000140549512/312024Q3false31111.0129041xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesidcc:segmentxbrli:pureidcc:patentidcc:claim00014054952024-01-012024-09-3000014054952024-10-2900014054952024-09-3000014054952023-12-3100014054952024-07-012024-09-3000014054952023-07-012023-09-3000014054952023-01-012023-09-300001405495us-gaap:CommonStockMember2022-12-310001405495us-gaap:AdditionalPaidInCapitalMember2022-12-310001405495us-gaap:RetainedEarningsMember2022-12-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001405495us-gaap:TreasuryStockCommonMember2022-12-310001405495us-gaap:NoncontrollingInterestMember2022-12-3100014054952022-12-310001405495us-gaap:RetainedEarningsMember2023-01-012023-03-3100014054952023-01-012023-03-310001405495us-gaap:NoncontrollingInterestMember2023-01-012023-03-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001405495us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001405495us-gaap:CommonStockMember2023-01-012023-03-310001405495us-gaap:CommonStockMember2023-03-310001405495us-gaap:AdditionalPaidInCapitalMember2023-03-310001405495us-gaap:RetainedEarningsMember2023-03-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001405495us-gaap:TreasuryStockCommonMember2023-03-310001405495us-gaap:NoncontrollingInterestMember2023-03-3100014054952023-03-310001405495us-gaap:RetainedEarningsMember2023-04-012023-06-3000014054952023-04-012023-06-300001405495us-gaap:NoncontrollingInterestMember2023-04-012023-06-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-04-012023-06-300001405495us-gaap:AdditionalPaidInCapitalMember2023-04-012023-06-300001405495us-gaap:CommonStockMember2023-04-012023-06-300001405495us-gaap:TreasuryStockCommonMember2023-04-012023-06-300001405495us-gaap:CommonStockMember2023-06-300001405495us-gaap:AdditionalPaidInCapitalMember2023-06-300001405495us-gaap:RetainedEarningsMember2023-06-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-06-300001405495us-gaap:TreasuryStockCommonMember2023-06-300001405495us-gaap:NoncontrollingInterestMember2023-06-3000014054952023-06-300001405495us-gaap:RetainedEarningsMember2023-07-012023-09-300001405495us-gaap:NoncontrollingInterestMember2023-07-012023-09-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-07-012023-09-300001405495us-gaap:AdditionalPaidInCapitalMember2023-07-012023-09-300001405495us-gaap:CommonStockMember2023-07-012023-09-300001405495us-gaap:TreasuryStockCommonMember2023-07-012023-09-300001405495us-gaap:CommonStockMember2023-09-300001405495us-gaap:AdditionalPaidInCapitalMember2023-09-300001405495us-gaap:RetainedEarningsMember2023-09-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-09-300001405495us-gaap:TreasuryStockCommonMember2023-09-300001405495us-gaap:NoncontrollingInterestMember2023-09-3000014054952023-09-300001405495us-gaap:CommonStockMember2023-12-310001405495us-gaap:AdditionalPaidInCapitalMember2023-12-310001405495us-gaap:RetainedEarningsMember2023-12-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001405495us-gaap:TreasuryStockCommonMember2023-12-310001405495us-gaap:NoncontrollingInterestMember2023-12-310001405495us-gaap:RetainedEarningsMember2024-01-012024-03-3100014054952024-01-012024-03-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001405495us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001405495us-gaap:CommonStockMember2024-01-012024-03-310001405495us-gaap:TreasuryStockCommonMember2024-01-012024-03-310001405495us-gaap:CommonStockMember2024-03-310001405495us-gaap:AdditionalPaidInCapitalMember2024-03-310001405495us-gaap:RetainedEarningsMember2024-03-310001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001405495us-gaap:TreasuryStockCommonMember2024-03-310001405495us-gaap:NoncontrollingInterestMember2024-03-3100014054952024-03-310001405495us-gaap:RetainedEarningsMember2024-04-012024-06-3000014054952024-04-012024-06-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-04-012024-06-300001405495us-gaap:AdditionalPaidInCapitalMember2024-04-012024-06-300001405495us-gaap:CommonStockMember2024-04-012024-06-300001405495us-gaap:TreasuryStockCommonMember2024-04-012024-06-300001405495us-gaap:CommonStockMember2024-06-300001405495us-gaap:AdditionalPaidInCapitalMember2024-06-300001405495us-gaap:RetainedEarningsMember2024-06-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-06-300001405495us-gaap:TreasuryStockCommonMember2024-06-300001405495us-gaap:NoncontrollingInterestMember2024-06-3000014054952024-06-300001405495us-gaap:RetainedEarningsMember2024-07-012024-09-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-07-012024-09-300001405495us-gaap:AdditionalPaidInCapitalMember2024-07-012024-09-300001405495us-gaap:CommonStockMember2024-07-012024-09-300001405495us-gaap:TreasuryStockCommonMember2024-07-012024-09-300001405495us-gaap:CommonStockMember2024-09-300001405495us-gaap:AdditionalPaidInCapitalMember2024-09-300001405495us-gaap:RetainedEarningsMember2024-09-300001405495us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-09-300001405495us-gaap:TreasuryStockCommonMember2024-09-300001405495us-gaap:NoncontrollingInterestMember2024-09-300001405495idcc:RecurringRevenueSmartphoneMember2024-07-012024-09-300001405495idcc:RecurringRevenueSmartphoneMember2023-07-012023-09-300001405495idcc:RecurringRevenueCEAutoIoTMember2024-07-012024-09-300001405495idcc:RecurringRevenueCEAutoIoTMember2023-07-012023-09-300001405495idcc:RecurringRevenueOtherMember2024-07-012024-09-300001405495idcc:RecurringRevenueOtherMember2023-07-012023-09-300001405495idcc:RecurringRevenuesMember2024-07-012024-09-300001405495idcc:RecurringRevenuesMember2023-07-012023-09-300001405495idcc:NonRecurringRevenuesMember2024-07-012024-09-300001405495idcc:NonRecurringRevenuesMember2023-07-012023-09-300001405495idcc:RecurringRevenueSmartphoneMember2024-01-012024-09-300001405495idcc:RecurringRevenueSmartphoneMember2023-01-012023-09-300001405495idcc:RecurringRevenueCEAutoIoTMember2024-01-012024-09-300001405495idcc:RecurringRevenueCEAutoIoTMember2023-01-012023-09-300001405495idcc:RecurringRevenueOtherMember2024-01-012024-09-300001405495idcc:RecurringRevenueOtherMember2023-01-012023-09-300001405495idcc:RecurringRevenuesMember2024-01-012024-09-300001405495idcc:RecurringRevenuesMember2023-01-012023-09-300001405495idcc:NonRecurringRevenuesMember2024-01-012024-09-300001405495idcc:NonRecurringRevenuesMember2023-01-012023-09-3000014054952024-10-012024-09-3000014054952025-01-012024-09-3000014054952026-01-012024-09-3000014054952027-01-012024-09-3000014054952028-01-012024-09-3000014054952029-01-012024-09-300001405495idcc:FourLargestLicenseesMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2024-01-012024-09-300001405495idcc:FourLargestLicenseesMemberus-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMember2023-01-012023-12-310001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel1Member2024-09-300001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel2Member2024-09-300001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel3Member2024-09