The increase in payroll taxes was driven by both an increased number of restricted stock units vested and a higher share price on vest date in first nine months 2017 as compared to restricted stock unit vestings in first nine months 2016. The increase in dividend payments was attributable to the September 2016 increase in the Company’s regular quarterly cash dividend, from $0.20 per share to $0.30 per share. The September 2017 increase from $0.30 per share to $0.35 per share will be paid beginning with the fourth quarter 2017 dividend payment.repurchases.

Other

Our combined short-term and long-term deferred revenue balance ~~at September~~as of June 30, ~~2017,~~2022 was approximately ~~$724.1~~$213.5 million, ~~an increase~~a net decrease of ~~$102.9~~$97.6 million from December 31, ~~2016. We have no material obligations associated with such deferred revenue. The increase was primarily due to a gross increase~~2021. This decrease in deferred revenue ~~of $330.4 million~~was primarily ~~associated with fixed-fee agreement payments due within twelve months, which were partially offset by $240.3 million~~attributable amortization of deferred revenue ~~recognized. The deferred revenue~~ recognized ~~was comprised of $220.1 million of amortized fixed-fee royalty payments~~in the period, offset by cash receipts and ~~$20.2 million of past~~non-cash patent ~~royalties and per-unit exhaustion of prepaid royalties.~~

acquisitions from previously disclosed patent license agreements.

Based on current license agreements, ~~and under current GAAP,~~ we expect the amortization of dynamic fixed-fee royalty payments ~~and the scheduled expiration of an agreement~~ to reduce the ~~September~~June 30, ~~2017,~~2022 deferred revenue balance of ~~$724.1~~$213.5 million by ~~$351.0~~$168.5 million over the next twelve months. ~~Additional reductions to deferred revenue will be dependent upon the level~~

Table of ~~per-unit royalties our licensees report against prepaid balances.~~Content s

Convertible Notes

See Note 7, “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.

Our ~~1.50% Senior Convertible~~2027 and 2024 Notes, ~~due 2020 (for~~which for purposes of this discussion are also referred to as the "Convertible Notes"), are included in the dilutive earnings per share calculation using the ~~treasury stock~~if-converted method. Under the ~~treasury~~if-converted method, we must assume that conversion of convertible securities occurs at the beginning of the reporting period. The Convertible Notes are convertible into cash up to the aggregate principal amount of the Convertible Notes to be converted and any remaining obligation may be in cash, shares of the Company’s common stock ~~method,~~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. We must calculate the number of shares of our common stock issuable under the terms of the Convertible Notes based on the average market price of our common stock during the applicable reporting period and include that number in the total diluted shares figure for the period.

At the time we issued the Convertible Notes, we entered into ~~convertible note hedge~~the 2027 Call Spread Transactions and ~~warrant agreements~~2024 Call Spread Transactions that together were designed to have the economic effect of reducing the net number of shares that will be issued in the event of conversion of the Convertible Notes by, in effect, increasing the conversion price of the Convertible Notes from our economic standpoint. However, under GAAP, since the impact of the ~~convertible note hedge agreements~~2027 Note Hedge Transactions and 2024 Note Hedge Transactions (together, the "Note Hedge Transactions") is anti-dilutive, we exclude from the calculation of fully diluted shares the number of shares of our common stock that we would receive from the counterparties to these agreements upon settlement.

During periods in which the average market price of ~~the Company's~~our common stock is above the applicable conversion price of the Convertible Notes ($~~72.12~~77.49 per share for the 2027 Notes and $81.29 per share for the 2024 Notes as of ~~September~~June 30, ~~2017)~~2022) or above the strike price of the warrants ($~~88.03~~106.37 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of ~~September~~June 30, ~~2017)~~2022), the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted earnings per share. As a result, in periods where the average market price of ~~the Company's~~our common stock is above the conversion price or strike price, as applicable, under the ~~treasury stock~~if-converted method, ~~the Company calculates~~we calculate 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~~include that number in the total diluted shares outstanding for the period.

Under the ~~treasury stock~~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 7, "~~Long-Term Debt,~~Obligations," ~~it is our current intent and policy to settle all conversions of~~ the Convertible Notes ~~through a combination settlement of~~are convertible into cash ~~and shares of common stock, with a specified dollar amount of $1,000 per $1,000~~up to the aggregate principal amount of the Convertible Notes to be converted and any remaining ~~amounts~~obligation may be in cash, shares of the Company’s common stock or a combination thereof. ("net share settlement"). Assuming net share settlement upon conversion, the following ~~table illustrates~~tables illustrate how, based on the ~~$316.0~~$460.0 million aggregate principal amount of ~~Convertible~~the 2027 Notes and the $126.2 million aggregate principal amount of the 2024 Notes outstanding as of ~~September~~June 30, ~~2017~~2022, and the approximately ~~4.4~~5.9 million warrants related to the 2027 Notes and the 1.6 million warrants remaining related to the 2024 Notes, outstanding as of the same date, changes in our stock price would affect (i) the number of shares issuable upon conversion of the Convertible Notes, (ii) the number of shares issuable upon exercise of the warrants subject to the ~~warrant agreements,~~2027 Warrant Transactions and 2024 Warrant Transactions (together, the "Warrant Transactions"), (iii) the number of additional shares deemed outstanding with respect to the Convertible Notes, after applying the ~~treasury stock~~if-converted method, for purposes of calculating diluted earnings per share ("Total ~~Treasury Stock~~If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the ~~hedge agreements~~Note Hedge Transactions and (v) the number of shares issuable upon concurrent conversion of the Convertible Notes, exercise of the warrants subject to the Warrant Transactions, and settlement of the ~~convertible note hedge agreements:~~Note Hedge Transactions:

Table of Content s


2027 Notes						2027 Notes
Market Price Per Share	Shares Issuable Upon Conversion of Convertible Notes	Shares Issuable Upon Exercise of Warrants	Total Treasury Stock Method Incremental Shares	Shares Deliverable to InterDigital upon Settlement of the Hedge Agreements	Incremental Shares Issuable ^(a)	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 in thousands)						(Shares in thousands)
$70	—
$80	432	—	432	(432)	—	$80	186	—	186	(186)	—
$85	664	—	664	(664)	—	$85	524	—	524	(524)	—
$90	871	96	967	(871)	96	$90	825	—	825	(825)	—
$95	1,055	322	1,377	(1,055)	322	$95	1,094	—	1,094	(1,094)	—
$100	1,222	525	1,747	(1,222)	525	$100	1,336	—	1,336	(1,336)	—
$105	1,372	709	2,081	(1,372)	709	$105	1,555	—	1,555	(1,555)	—
$110	1,509	876	2,385	(1,509)	876	$110	1,754	196	1,950	(1,754)	196
$115	1,634	1,029	2,663	(1,634)	1,029	$115	1,936	445	2,381	(1,936)	445
$120	1,748	1,169	2,917	(1,748)	1,169	$120	2,103	674	2,777	(2,103)	674
$125						$125	2,256	885	3,141	(2,256)	885


2024 Notes
Market Price Per Share	Shares Issuable Upon Conversion of the 2024 Notes	Shares Issuable Upon Exercise of the 2024 Warrant Transactions	Total If-Converted Method Incremental Shares	Shares Deliverable to InterDigital upon Settlement of the 2024 Note Hedge Transactions	Incremental Shares Issuable (a)
	(Shares in thousands)
$85	68	—	68	(68)	—
$90	150	—	150	(150)	—
$95	224	—	224	(224)	—
$100	290	—	290	(290)	—
$105	351	—	351	(351)	—
$110	405	8	413	(405)	8
$115	455	75	530	(455)	75
$120	501	137	638	(501)	137
$125	543	193	736	(543)	193
$130	582	246	828	(582)	246

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

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RESULTS OF OPERATIONS

~~Third~~Second Quarter ~~2017~~2022 Compared to ~~Third~~Second Quarter ~~2016~~2021

Revenues

The following table compares ~~third~~second quarter ~~2017~~2022 revenues to ~~third~~second quarter ~~2016~~2021 revenues (in thousands):


	Three months ended June 30,
	2022		2021		Total Increase/(Decrease)
Variable patent royalty revenue	$	7,673	$	7,323	$	350	5	%
Fixed-fee royalty revenue	91,756		69,296		22,460		32	%
Current patent royalties a	99,429		76,619		22,810		30	%
Non-current patent royalties b	24,556		9,586		14,970		156	%
Total patent royalties	123,985		86,205		37,780		44	%
Current technology solutions revenue a	672		1,530		(858)		(56)	%

Total revenue	$	124,657	$	87,735	$	36,922	42	%

For the Three Months Ended September 30,
2017 2016 Increase/(Decrease)
Per-unit royalty revenue $ 10,081
$ 35,804
$ (25,723 ) (72 )%
Fixed-fee amortized royalty revenue 73,653
45,740
27,913
61 %
Current patent royalties ^a
83,734
81,544
2,190
3 %
Past patent royalties ^b
8,832
123,973
(115,141 ) (93 )%
Total patent licensing royalties 92,566
205,517
(112,951 ) (55 )%
Current technology solutions revenue ^a
4,759
2,790
1,969
71 %
Total revenue $ 97,325
$ 208,307
$ (110,982 ) (53 )%

a. Recurring revenues ~~consist~~are comprised of current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions ~~revenue.~~revenue from the table above.

b. ~~Past sales consist~~Non-recurring revenues are comprised of non-current patent royalties, which include past patent royalties and ~~past technology solutions revenue.~~royalties from static agreements, as well as patent sales from the table above.

The ~~$111.0 million decrease~~increase in both total and recurring revenue was primarily driven by ~~the~~previously disclosed new patent license agreements, two new agreements signed in second quarter 2022, as well as revenues from connected automobile license agreements with GM and Ford Motor Company through a licensing platform. These increases were partially offset by a decrease in ~~past~~technology solutions revenues from a contract that was terminated in the first half of 2021. Non-recurring revenue in second quarter 2021 primarily related to a static fixed-fee patent ~~royalties~~licensing agreement signed in second quarter 2021.

In second quarter 2022 and second quarter 2021, 70% and 79% of ~~$115.1~~our total revenue, respectively, was attributable to licensees that individually accounted for 10% or more of our total revenue. In second quarter 2022 and second quarter 2021, the following licensees accounted for 10% or more of our total revenue:


	Three months ended June 30,
	2022	2021
Customer A	28%	32%
Customer B	16%	22%
Customer C	14%	—%
Customer D	12%	—%
Customer E	<10%	13%
Customer F	<10%	12%

Operating Expenses

The following table summarizes the changes in operating expenses between second quarter 2022 and second quarter 2021 by category (in thousands):


	Three months ended June 30,
	2022		2021		Increase/(Decrease)
Patent administration and licensing	$	45,417	$	40,970	$	4,447	11	%
Development	17,086		21,870		(4,784)		(22)	%
Selling, general and administrative	9,516		14,799		(5,283)		(36)	%
Restructuring activities	2,738		13,245		(10,507)		100	%
Total operating expenses	$	74,757	$	90,884	$	(16,127)	(18)	%

Table of Content s

Operating expenses decreased to $74.8 million in second quarter 2022 from $90.9 million in second quarter 2021. The $16.1 million decrease in total operating expenses was primarily due to changes in the ~~patent license agreement signed with Huawei during third quarter 2016. Additionally, per-unit royalty revenue decreased by $25.7~~following items (in thousands):


	Increase/(Decrease)
Restructuring activities	$	(10,507)
Personnel-related costs	(9,204)
Intellectual property enforcement and non-patent litigation	3,392
Revenue share and commissions	1,157
Other	(965)
Total decrease in operating expenses	$	(16,127)

The $16.1 million decrease in operating expenses was primarily ~~attributable~~due to ~~entry into the Apple patent license agreement~~a $10.5 million reduction in ~~fourth quarter 2016, as royalties~~non-recurring charges, substantially related to ~~Apple products covered under our per-unit patent license agreement with Pegatron were~~the company's previously ~~included~~announced restructuring plans, and a $9.2 million decrease in ~~per-unit revenue.~~personnel-related costs primarily driven by cost-savings actions taken in 2021. These decreases were partially offset by $3.4 million of additional intellectual property enforcement costs related to the Lenovo and Oppo litigations and $1.2 million of additional revenue share and commissions costs due to the new licensing successes.