-300001405495idcc:MoneyMarketFundsAndDemandDepositsMember2024-09-300001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2024-09-300001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2024-09-300001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2024-09-300001405495us-gaap:CommercialPaperMember2024-09-300001405495us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryAndGovernmentMember2024-09-300001405495us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2024-09-300001405495us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasuryAndGovernmentMember2024-09-300001405495us-gaap:USTreasuryAndGovernmentMember2024-09-300001405495us-gaap:FairValueInputsLevel1Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2024-09-300001405495us-gaap:FairValueInputsLevel2Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2024-09-300001405495us-gaap:FairValueInputsLevel3Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2024-09-300001405495idcc:CorporateBondsAndAssetBackedSecuritiesMember2024-09-300001405495us-gaap:FairValueInputsLevel1Member2024-09-300001405495us-gaap:FairValueInputsLevel2Member2024-09-300001405495us-gaap:FairValueInputsLevel3Member2024-09-300001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel1Member2023-12-310001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel2Member2023-12-310001405495idcc:MoneyMarketFundsAndDemandDepositsMemberus-gaap:FairValueInputsLevel3Member2023-12-310001405495idcc:MoneyMarketFundsAndDemandDepositsMember2023-12-310001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel1Member2023-12-310001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel2Member2023-12-310001405495us-gaap:CommercialPaperMemberus-gaap:FairValueInputsLevel3Member2023-12-310001405495us-gaap:CommercialPaperMember2023-12-310001405495us-gaap:FairValueInputsLevel1Memberus-gaap:USTreasuryAndGovernmentMember2023-12-310001405495us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2023-12-310001405495us-gaap:FairValueInputsLevel3Memberus-gaap:USTreasuryAndGovernmentMember2023-12-310001405495us-gaap:USTreasuryAndGovernmentMember2023-12-310001405495us-gaap:FairValueInputsLevel1Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2023-12-310001405495us-gaap:FairValueInputsLevel2Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2023-12-310001405495us-gaap:FairValueInputsLevel3Memberidcc:CorporateBondsAndAssetBackedSecuritiesMember2023-12-310001405495idcc:CorporateBondsAndAssetBackedSecuritiesMember2023-12-310001405495us-gaap:FairValueInputsLevel1Member2023-12-310001405495us-gaap:FairValueInputsLevel2Member2023-12-310001405495us-gaap:FairValueInputsLevel3Member2023-12-310001405495idcc:CorporateBondsAndAssetBackedSecuritiesMember2024-09-300001405495idcc:CorporateBondsAndAssetBackedSecuritiesMember2023-12-310001405495us-gaap:PatentsMember2023-01-012023-09-300001405495idcc:InvestmentInOtherEntitiesMember2024-07-012024-09-300001405495idcc:InvestmentInOtherEntitiesMember2024-01-012024-09-300001405495idcc:InvestmentInOtherEntitiesMember2023-07-012023-09-300001405495idcc:InvestmentInOtherEntitiesMember2023-01-012023-09-300001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2024-09-300001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2023-12-310001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2024-09-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2023-12-310001405495idcc:TechnicolorPatentAcquisitionMember2024-09-300001405495idcc:TechnicolorPatentAcquisitionMember2023-12-310001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2022-05-270001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2022-05-272022-05-270001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2022-05-2500014054952022-05-250001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2019-06-030001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2022-06-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2024-06-012024-06-010001405495idcc:A2024NoteHedgeTransactionMemberus-gaap:ConvertibleDebtMember2019-05-310001405495idcc:A2024WarrantTransactionsMember2019-05-3100014054952024-06-012024-06-010001405495idcc:A2024NoteHedgeTransactionMemberus-gaap:ConvertibleDebtMember2024-06-012024-06-010001405495idcc:A2024WarrantTransactionsMember2024-01-012024-09-300001405495idcc:A2024WarrantTransactionsMember2024-09-300001405495us-gaap:ConvertibleDebtMember2024-09-300001405495us-gaap:ConvertibleDebtMember2023-12-310001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2024-07-012024-09-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2024-07-012024-09-300001405495us-gaap:ConvertibleDebtMember2024-07-012024-09-300001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2023-07-012023-09-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2023-07-012023-09-300001405495us-gaap:ConvertibleDebtMember2023-07-012023-09-300001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2024-01-012024-09-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2024-01-012024-09-300001405495us-gaap:ConvertibleDebtMember2024-01-012024-09-300001405495idcc:ConvertibleNotes2027Memberus-gaap:ConvertibleDebtMember2023-01-012023-09-300001405495idcc:ConvertibleNotes2024Memberus-gaap:ConvertibleDebtMember2023-01-012023-09-300001405495us-gaap:ConvertibleDebtMember2023-01-012023-09-300001405495idcc:TechnicolorPatentAcquisitionMember2024-07-012024-09-300001405495idcc:TechnicolorPatentAcquisitionMember2024-01-012024-09-300001405495idcc:TechnicolorPatentAcquisitionMember2023-07-012023-09-300001405495idcc:TechnicolorPatentAcquisitionMember2023-01-012023-09-300001405495idcc:U.K.ProceedingsMember2019-08-270001405495idcc:U.K.ProceedingsMember2023-12-310001405495idcc:U.K.ProceedingsMember2023-03-162023-03-160001405495idcc:U.K.ProceedingsMember2023-06-272023-06-270001405495idcc:U.K.ProceedingsMember2024-07-012024-07-310001405495idcc:U.K.ProceedingsMember2023-09-240001405495idcc:DistrictOfDelawareProceedingsMember2019-08-310001405495idcc:InternationalTradeCommissionMember2023-09-300001405495idcc:DistrictOfNorthCarolinaProceedingsMember2023-09-300001405495idcc:GermanProceedingsMember2021-12-310001405495idcc:GermanProceedingsMunichMember2021-12-310001405495idcc:GermanProceedingsMannheimMember2021-12-310001405495idcc:TeslaProceedingsMember2023-12-050001405495us-gaap:ForeignCountryMember2024-01-012024-09-300001405495us-gaap:ForeignCountryMember2023-01-012023-09-300001405495idcc:RestrictedStockUnitsRSUsAndShareBasedPaymentArrangementOptionMember2024-07-012024-09-300001405495idcc:RestrictedStockUnitsRSUsAndShareBasedPaymentArrangementOptionMember2023-07-012023-09-300001405495idcc:RestrictedStockUnitsRSUsAndShareBasedPaymentArrangementOptionMember2024-01-012024-09-300001405495idcc:RestrictedStockUnitsRSUsAndShareBasedPaymentArrangementOptionMember2023-01-012023-09-300001405495us-gaap:WarrantMember2024-07-012024-09-300001405495us-gaap:WarrantMember2023-07-012023-09-300001405495us-gaap:WarrantMember2024-01-012024-09-300001405495us-gaap:WarrantMember2023-01-012023-09-30

    For the transition period from                      to                     

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

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☑ No ☐

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.

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 ☐ No þ

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

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.

Item 1. FINANCIAL STATEMENTS

Refer to Note 1, "Basis of Presentation," for additional supplemental cash flow information. Additionally, refer to Note 3, "Cash, Concentration of Credit Risk and Fair Value of Financial Instruments" for a reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheets.

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 30, 2024, the results of our operations for the three and nine months ended September 30, 2024 and 2023 and our cash flows for the nine months ended September 30, 2024 and 2023. The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the detailed schedules, information and notes necessary to state fairly the financial condition, results of operations and cash flows in conformity with United States generally accepted accounting principles (“GAAP”). The year-end condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP for year-end financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (our “2023 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February 15, 2024. Definitions of capitalized terms not defined herein appear within our 2023 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. We have one reportable segment.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

There have been no material changes or updates to our existing accounting policies from the disclosures included in our 2023 Form 10-K, except as indicated below in "New Accounting Guidance".

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

The following table presents additional supplemental cash flow information for the nine months ended September 30, 2024 and 2023 (in thousands):

Accounting Standards Update: Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments in the ASU require disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption allowed. We are currently evaluating the impact of adoption on our financial disclosures.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. The amendments in the ASU enhance income tax disclosures, primarily through standardization, disaggregation of rate reconciliation categories, and income taxes paid by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption allowed. We are currently evaluating the impact of adoption on our financial disclosures.