Patent Administration and Licensing Expense: The $4.4 million increase in patent administration and licensing expense was primarily due to the above noted increase in intellectual property enforcement costs, as well as an increase in ~~fixed-fee revenue~~patent amortization expense. These increases were partially offset by a decrease in personnel-related costs.

Development Expense: Development expense decreased $4.8 million primarily due to the above noted decrease in personnel-related costs, as well as a decrease in consulting costs.

Selling, General and Administrative Expense: Selling, general and administrative expense decreased $5.3 million primarily due to the above noted decrease in personnel-related costs.

Restructuring Activities: Restructuring expenses associated with our overall restructuring plan decreased due to the plan commencing and the initial accrual being recorded during second quarter 2021. For more information on the restructuring activities, refer to Note 11, "Restructuring Activities" within the notes to condensed consolidated financial statements included in Part I, Item 1 of ~~$27.9~~this Quarterly Report on Form 10-Q.

Non-Operating Expense

The following table compares second quarter 2022 non-operating expense to second quarter 2021 non-operating expense (in thousands):


	Three months ended June 30,
	2022		2021		Increase/(Decrease)
Interest expense	$	(6,272)	$	(6,666)	$	394	6	%
Interest and investment income	297		446		(149)		(33)	%

Loss on extinguishment of long-term debt	(11,190)		—		(11,190)		—	%
Other (expense) income, net	(4,123)		2,593		(6,716)		(259)	%
Total non-operating expense	$	(21,288)	$	(3,627)	$	(17,661)	(487)	%

The $17.7 million change in non-operating expenses between the second quarter 2022 and 2021 was primarily due to the $11.2 million loss on extinguishment of the 2024 Notes, as described further in Note 7, "Obligations", and due to a foreign currency translation loss of $3.6 million in the second quarter 2022 arising from euro translation of our foreign subsidiaries, compared to a foreign currency translation gain of $1.1 million in second quarter 2021.

Additionally, in both periods we recognized gains resulting from observable price changes of our long-term strategic investments, which were $1.6 million recognized in second quarter 2022 and $1.0 million recognized in second quarter 2021.

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Income taxes

In second quarter 2022 and 2021, based on the statutory federal tax rate net of discrete federal and state taxes, we had an effective tax rate of 28.1% and (0.3)%, respectively. The effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit, as well as by the foreign-derived intangible income deduction and non-deductible compensation. In the second quarter 2022, the Company recorded a net discrete tax expense of $2.3 million related to the ~~signing~~extinguishment of ~~the Apple agreement. Additionally,~~long-term debt recognized during second quarter 2022. Excluding this valuation allowance, our second quarter 2022 and 2021 effective tax rate would have been 24.9% and 26.3%, respectively.

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First Half 2022 Compared to First Half 2021

Revenues

The following table compares first half 2022 revenues to first half 2021 revenues (in thousands):


	Six months ended June 30,
	2022		2021		Total Increase/(Decrease)
Variable patent royalty revenue	$	16,718	$	14,419	$	2,299	16	%
Fixed-fee royalty revenue	181,599		138,592		43,007		31	%
Current patent royalties a	198,317		153,011		45,306		30	%
Non-current patent royalties b	26,747		13,367		13,380		100	%
Total patent royalties	225,064		166,378		58,686		35	%
Current technology solutions revenue a	911		3,720		(2,809)		(76)	%

Total revenue	$	225,975	$	170,098	$	55,877	33	%

(a) Recurring revenues are comprised of current patent royalties, inclusive of dynamic fixed-fee royalty payments, and current technology solutions revenue ~~increased~~from the table above.

(b) Non-recurring revenues are comprised of non-current patent royalties, which include past patent royalties and royalties from static agreements, as well as patent sales from the table above.

The increase in both total and recurring revenue was primarily driven by ~~$2.0 million primarily due to increased shipments~~previously disclosed new patent license agreements, two additional new agreements signed in second quarter 2022, as well as revenues from connected automobile license agreements with GM and Ford Motor Company through a licensing platform. These increases were partially offset by ~~one of our~~a decrease in technology solutions ~~customers~~revenues from a contract that was terminated in the first half of 2021 and ~~the inclusion of~~a decrease in recurring revenues from a previously disclosed expired patent license agreement. Non-recurring revenue ~~from Hillcrest Laboratories ("Hillcrest").~~in first half 2021 primarily related two patent licensing agreement signed in second quarter 2021.

In ~~third quarter 2017~~first half 2022 and ~~third quarter 2016, 73%~~first half 2021, 71% and ~~66%~~69% of our total revenue, respectively, was attributable to companies that individually accounted for 10% or more of our total revenue. In ~~third quarter 2017~~first half 2022 and ~~third quarter 2016,~~first half 2021, the following companies accounted for 10% or more of our total revenue:


	Six months ended June 30,
	2022	2021
Customer A	31%	33%
Customer B	17%	23%
Customer D	13%	—%
Customer E	10%	13%

For the Three Months Ended September 30,
2017 2016
Apple 29% —%
Huawei 26% 66%
Samsung 18% < 10%

~~Operating Expenses~~

~~The following table summarizes the changes in operating expenses between~~ ~~third quarter 2017~~ ~~and~~ ~~third quarter 2016~~ ~~by category (in thousands):~~

For the Three Months Ended September 30,
2017 2016 Increase/(Decrease)
Patent administration and licensing $ 28,673
$ 26,149
$ 2,524
10 %
Development 15,924
15,560
364
2 %
Selling, general and administrative 11,853
9,880
1,973
20 %
Total operating expenses $ 56,450
$ 51,589
$ 4,861
9 %

~~Operating expenses increased to~~ ~~$56.5 million~~ in ~~third quarter 2017~~ ~~from~~ ~~$51.6 million~~ in ~~third quarter 2016. The~~ ~~$4.9 million~~ ~~increase in total operating expenses was primarily due to changes in the following items (in thousands):~~

Increase/
(Decrease)

Commercial initiatives $ 2,674
Depreciation and amortization 1,346
Consulting services 1,179
Other 993
Personnel-related costs 676
Performance-based incentive compensation (1,240 )
Patent maintenance (767 )
Total increase in operating expenses $ 4,861

The $2.7 million increase in costs associated with commercial initiatives and the $1.3 million increase in depreciation and amortization were primarily attributable to the acquisition of Hillcrest during fourth quarter 2016. The $1.2 million increase in consulting services primarily related to spending on corporate initiatives including the implementation of a new enterprise resource planning system. The $0.7 million increase in personnel-related costs was primarily attributable to hiring activity. The $1.2 million decrease in performance-based incentive compensation was primarily related to increased accrual rates in third quarter 2016 as a result of a new license agreement signed during that quarter. Patent maintenance costs decreased by $0.8 million as a result of the Company's initiatives to more efficiently prosecute and maintain its patent portfolio.