2. REVENUE

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2024 and 2023 (in thousands):

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

During the nine months ended September 30, 2024, we recognized $119.8 million of revenue that had been included in deferred revenue as of the beginning of the period. As of September 30, 2024, we had contract assets of $161.1 million included within "Accounts receivable" in the condensed consolidated balance sheet. As of December 31, 2023, we had contract assets of $94.6 million included within "Accounts receivable" in the condensed consolidated balance sheet.

Based on contracts signed and committed as of September 30, 2024, we expect to recognize the following revenue from dynamic fixed-fee royalty payments over the term of such contracts (in thousands):

(a)    This table includes estimated revenue related to our Samsung arbitration. In accordance with ASC 606, these estimates are limited to the amount of revenue we expect to recognize only to the extent it is probable that a subsequent change in the estimate would not result in a significant revenue reversal.

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

Cash, cash equivalents, and restricted cash currently consist of money market and demand accounts. The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of September 30, 2024, December 31, 2023 and September 30, 2023 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):

Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable. We place our cash equivalents and short-term investments only in highly rated financial instruments and in United States government instruments.

Our accounts receivable and contract assets are derived principally from patent license and technology solutions agreements. Four licensees comprised 85% and 84% of our accounts receivable balances of September 30, 2024 and December 31, 2023, respectively. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values.

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.

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 30, 2024 and December 31, 2023 (in thousands):

______________________________

(a)Primarily included within cash and cash equivalents.

(b)As of December 31, 2023, $5.7 million of commercial paper was included within cash and cash equivalents.

(c)As of September 30, 2024 and December 31, 2023, $10.4 million and $6.5 million of corporate bonds, asset backed and other securities was included within cash and cash equivalents, respectively.

During the nine months ended September 30, 2023, we incurred a one-time impairment of $2.5 million on our patents held for sale. We determined the fair value based upon evaluation of market conditions.

During the three and nine months ended September 30, 2024, we recognized net gains of $0.3 million and $1.8 million, respectively, resulting from fair value changes of our long-term strategic investments, which was included within “Other income, net” in the condensed consolidated statement of income.

During the three and nine months ended September 30, 2023, we recognized gains of $6.1 million and $9.4 million, respectively, resulting from fair value changes of one of our long-term strategic investments, which was included within “Other income, net” in the condensed consolidated statement of income.

The principal amount, carrying value and related estimated fair value of the Company's Convertible Notes reported as of September 30, 2024 and December 31, 2023 was as follows (in thousands). The aggregate fair value of the principal amount of the Convertible Notes is a Level 2 fair value measurement.

The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported as of September 30, 2024 and December 31, 2023 was as follows (in thousands). The aggregate fair value of the Technicolor Patent Acquisition long-term debt is a Level 3 fair value measurement.

4.    OTHER ASSETS AND LIABILITIES

The amounts included in "Prepaid and other current assets" in the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

The amounts included in "Other non-current assets, net" in the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

The amounts included in "Other accrued expenses" in the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

The amounts included in "Other long-term liabilities" in the condensed consolidated balance sheet as of September 30, 2024 and December 31, 2023 were as follows (in thousands):

5. OBLIGATIONS

On May 27, 2022, we issued $460.0 million in aggregate principal amount of 3.50% Senior Convertible Notes due 2027 (the "2027 Notes"). The net proceeds from the issuance of the 2027 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $450.0 million. The 2027 Notes bear interest at a rate of 3.50% per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2022, and mature on June 1, 2027, unless earlier redeemed, converted or repurchased.

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 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). From the period January 1, 2024 through December 31, 2024, the holders of the 2027 Notes have the right, but not the obligation, to convert any portion of the principal amount of the 2027 Notes. As such, the 2027 Notes are included in "Current portion of long-term debt" in our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023.

The 2027 Notes are the Company’s senior unsecured obligations and rank equally in right of payment with any of the Company’s current and any future senior unsecured indebtedness. The 2027 Notes are effectively subordinated to all of the Company’s future secured indebtedness, if any, to the extent of the value of the related collateral, and the 2027 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of the Company’s subsidiaries.

On May 24 and May 25, 2022, in connection with the offering of the 2027 Notes, we entered into convertible note hedge transactions ("2027 Note Hedge Transactions") that cover, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2027 Notes, subject to adjustment, and are exercisable upon any conversion of the 2027 Notes. Also, on May 24 and May 25, 2022, we entered into privately negotiated warrant transactions ("2027 Warrant Transactions"), whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 5.9 million shares of common stock. As of September 30, 2024, the warrants under the 2027 Warrant Transactions had a weighted average strike price of $106.31 per share, subject to adjustment, and mature beginning September 2027 through April 2028.

On June 3, 2019, we issued $400.0 million in aggregate principal amount of Senior Convertible Notes due in 2024 (the "2024 Notes") that bore interest at a rate of 2.00% per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2019, and matured on June 1, 2024. During second quarter 2022, we repurchased $273.8 million in aggregate principal amount of the 2024 Notes in privately negotiated transactions concurrently with the offering of the 2027 Notes. We repaid the remaining $126.2 million in aggregate principal at maturity on June 1, 2024.

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 covered, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock, in the aggregate, at a strike price that corresponded to the conversion price of the 2024 Notes, subject to adjustment, and were exercisable upon any conversion of the 2024 Notes. 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.