~~Patent Administration and Licensing Expense:~~ The increase in patent administration and licensing expense primarily resulted from the above-noted increases in patent amortization expense and personnel-related costs, as well as an increase in intellectual property enforcement. These increases were partially offset by decreased patent maintenance costs and performance-based incentive compensation as discussed above.

~~Development Expense:~~ The increase in development expense primarily resulted from the above-noted increase in commercial initiatives expense. This increase was partially offset by decreased performance-based incentive compensation as discussed above.

~~Selling, General and Administrative Expense:~~ The increase in selling, general and administrative expense primarily resulted from the above-noted increases in commercial initiatives and consulting services expenses. These increases were partially offset by decreased performance-based incentive compensation as discussed above.

~~Other (Expense) Income~~

~~The following table compares~~ ~~third quarter 2017~~ ~~other (expense) income to~~ ~~third quarter 2016~~ ~~other (expense) income (in thousands):~~

For the Three Months Ended September 30,
2017 2016 Change
Interest expense $ (4,480 ) $ (4,305 ) $ (175 ) (4 )%
Other 130
(385 ) 515
134 %
Interest and investment income 2,163
892
1,271
142 %
$ (2,187 ) $ (3,798 ) $ 1,611
42 %

~~In third quarter 2017, other expense was~~ ~~$2.2 million~~ as compared to other expense of $3.8 million in third quarter 2016. The change between periods was primarily due to the increase in interest and investment income of $1.3 million primarily due to higher average investment balances and higher returns during third quarter 2017 as compared to third quarter 2016.

~~Income tax provision~~

In third quarter 2017, based on the statutory federal tax rate net of discrete federal and state taxes, our effective tax rate was 10.2% as compared to 32.3% during third quarter 2016. The third quarter 2017 effective tax rate included a $9.1 million discrete net benefit primarily related to the reversal of uncertain tax positions associated with domestic production activities refund claims.

~~First Nine Months 2017 Compared to First Nine Months 2016~~

~~Revenues~~

~~The following table compares first nine months 2017 revenues to first nine months 2016 revenues (in thousands):~~

For the Nine Months Ended September 30,
2017 2016 Increase/(Decrease)
Per-unit royalty revenue $ 37,338
$ 154,018
$ (116,680 ) (76 )%
Fixed-fee amortized royalty revenue 220,083
103,936
116,147
112 %
Current patent royalties ^a
257,421
257,954
(533 ) — %
Past patent royalties ^b
56,692
129,417
(72,725 ) (56 )%
Total patent licensing royalties 314,113
387,371
(73,258 ) (19 )%
Current technology solutions revenue ^a
13,521
4,615
8,906
193 %
Total revenue $ 327,634
$ 391,986
$ (64,352 ) (16 )%

~~a. Recurring revenues consist of current patent royalties and current technology solutions revenue.~~

~~b. Past sales consist of past patent royalties and past technology solutions revenue.~~

The $64.4 million decrease in total revenue was primarily driven by the decrease in past patent royalties of $72.7 million. In first nine months 2016, past patent royalties were primarily driven by the patent license agreement with Huawei signed during third quarter 2016, while the first nine months 2017 past patent royalties primarily included the Microsoft Settlement Agreement signed during second quarter 2017. Current technology solutions revenue increased by $8.9 million primarily due to increased shipments by one of our technology solutions customers and the inclusion of revenue from Hillcrest.

In first nine months 2017 and first nine months 2016, 74% and 72% of our total revenue, respectively, were attributable to companies that individually accounted for 10% or more of our total revenue. In first nine months 2017 and first nine months 2016, the following companies accounted for 10% or more of our total revenue:

For the Nine Months Ended September 30,
2017 2016
Apple 26% —%
Huawei 18% 35%
Samsung 16% 13%
Microsoft 14% —%
Pegatron < 10% 24%

Operating Expenses

The following table summarizes the changes in operating expenses between first ~~nine months 2017~~half 2022 and first ~~nine months 2016~~half 2021 by category (in thousands):


	Six months ended June 30,
	2022		2021		Increase/(Decrease)
Patent administration and licensing	$	87,512	$	77,544	$	9,968	13	%
Development	34,698		44,453		(9,755)		(22)	%
Selling, general and administrative	20,400		26,016		(5,616)		(22)	%
Restructuring activities	3,280		13,245		(9,965)		100	%
Total operating expenses	$	145,890	$	161,258	$	(15,368)	(10)	%

For the Nine Months Ended September 30,
2017 2016 Increase/(Decrease)
Patent administration and licensing $ 83,559
$ 81,601
$ 1,958
2 %
Development 52,228
50,438
1,790
4 %
Selling, general and administrative 36,056
31,790
4,266
13 %
Total operating expenses $ 171,843
$ 163,829
$ 8,014
5 %

Table of Content s

Operating expenses ~~increased 5%~~decreased 10% to ~~$171.8~~$145.9 million in first ~~nine months 2017~~half 2022 from ~~$163.8~~$161.3 million in first ~~nine months 2016.~~half 2021. The ~~$8.0~~$15.4 million ~~increase~~decrease in total operating expenses was primarily due to changes in the following items (in thousands):

Increase/(Decrease)
Commercial initiatives $ 7,569
Depreciation and amortization 3,657
Consulting services 2,626
Other 887
Bad debt expense 456
Performance-based incentive compensation (3,360 )
Patent maintenance (1,939 )
Intellectual property enforcement and non-patent litigation (1,156 )
Personnel-related costs (726 )
Total increase in operating expenses $ 8,014


	Increase/(Decrease)
Personnel-related costs	$	(14,051)
Restructuring activities	(9,966)
Consulting costs	(3,640)
Intellectual property enforcement and non-patent litigation	7,711
Share-based compensation	3,440
Revenue share and commissions	1,770
Other	(632)
Total decrease in operating expenses	$	(15,368)

The $7.6 million increase in costs associated with commercial initiatives and the $3.7 million increase in depreciation and amortization were primarily related to the acquisition of Hillcrest during fourth quarter 2016. The $2.6 million increase in consulting services primarily related to spending on corporate initiatives including the implementation of a new enterprise resource planning system. The $0.5 million of bad debt expense related to an unpaid royalties reserve established with respect to a technology solutions licensee experiencing financial issues. The $3.4$15.4 million decrease in ~~performance-based incentive compensation~~operating expenses was primarily ~~driven by~~due to the recognition of a $3.0 million non-recurring charge to increase accrual rates associated with our long-term performance-based compensation plans in first nine months 2016. Patent maintenance costs decreased $1.9 million as a result of initiatives to more efficiently prosecute and maintain our patent portfolio. The $1.2company's previously announced restructuring plan, which drove the $10.0 million decrease in ~~intellectual property enforcement and non-patent litigation primarily related to decreased costs associated with licensee arbitrations. The $0.7~~one-time restructuring expenses. These cost-savings actions taken in 2021 also drove a $14.1 million decrease in personnel-related costs ~~was primarily attributable~~and a $3.6 million decrease in consulting costs. These decreases were partially offset by $7.7 million of additional intellectual property enforcement costs related to ~~a one-time severance charge recognized in first nine months 2016.~~the Lenovo and Oppo litigations. Additionally, share-based compensation costs increased $3.4 million and revenue share and commissions costs increased $1.8 million both driven by licensing successes.

Patent Administration and Licensing Expense: The $10.0 million increase in patent administration and licensing expense primarily resulted from the ~~above-noted~~above noted increases in intellectual property enforcement costs, revenue share costs, and share-based compensation, as well as an increase in patent ~~amortization expense and personnel-related costs.~~amortization. These increases were partially offset by ~~decreased intellectual property enforcement and non-patent litigation and patent maintenance costs as discussed above.~~a decrease in personnel-related costs.

Development Expense: ~~The increase in development~~ Development expense decreased by $9.8 million primarily ~~resulted~~resulting from the above-noted ~~increases~~decreases in ~~commercial initiatives~~personnel-related costs and consulting ~~services expenses. These increases were~~costs, partially offset by ~~decreased performance-based incentive compensation and personnel-related costs as discussed above.~~the above-noted increase in share-based compensation.

Selling, General and Administrative Expense: The ~~increase~~$5.6 million decrease in selling, general and administrative expense primarily resulted from the above-noted ~~increases~~decreases in ~~commercial initiatives~~personnel-related costs and consulting ~~services expenses. These increases were~~costs, partially offset by the above-noted increase in share-based compensation.

Restructuring Activities: Restructuring expenses associated with our overall restructuring plan decreased ~~performance-based incentive compensation costs as discussed above.~~due to the plan commencing and the initial accrual being recorded during second quarter 2021. For more information on the restructuring activities, refer to Note 11, "Restructuring Activities" within the notes to condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~Other (Expense) Income~~ Non-Operating Expense

The following table compares first ~~nine months 2017 other (expense) income~~half 2022 non-operating expense to first ~~nine months 2016 other (expense) income~~half 2021 non-operating expense (in thousands):


	Six months ended June 30,
	2022		2021		Increase/(Decrease)
Interest expense	$	(11,787)	$	(13,656)	$	1,869	14	%
Interest and investment income	506		999		(493)		(49)	%
Loss on extinguishment of long-term debt	(11,190)		—		(11,190)		—	%
Other income, net	(5,337)		2,764		(8,101)		293	%
Total non-operating expense	$	(27,808)	$	(9,893)	$	(17,915)	(181)	%

For the Nine Months Ended September 30,
2017 2016 Change
Interest expense $ (13,308 ) $ (16,768 ) $ 3,460
21 %
Other 26
2,572
(2,546 ) (99 )%
Interest and investment income 5,951
2,555
3,396
133 %
$ (7,331 ) $ (11,641 ) $ 4,310
37 %

InThe $17.9 million change in non-operating expenses between the first ~~nine months 2017, other expense was $7.3 million as compared to other expense of $11.6 million in~~half 2022 and first ~~nine months 2016. The change between periods~~half 2021 was primarily due to ~~lower interest expense as a result~~the $11.2 million loss on extinguishment of the ~~repayment~~2024 Notes, as described further in Note 7, "Obligations", and due to a foreign currency translation loss of $4.0 million in the ~~2016 Notes~~first half 2022 arising from euro translation of our foreign subsidiaries, compared to a foreign currency translation loss of $0.8 million in first quarter 2016 and higher investment income attributable to higher average investments balances and returns during first nine months 2017 as compared to first nine months 2016. The decrease in other income was primarily related tohalf 2021.

Table of Content s

Additionally, we recognized a ~~$3.4~~$1.9 million gain on ~~the sale~~a contract termination in first half 2021 and in both periods we recognized gains resulting from observable price changes of our ~~former King of Prussia facility~~long-term strategic investments, which were $1.6 million recognized in first ~~nine months 2016.~~half 2022 and $1.0 million recognized in first half 2021.

Income ~~tax provision~~taxes

In first ~~nine months 2017, based on the statutory federal tax rate net of discrete federal~~half 2022 and ~~state taxes, our~~2021, we had an effective tax rate ~~was a provision~~ of ~~19.8%.~~26.8% and (169.6)%, respectively. The effective tax rate ~~for~~in both periods was driven by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit, as well as by the foreign-derived intangible income deduction and non-deductible compensation. Excluding this valuation allowance, our first ~~nine months 2017 was favorably impacted by our current year adoption of ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting,” as discussed above in Note 1, “Basis of Presentation.” In conjunction with our adoption of the standard, we recorded discrete benefits of $12.1 million for excess~~half 2022 and 2021 effective tax benefits related to share-based compensation. We also recorded discrete benefits of $9.1 million primarily related to the reversal of uncertain tax positions associated with domestic production activities refund claims. The effective rate would have been 23.2% and 104.3%, respectively. In the first half 2022 and 2021, we recorded a ~~provision of 34.2% not including these~~net discrete ~~benefits. This is compared to an effective~~ tax ~~rate~~ benefit of ~~21.6% based on the statutory federal tax rate net of discrete federal~~$2.2 million and ~~state taxes during first nine months 2016. The first nine months 2016 effective tax rate included a $24.0~~$0.6 million, ~~discrete net benefit~~respectively, primarily related to ~~domestic production activities refund claims for prior years.~~extinguishment of long-debt.