At maturity on June 1, 2024, the Company issued 0.3 million shares to settle the 2024 Notes that had been converted by holders. This issuance was effectively offset by our receipt of 0.3 million shares from the settlement of the 2024 Note Hedge Transactions. The 2024 Warrants settle during the period September 3, 2024 through December 17, 2024 on a net-share basis. 0.1 million shares have been issued related to the 2024 Warrant Transactions as of September 30, 2024, and warrants to acquire 1.1 million shares of common stock at an initial strike price of approximately $109.43 per share, subject to adjustment, remain outstanding.

The following table reflects the carrying value of our Convertible Notes long-term debt as of September 30, 2024 and December 31, 2023 (in thousands):

The following table presents the amount of interest cost recognized, which is included within "Interest expense" in our condensed consolidated statements of income, for the three and nine months ended September 30, 2024 and 2023 relating to the contractual interest coupon and the amortization of deferred financing costs of the Convertible Notes (in thousands):

On July 30, 2018, we completed our acquisition of the patent licensing business of Technicolor SA ("Technicolor"), a worldwide technology leader in the media and entertainment sector (the "Technicolor Patent Acquisition"). In conjunction with the Technicolor Patent Acquisition, we assumed Technicolor’s rights and obligations under a joint licensing program with Sony relating to digital televisions and standalone computer display monitors, which commenced in 2015 (the "Madison Arrangement"). An affiliate of CPPIB Credit Investments Inc. ("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement. CPPIB Credit made certain payments to Technicolor and Sony and agreed to contribute cash to fund certain capital reserve obligations under the arrangement in exchange for a percentage of future 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 September 30, 2024 and December 31, 2023 is disclosed within Note 3, "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.

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 nine months ended September 30, 2024, we recognized $0.6 million and $2.2 million, respectively, of interest expense related to this debt, compared to $1.1 million and $2.5 million during the three and nine months ended September 30, 2023, respectively. This was included within “Interest Expense” in the condensed consolidated statements of income. Any future payments made to CPPIB Credit, or additional proceeds received from CPPIB Credit, will decrease or increase the long-term debt balance accordingly. We made $12.9 million in payments to CPPIB Credit during the nine months ended September 30, 2024, and no payments were made during the nine months ended September 30, 2023.

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 September 30, 2024, the contingent consideration liability from the revenue-sharing arrangement was deemed not probable and is therefore not reflected within the consolidated financial statements.

6. LITIGATION AND LEGAL PROCEEDINGS

In fourth quarter 2024, the Company reached an agreement with Lenovo Group Limited and certain of its subsidiaries (“Lenovo”) to enter into binding arbitration to determine the final terms of a new patent license agreement, which will be effective from January 1, 2024. As part of the agreement to arbitrate, both parties have agreed to dismiss all pending litigations between them.

In August 2019, the Company and certain of its subsidiaries filed a claim in the UK High Court against Lenovo. The claim, as amended, alleged infringement of five of the Company’s patents relating to 3G and/or 4G/LTE standards. The Company sought, among other relief, injunctive relief to prevent further infringement of the asserted patents or, in the alternative, a determination of the terms of a FRAND license.

Between 2021 and 2023, three of the Company’s European Patents were found by UK courts to be valid, essential and infringed by Lenovo. In March 2023, the UK High Court issued an order staying all deadlines with respect to the fourth and fifth technical trials.

On March 16, 2023, the UK High Court issued its order regarding judgment in the trial to determine how much Lenovo must pay for a license to the Company’s portfolio of cellular assets, awarding the Company a lump sum of $138.7 million for such license through December 31, 2023. On June 27, 2023, the court issued an order awarding the Company an additional $46.2 million, thus increasing the total award to $184.9 million, which was paid on July 11, 2023. The court also found that the Company should pay a portion of Lenovo’s costs and granted both parties permission to appeal on certain grounds. Both parties appealed certain aspects of the ruling, and in July 2024, the UK Court of Appeal ruled in favor of InterDigital and awarded the Company an additional amount of $55.2 million to a total of approximately $240.1 million. It rejected Lenovo’s appeal in its entirety and confirmed that Lenovo must pay for all of its past sales starting from 2007 through December 31, 2023. The court also found that Lenovo should pay the Company’s costs for the appeal and reduced the costs that Lenovo was awarded from the initial decision. Lenovo sought permission to appeal, and permission to appeal was refused by the UK Court of Appeals. Lenovo filed an application to the UK Supreme Court requesting permission to appeal on August 9, 2024; Lenovo withdrew its application to appeal in October 2024 following entry into the arbitration agreement described above.

On September 24, 2023, Lenovo filed a new claim in the UK High Court, which alleged invalidity of two of the Company’s patents relating to 4G/LTE standards. Lenovo sought, among other relief, a declaration that the patents at issue were invalid, not essential, and not infringed, revocation of the patents at issue, and a declaration that, upon expiration of the current license in 2023, Lenovo is licensed under terms to be determined by the UK High Court through 2028 or, in the alternative, a determination of the terms of a FRAND license. In October 2023, Lenovo filed a request for an order that the Company indicate whether it is prepared to give an unconditional undertaking to enter into a global license on terms set by the UK Court, or failing that, a declaration that the Defendants are unwilling licensors; a hearing was held in December 2023 during which Lenovo agreed to stay its application. The Company filed a jurisdiction challenge in October 2023, and a hearing on such challenge took place in April 2024, following which, the jurisdiction challenge was denied. In November 2023, Lenovo filed an application seeking an expedited FRAND trial and an interim license until a FRAND decision is issued in the UK. A hearing on the interim license was held in February 2024; in March 2024 the UK High Court denied Lenovo’s request for the interim license. A FRAND trial was set for June-July 2025.

In August 2019, the Company and certain of its subsidiaries filed a complaint in the United States District Court for the District of Delaware (the "Delaware District Court") against Lenovo alleging that Lenovo infringes eight of the Company’s U.S. patents by making, using, offering for sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities. As relief, InterDigital sought: (a) a declaration that the Company is not in breach of its relevant FRAND commitments with respect to Lenovo; (b) to the extent Lenovo does not agree to negotiate a worldwide patent license, does not agree to enter into binding international arbitration to set the terms of a FRAND license, and does not agree to be bound by the 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.

In June 2023, the parties requested that the entire case be stayed pending resolution of all appeals in the UK proceedings, and this request was granted.

In April 2020, Lenovo and Motorola Mobility LLC filed a complaint in the Delaware District Court against the Company and certain of its subsidiaries, alleging that the Company defendants 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 alleged that the Company defendants have violated their commitment to the ETSI with respect to the licensing of 3G and 4G SEPs on FRAND terms and conditions. The complaint sought, among other things (i) rulings that the Company defendants have violated Sections 1 and 2 of the Sherman Act and are liable for breach of their ETSI FRAND commitments, (ii) a judgment that the plaintiffs are entitled to a license with respect to the Company’s 3G and 4G SEPs on FRAND terms and conditions, and (iii) injunctions against any demand for allegedly excessive royalties or enforcement of the Company defendants’ 3G and 4G U.S. SEPs against the plaintiffs or their customers via patent infringement proceedings.

In June 2020, the Company filed a motion to dismiss Lenovo’s Sherman Act claims with prejudice, and to dismiss Lenovo’s breach of contract claim with leave to re-file as a counterclaim in the Company’s legal proceeding against Lenovo in the Delaware District Court discussed above.

In March 2021, the Delaware District Court dismissed the Sherman Act Section 1 claim without prejudice, denied the motion to dismiss the Sherman Act Section 2 claim, and consolidated the Section 2 and breach of contract claims with Company’s Delaware patent proceeding discussed above.

In September 2023, the Company and certain of its subsidiaries filed a complaint in the United States International Trade Commission (the "International Trade Commission") alleging that Lenovo infringes five of the Company’s U.S. patents by making, using, offering for sale, and/or selling certain electronic devices, including smartphones, computers, tablet computers, and components thereof that infringe certain claims of the asserted patents. As relief, the Company sought: (a) a limited exclusion order against Lenovo barring from entry into the United States all of Lenovo’s products that infringe the asserted patents; (b) cease and desist orders prohibiting Lenovo from importing, selling, offering for sale, marketing, advertising, and distributing, infringing products; and (c) a bond during the 60-day Presidential review period. An evidentiary hearing was held in August 2024.

Also in September 2023, the Company and certain of its subsidiaries filed a complaint in the United States District Court for the Eastern District of North Carolina (the "North Carolina District Court") alleging that Lenovo infringes those same five of the Company’s U.S. patents. As relief, the Company sought: (a) a finding that Lenovo is liable for infringement of the asserted patents; (b) an injunction against further infringement; (c) damages, including enhanced damages for willful infringement and supplemental damages; and (d) costs.

In September 2023, the Company filed a complaint with the Munich Regional Court against Lenovo and certain of its affiliates, alleging infringement of a European patent relating to cellular 4G/LTE and/or 5G standards. The Company sought, among other relief, injunctive relief to prevent further infringement of the asserted patents. In May 2024, the Munich Regional Court issued a judgment finding Lenovo infringed the Company’s European patent and that the Company complied with its FRAND obligations while Lenovo did not; the Court ordered Lenovo to cease and desist selling infringing products. The Company served Lenovo with an enforcement note of the judgment in May 2024. Lenovo appealed the judgment and requested a stay of the enforcement of the judgment, and in June 2024, the Munich Regional Court rejected Lenovo’s request.

In fourth quarter 2024, the Company entered into a license agreement with Guangdong Oppo Mobile Telecommunications Corp., Ltd. (“Oppo”) and certain of its subsidiaries and affiliates, (collectively, “Oppo Group”). As part of the license agreement, both parties have agreed to dismiss all pending litigations between them.

In December 2021, the Company filed a patent infringement claim in the UK High Court against 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, collectively, Oppo Group, alleging infringement of the Company’s European patents relating to cellular 3G, 4G/LTE or 5G standards. The Company was seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents.

In March 2023, the parties agreed to stay all technical trials. The FRAND trial to determine the royalties to be paid under the license with Oppo was held in March and April 2024; a second hearing was held in September 2024 regarding the parties’ submissions relating to the UK Court of Appeal’s decision in the Lenovo litigation.

In December 2021, the Company and certain of its subsidiaries filed patent infringement claims in 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 certain of the Company’s Indian patents relating to cellular 3G, 4G/LTE, and/or 5G, and HEVC standards. The Company was seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. In February 2024, the Delhi High Court granted the Company’s application for pro tem security, and Oppo appealed. Evidentiary trial proceedings began in October 2024 and were expected to take place through December 2024.