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

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of ~~Section 21E of~~ the Private Securities ~~Exchange~~Litigation Reform Act of ~~1934, as amended.~~1995. Such statements include certain information ~~under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information~~in regarding our current beliefs, plans and expectations, including, without limitation, the matters set forth below. Words such as "believe," “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “forecast,” ~~“goal,”~~"goal," "could," "would," "should," "if," "may," "might," "future," "target," "trend," "seek to," "will continue," "predict," "likely," "in the event," and variations of any such words or similar expressions contained herein are intended to identify such forward-looking statements. Forward-looking statements are made on the basis of management’s current views and assumptions and are not guarantees of future performance. Although the forward-looking statements in this ~~Quarterly Report on~~ Form 10-Q ~~include, without limitation,~~reflect the good faith judgment of our management, such statements ~~regarding:~~

~~Our expectations regarding the potential effects of new accounting standards, including the new revenue recognition guidance,~~can only be based on ~~our financial position, results of operations or cash flows;~~

~~Our expectation that the amortization of fixed-fee royalty payments~~facts and ~~the scheduled expiration of an agreement will reduce our~~ ~~September 30, 2017, deferred revenue balance over the next twelve months;~~

~~The timing, outcome and impact of, and plans, expectations and beliefs with respect to, our various litigation, arbitration, regulatory and administrative matters;~~

~~Our belief that we have the ability to obtain additional liquidity through debt and equity financings;~~

Our belief that our available sources of funds will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program and dividend program for the next twelve months; and

~~Our expectation that we will continue to pay dividends comparable to our quarterly $0.35 per share cash dividend in the future.~~

~~Forward-looking~~factors currently known by us. Consequently, forward-looking statements concerning our business, results of operations and financial condition are inherently subject to risks and ~~uncertainties that could cause actual results, and actual events that occur, to differ materially from results contemplated by the forward-looking statements.~~uncertainties. These risks and uncertainties include, but are not limited to, the risks and uncertainties ~~outlined in greater detail~~described in Part I, Item 1A of our ~~2016~~2021 Form 10-K and ~~Part II, Item 1A Risk Factors~~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 and identify and acquire technology and patent portfolios that align with our roadmap;

•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;

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

•changes or inaccuracies in market projections;

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

•the potential effects that the ongoing COVID-19 pandemic and/or general economic or other conditions could have on our financial position, results of operations and cash flows; and

•changes in our business strategy.

You should carefully consider these factors before making any investment decision with respect to our common stock. These factors, individually or in the aggregate, may cause our actual results to differ materially from our expected and historical results. You should understand that it is not possible to predict or identify all such factors. In addition, you should not place undue reliance on the forward-looking statements contained herein, which are made only as of the date of this ~~Quarterly Report on~~ Form 10-Q. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in quantitative and qualitative market risk from the disclosures included in our ~~2016~~2021 Form ~~10-K~~.10-K.

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Item 4. CONTROLS AND PROCEDURES.

The Company’s principal executive officer and principal financial officer, with the assistance of other members of management, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our

management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September~~June 30, ~~2017~~,2022, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS.

~~Pegatron Actions~~

Reference is made to the Pegatron actions previously disclosed in the 2016 Form 10-K. On October 14, 2016, Pegatron filed in the arbitration a motion to dismiss for lack of jurisdiction, arguing that Pegatron’s counterclaims and InterDigital’s corresponding declaratory judgment claims were not arbitrable. Following briefing and an oral argument, on September 18, 2017, the tribunal issued a Partial Final Award and determined by majority decision that none of Pegatron’s counterclaims, nor InterDigital’s related claim for declaratory relief, are arbitrable. The arbitration remains pending with respect to InterDigital’s breach of contract claim. In light of the arbitral award regarding jurisdiction, Pegatron’s claims are pending before the CA Northern District Court. The schedule for this matter has not yet been entered, except that a case management conference is currently scheduled for December 6, 2017.

~~Asustek Actions~~

Reference is made to the Asustek actions previously disclosed in the 2016 Form 10-K, the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (the "First Quarter 2017 Form 10-Q") and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the "Second Quarter 2017 Form 10-Q"). On August 2, 2017, the arbitral tribunal issued its Final Award. The tribunal fully rejected the counterclaim made by Asustek Computer Incorporated (“Asus”), finding that InterDigital did not fraudulently induce Asus to enter into the 2008 Asus patent license agreement. Accordingly, the tribunal dismissed Asus’s fraudulent inducement counterclaim in its entirety. The tribunal also dismissed InterDigital’s claims that Asus breached the confidentiality provisions and the dispute resolution provisions of the 2008 Asus patent license agreement. On October 20, 2017, InterDigital and Asus jointly moved to confirm both the tribunal’s Final Award and the Interim Award on Jurisdiction in the CA Northern District.

~~Investigation by Taiwan Fair Trade Commission~~

Reference is made to the investigation by the Taiwan Fair Trade Commission ("TFTC") previously disclosed in the 2016 Form 10-K. On October 24, 2017, InterDigital received notice from the TFTC that the Commission did not find that InterDigital had violated Taiwan's Fair Trade Act and has closed its investigation.

~~2013 USITC Proceeding (337-TA-868) and Related ZTE Delaware District Court Proceeding~~

Reference is made to the USITC proceeding and related Delaware District Court proceeding initiated in January 2013 involving InterDigital and ZTE previously disclosed in the 2016 Form 10-K, the First Quarter 2017 Form 10-Q and the Second Quarter 2017 Form 10-Q. On July 28, 2017, IPR Licensing, Inc., filed a petition for a writ of certiorari with the U.S. Supreme Court seeking to appeal the April 2017 Federal Circuit decision affirming the PTAB’s decision that most of the challenged claims of the ’244 patent are unpatentable as obvious. In the petition, IPR Licensing, Inc., argues that the petition should be held pending the Supreme Court’s decision in ~~Oil States Energy Services, LLC v. Greene’s Energy Group, LLC~~, which will determine whether the IPR process as a whole is unconstitutional. On October 2, 2017, ZTE filed a response to the petition for a writ of certiorari in which ZTE agreed that the petition should be held pending the Court’s decision in ~~Oil States~~ and then disposed of as appropriate in light of that decision. The petition for a writ of certiorari remains pending. On October 4, 2017, oral argument was heard on ZTE’s appeal with the Federal Circuit regarding the Delaware District Court’s judgment against ZTE with respect to the ’966 and ’847 patents. A decision in that appeal remains pending.