In December 2021, a subsidiary of the Company filed three patent infringement claims, two in the Munich Regional Court and 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 certain of the Company’s European patents relating to cellular 3G, 4G/LTE and/or 5G standards. The Company was seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. The Munich Regional Court held hearings in March and December 2023, and in December 2023, the Munich Regional Court issued a decision finding infringement and issuing an injunction against Oppo. Oppo appealed this decision. In March and November 2023, the Munich Regional Court entered stays of the proceedings in respect of specific patents.

In January 2022, the Company was informed that Oppo had purportedly filed a complaint against the Company in the Guangzhou Intellectual Property Court (the “Guangzhou IP Court”) seeking a determination of a global FRAND royalty rate for the Company’s 3G, 4G, 5G, 802.11 and HEVC SEPs. In May 2022, the Company filed an application challenging, among other things, process of service and the jurisdiction of the Guangzhou IP Court. The Guangzhou IP Court denied the application, and the Company appealed that decision. The Supreme People’s Court denied the appeal, and an initial evidentiary hearing was held in October 2023.

In March 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 an amended complaint in April 2022, alleging infringement of certain of its European patents relating to cellular 3G, 4G/LTE and/or 5G standards. The Company was seeking, among other relief, injunctive relief to prevent further infringement of the asserted patents. Evidentiary trial proceedings were scheduled to take place in May 2025.

The Company reached an agreement with Samsung Electronics Co. Ltd. (“Samsung”) to enter into binding arbitration to determine the final terms of a renewed patent license agreement to certain of the Company’s patents, which will be effective from January 1, 2023. The Company and Samsung have also agreed not to initiate certain claims against the other during the arbitration. On March 31, 2023, the Company filed a request for arbitration with the International Chamber of Commerce.

On July 21, 2023, the International Chamber of Commerce confirmed the full tribunal for the arbitration. The two-week arbitration hearing was held in July 2024, and we expect a decision by the end of 2024.

On December 5, 2023, Tesla and certain of its subsidiaries filed a claim in the UK High Court against the Company and Avanci. The claim alleges invalidity of three of the Company’s patents relating to 5G standards: European Patent (UK) Nos. 3,718,369, 3,566,413, and 3,455,985. Tesla sought, among other relief, a declaration that the patents at issue are invalid, not essential, and not infringed, revocation of the patents at issue, a declaration that the terms of the Avanci 5G Connected Vehicle platform license are not FRAND, and a determination of FRAND terms for a license between Tesla and Avanci covering its Avanci’s 5G Connected Vehicle platform. On March 8, 2024, the Company filed a jurisdiction challenge; the jurisdiction challenge was heard on May 24-25 and June 4, 2024, and on July 15, 2024 the UK High Court issued a judgment dismissing Tesla’s FRAND claims against the Company and Avanci, and maintaining Tesla’s patent claims against the Company. The patent claims against the Company were further stayed by the UK High Court, and a hearing on costs and permission to appeal is scheduled for July 30, 2024. On July 16, 2024, Tesla sought permission to appeal the decision; the Company also sought permission to appeal on two limited grounds conditionally, should Tesla’s request for an appeal be granted. The appeal hearing is scheduled to take place on December 2-3, 2024.

We are party to certain other disputes and legal actions in the ordinary course of business, including arbitrations and legal proceedings with licensees regarding the terms of their agreements and the negotiation thereof. We do not currently believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows. None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of September 30, 2024, except as noted above.

7. INCOME TAXES

In the nine months ended September 30, 2024 and 2023, the Company had an estimated effective tax rate of 18.4% and 14.7%, respectively. The change in effective tax rate is due to a decrease in the amount of Foreign Derived Intangible Income deduction benefit available to the Company. In addition, the Company is subject to an increase in the Global Intangible Low-Tax Income inclusion derived from the increase in revenue in certain foreign jurisdictions. The effective tax rate in the nine months ended September 30, 2023 was impacted by losses in certain jurisdictions where the Company recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, our effective tax rate for the nine months ended September 30, 2023 would have been 13.4%. During both the nine months ended September 30, 2024 and 2023, the Company recorded discrete net benefits of $4.3 million and $2.9 million, respectively, primarily related to share-based compensation.

The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the Company’s customers, and any discrete items that may occur.

During the nine months ended September 30, 2024 and 2023, the Company paid approximately $14.5 million and $8.4 million, respectively, in foreign source creditable withholding tax.

8. NET INCOME PER SHARE

Basic Earnings Per Share ("EPS") is calculated by dividing net income or loss available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other securities with features that could result in the issuance of common stock were exercised or converted to common stock or resulting from the unvested outstanding restricted stock units ("RSUs"). The following tables reconcile the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):

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):

Refer to Note 5, "Obligations," for information about the Company's convertible notes and warrants and related conversion and strike prices. During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Company's convertible notes, or above the strike price of the Company's outstanding warrants, the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted EPS. As a result, in periods where the average market price of the Company's common stock is above the conversion price or strike price, as applicable, under the if-converted method, the Company calculates the number of shares issuable under the terms of the convertible notes and the warrants based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period.