~~2011 USITC Proceeding (337-TA-800) and Related ZTE and LG Delaware District Court Proceeding~~

Reference is made to the USITC proceeding and related Delaware District Court proceeding initiated in July 2011 involving InterDigital, ZTE and LG previously disclosed in the 2016 Form 10-K, the First Quarter 2017 Form 10-Q and the Second Quarter 2017 Form 10-Q. The Delaware District Court proceeding is now stayed through December 11, 2017.

See Note 4,5, “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 discussion regarding these and other proceedings.~~a description of legal proceedings, which is incorporated herein by reference.

Item 1A.RISK FACTORS.

~~In addition~~Reference is made to Part I, Item 1A, “Risk Factors” included in our 2021 Form 10-K for information concerning risk factors, which should be read in conjunction with the factors set forth in the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 -- Forward-Looking Statements in Part I, Item 2 of this Quarterly Report on Form ~~10-Q, you~~10-Q. Except as set forth below, there have been no material changes with respect to the risk factors disclosed in our 2021 Form 10-K. You should carefully consider ~~the~~such factors,

~~discussed in Part I, Item 1A Risk Factors of the 2016 Form 10-K,~~ which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q and in the ~~2016~~2021 Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.

Rising inflation may result in increased costs of operations

Inflation has accelerated in the U.S. and globally. A majority of our revenue is derived from patent license agreements that provide for fixed payments that were negotiated before the recent rise in inflation. An inflationary environment can increase our cost of labor, as well as our other operating costs without a corresponding increase in our revenue, which may have a material adverse impact on our operating results and financial condition.

Potential patent and litigation reform legislation, potential USPTO and international patent rule changes, potential legislation affecting mechanisms for patent enforcement and available remedies, and potential changes to the intellectual property rights (“IPR”) policies of worldwide standards bodies, as well as rulings in legal proceedings, may affect our investments in research and development and our strategies for patent prosecution, licensing and enforcement and could have a material adverse effect on our licensing business as well as our business as a whole.

Potential changes to certain U.S. and international patent laws, rules and regulations may occur in the future, some or all of which may affect our research and development investments, patent prosecution costs, the scope of future patent coverage we secure, the number of forums in which we can seek to enforce our patents, the remedies that we may be entitled to in patent litigation, and attorneys’ fees or other remedies that could be sought against us, and may require us to reevaluate and modify our research and development activities and patent prosecution, licensing and enforcement strategies. For example, the State Administration for Market Regulation in China requested comments on June 27, 2022 on its draft Provisions on the Prohibition of the Abuse of Intellectual Property Rights to Exclude or Restrict Competition. If adopted as drafted, among other things, the provisions might create an ambiguous standard for a violation of Chinese antitrust laws where a patent holder seeks to enforce its patents “improperly”. The European Commission has also initiated a process to review the EU’s IP policies, in particular as they relate to SEPs and FRAND. Any change as it relates to these matters could impact our ability to negotiate license agreements on favorable terms or at all, limit our potential legal remedies and materially impact our business. Further, legislation designed to reduce the jurisdiction and remedial authority of the USITC has periodically been introduced in Congress.

Any potential changes in the law, the IPR policies of standards bodies or other developments that reduce the number of forums available or the type of relief available in such forums (such as injunctive relief), restrict permissible licensing practices (such as our ability to license on a worldwide portfolio basis) or that otherwise cause us to seek alternative forums (such as arbitration or state court), would make it more difficult for us to enforce our patents, whether in adversarial proceedings or in negotiations. Because we have historically depended on the availability of certain forms of legal process to enforce our patents and obtain fair and adequate compensation for our investments in research and development and the unauthorized use of our intellectual property, developments that undermine our ability to do so could have a negative impact on future licensing efforts.

Rulings in our legal proceedings as well as those of third parties may affect our strategies for patent prosecution, licensing and enforcement. For example, in recent years, the USITC and U.S. courts, including the U.S. Supreme Court and the U.S. Court of Appeals for the Federal Circuit, have taken some actions that have been viewed as unfavorable to patentees, including us. Decisions that occur in the U.S. or in international forums may change the law applicable to various patent law issues, such as, for example, patentability, validity, claim construction, patent exhaustion, patent misuse, permissible licensing practices, available forums, and remedies such as damages and injunctive relief, in ways that are detrimental to the ability of patentees to enforce patents and obtain suitable relief.

We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement of our rights with regard to these developments; however, any resulting change in such strategies may have an adverse impact on our business and financial condition.

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We may not be able to attract and retain qualified employees.

Competition for top talent is substantial and increasing. In order to be successful, we must attract, develop, and retain employees. Implementing our business strategy requires specialized engineering and other technical talent, and these skills are in high demand among our competitors. The market for employees in our industry is extremely competitive, and competitors for talent, particularly engineering talent, increasingly attempt to hire, and to varying degrees have been successful in hiring, our employees or employment candidates. Further, the increased availability of remote working arrangements, largely driven by the COVID-19 pandemic, has expanded the pool of companies that can compete for our employees and employment candidates. A number of such competitors for talent are significantly larger than us and may be able to offer compensation, benefits or work arrangements perceived as more desirable than what we are able to offer. Wage inflation driven by the current inflationary economic environment could make it even more difficult to attract and retain talent. If we are unable to recruit, retain, and motivate our employees, then we may not be able to innovate, execute on our strategy and grow our business as planned.

Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Issuer Purchases of Equity Securities

The ~~Company did not repurchase any shares~~following table provides information regarding the Company’s purchases of its common stock during ~~third~~second quarter ~~2017. As~~2022.


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (3)
April 1, 2022 - April 30, 2022	—	$	—	—	$	41,464,736
May 1, 2022 - May 31, 2022	1,224,832	$	60.78	1,224,832	$	67,019,447
June 1, 2022 - June 30, 2022	—	$	—	—	$	67,019,447
Total	1,224,832	$	60.78	1,224,832	$	67,019,447

(1) Total number of shares purchased during each period reflects share purchase transactions that were completed (i.e., settled) during the period indicated.

(2) Shares were purchased pursuant to the 2014 Repurchase Program, $300 million of which was authorized by the Company’s Board of Directors in June 2014, with an additional $100 million authorized by the Company’s Board of Directors in each of June 2015, September ~~30,~~ 2017, ~~there was approximately $186 million~~December 2018, May 2019, and May 2022, respectively. The 2014 Repurchase Program has no expiration date. The Company may repurchase shares under the 2014 Repurchase Program through open market purchases, pre-arranged trading plans, or privately negotiated purchases.

(3) Amounts shown in this column reflect the amounts remaining under the ~~Company's stock repurchase authorization.~~2014 Repurchase Program.

Item 4.MINE SAFETY DISCLOSURES.

Not applicable.

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Item 6.EXHIBITS.

The following is a list of exhibits filed with this Quarterly Report on Form 10-Q:



Exhibit Number		Exhibit Description
~~31.1~~3.1		Amended and Restated Bylaws of InterDigital Inc. (Exhibit 3.1 to InterDigital's Form 8-K dated July 13, 2022)
4.1		Indenture, dated May 27, 2022, between InterDigital, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (Exhibit 4.1 to InterDigital's Form 8-K dated May 24, 2022).
4.2		Form of 3.50% Senior Convertible Note due 2027 (included in Exhibit 4.1).
10.1		Purchase Agreement, dated May 24, 2022, between InterDigital, Inc. and BofA Securities Inc. and Jefferies LLC, as representatives of the several initial purchasers named in Schedule I attached thereto (Exhibit 10.1 to InterDigital's Form 8-K dated May 24, 2022).
10.2		Form of Convertible Note Hedge Transaction Confirmation (Exhibit 10.2 to InterDigital's Form 8-K dated May 24, 2022).
10.3		Form of Warrant Transaction Confirmation (Exhibit 10.3 to InterDigital's Form 8-K dated May 24, 2022).
10.4		Form of Unwind Agreement (Exhibit 10.4 to InterDigital's Form 8-K dated May 24, 2022).
10.5		Offer Letter between InterDigital, Inc. and Rajesh Pankaj dated June 1 6 , 2022.
31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2
~~31.2~~	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1+
~~32.1~~	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.2+
~~32.2~~	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INS		Inline Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
~~101~~101.SCH		The following financial information from InterDigital, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, filed with the Securities and Exchange Commission on October 26, 2017, formatted in eXtensible Business Reporting Language:Inline Schema Document
101.CAL		Inline Calculation Linkbase Document
101.DEF		(i) Condensed Consolidated Balance Sheets at September 30, 2017 and December 31, 2016, (ii) Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2017 and 2016, (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016, (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 and (v) Notes to Condensed Consolidated Financial Statements. Inline Definition Linkbase Document
101.LAB		Inline Labels Linkbase Document
101.PRE		Inline Presentation Linkbase Document
104		Inline Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)



*+						This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that InterDigital, Inc. specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		INTERDIGITAL, INC.

Date: August 4, 2022		/s/ LIREN CHEN
		Liren Chen
		President and Chief Executive Officer


Date: August 4, 2022		~~INTERDIGITAL, INC.~~

~~Date: October 26, 2017~~	~~/s/ WILLIAM J. MERRITT~~
	~~William J. Merritt~~
	~~President and Chief Executive Officer~~


~~Date: October 26, 2017~~	/s/ RICHARD J. BREZSKI
		Richard J. Brezski
		Chief Financial Officer



	2014 Repurchase Program
	# of Shares	Value
2016	1,304	$	64,685
2015	1,836	96,410
2014	3,554	152,625
Total	6,694	$	313,720



2017	Per Share		Total		Cumulative by Fiscal Year
First quarter	$	0.30	$	10,404	$	10,404
Second quarter	0.30		$	10,413	20,817
Third quarter	0.35		$	12,149	32,966
	$	0.95	$	32,966

2016	Per Share		Total		Cumulative by Fiscal Year
First quarter	$	0.20	$	6,923	$	6,923
Second quarter	0.20		6,861		13,784
Third quarter	0.30		10,285		24,069
Fourth quarter	0.30		10,290		34,359
	$	1.00	$	34,359



	Fair Value as of September 30, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	261,780	$	—	$	—	$	261,780
Commercial paper (b)	—		81,866		—		81,866
U.S. government securities	—		480,336		—		480,336
Corporate bonds, asset backed and other securities	—		143,230		—		143,230
	$	261,780	$	705,432	$	—	$	967,212



	Fair Value as of December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets:
Money market and demand accounts (a)	$	404,074	$	—	$	—	$	404,074
Commercial paper	—		113,490		—		113,490
U.S. government securities	—		224,330		—		224,330
Corporate bonds, asset backed and other securities	—		210,867		—		210,867
	$	404,074	$	548,687	$	—	$	952,761



	September 30, 2017		December 31, 2016		Increase / (Decrease)
Current assets	$	1,420,304	$	1,221,119	$	199,185
Less: current liabilities	440,439		425,480		14,959
Working capital	979,865		795,639		184,226
Subtract:
Cash and cash equivalents	283,557		404,074		(120,517		)
Short-term investments	683,655		548,687		134,968
Add:
Current deferred revenue	351,012		360,192		(9,180		)
Adjusted working capital	$	363,665	$	203,070	$	160,595



	Increase/ (Decrease)
Commercial initiatives	$	2,674
Depreciation and amortization	1,346
Consulting services	1,179
Other	993
Personnel-related costs	676
Performance-based incentive compensation	(1,240		)
Patent maintenance	(767		)
Total increase in operating expenses	$	4,861



	Increase/(Decrease)
Commercial initiatives	$	7,569
Depreciation and amortization	3,657
Consulting services	2,626
Other	887
Bad debt expense	456
Performance-based incentive compensation	(3,360		)
Patent maintenance	(1,939		)
Intellectual property enforcement and non-patent litigation	(1,156		)
Personnel-related costs	(726		)
Total increase in operating expenses	$	8,014