9. OTHER INCOME, NET

The amounts included in "Other income, net" in the condensed consolidated statements of income for the three and nine months ended September 30, 2024 and 2023 were as follows (in thousands):

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

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 2023 Form 10-K, other reports filed with the SEC and the Statement Pursuant to the Private Securities Litigation Reform Act of 1995 — Forward-Looking Statements below.

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

In October 2024, we entered into a patent license agreement with Oppo Group. The agreement covers Oppo, realme and OnePlus branded mobile devices worldwide. As part of the agreement, both parties have agreed to dismiss all pending litigations between us. We expect to recognize revenue related to the patent license agreement beginning in fourth quarter 2024.

In October 2024, we entered into an arbitration agreement with Lenovo to determine the terms of a new patent license. As part of the agreement to arbitrate, both parties have agreed to dismiss all pending litigations between them. We expect to recognize revenue related to the arbitration agreement, on an estimated basis, beginning in fourth quarter 2024.

In September 2024, we signed new patent license agreements with TPV, a major manufacturer of a range of digital TVs under various brands. These agreements license TPV to InterDigital’s extensive portfolio of HEVC patents as well as DTV patents licensed through InterDigital´s joint licensing program with Sony. Additionally, in August 2024, we signed a signed a new license agreement with Panasonic.

A portion of the 2024 Warrant Transaction settled during third quarter 2024 resulting in the issuance of 0.1 million shares. As of September 30, 2024, 1.1 million warrants at an initial strike price of approximately $109.43 per share, subject to adjustment, remain outstanding and will settle, on a net-share basis, during the period October 1, 2024 to December 17, 2024. Additionally, 5.9 million warrants remain outstanding related to the 2027 Warrant Transactions at a weighted average strike price of $106.31 per share, subject to adjustment, which mature on a net-share basis beginning September 2027 through April 2028.

During third quarter 2024, the 2027 Notes had a dilutive impact of 2.4 million shares, which are offset from an economic standpoint by the 2027 Note Hedge Transactions and would result in no incremental shares being issued upon conversion. However, under GAAP, we are required to exclude the impact of the shares received from the 2027 Note Hedge Transactions counterparties from the calculation of weighted average diluted shares outstanding.

Assuming a share price of $150, we would issue 0.3 million and 1.7 million of common shares related to the 2024 and 2027 Warrant Transactions, respectively. Refer to "Financial Position, Liquidity, and Capital Resources — Convertible Notes" for further information regarding how changes in our stock price would affect the number of shares issuable related to the 2024 Warrant Transactions and the 2027 Warrant Transactions.

During the third quarter 2024, we returned $14.5 million to shareholders, including $11.4 million, or $0.45 per share, of cash dividends declared and $3.1 million through the repurchase of shares of common stock. Additionally, we announced an increase to the quarterly cash dividend from $0.40 to $0.45 per share, beginning with the dividend paid in fourth quarter 2024.

As of October 31, 2024, there was $229.5 million remaining under the share repurchase authorization, which we plan to utilize to periodically repurchase additional common shares. See Part II, Item II - Unregistered Sales of Equity Securities and Use of Proceeds—Issuer Purchases of Equity Securities of this Quarterly Report on Form 10-Q.

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

88% of our recurring revenue comes from fixed-fee royalties. Such agreements often have prescribed payment schedules that are uneven and sometimes front-loaded, resulting in timing differences between when we collect the cash payments and recognize the related revenue.

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

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

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

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

When we collect payments on a front-loaded basis, we recognize a deferred revenue liability equal to the cash received and accounts receivable recorded which relate to revenue expected to be recognized in future periods. That liability is then reduced as we recognize revenue over the balance of the agreement. The following table shows the projected amortization of our current and long term deferred revenue as of September 30, 2024 (in thousands):

Total revenues of $128.7 million, which includes both recurring and catch-up revenues, decreased 8% compared to third quarter 2023 primarily due to catch-up revenues from the Lenovo HEVC agreement recognized in third quarter 2023, partially offset by revenues recognized from new agreements and the resolution of litigation. Third quarter 2024 recurring revenues were $98.6 million, compared to recurring revenues of $104.5 million in third quarter 2023. In third quarter 2024, revenues (in descending order) from Apple, Samsung, TPV, Lenovo, and Xiaomi each comprised 10% or more of our consolidated revenues. Refer to "Results of Operations --Third Quarter 2024 Compared to Third Quarter 2023" for further discussion of our 2024 revenue.

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

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

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

•During third quarter 2024, we recorded a $1.2 million one-time contra expense for a net litigation fee reimbursement. See Note 6, “Litigation and Legal Proceedings,” to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding the litigation proceedings.

Our significant accounting policies are described in Note 2, "Summary of Significant Accounting Policies and New Accounting Guidance", in the notes to consolidated financial statements included in our 2023 Form 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 2023 Form 10-K. There have been no material changes to our existing critical accounting policies from the disclosures included in our 2023 Form 10-K. Refer to Note 1, “Basis of Presentation,” in the notes to 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 and changes in accounting policies.

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 investments and cash generated from our operations, will be sufficient to finance our operations, capital requirements, debt obligations, existing stock repurchase program, dividend program, and other contractual obligations discussed below in both the short-term over the next twelve months, and the long-term beyond twelve months.

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

The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $251.0 million and cash used in investing activities of $33.9 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $79.5 million. Refer to the sections below for further discussion of these items.

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

Our cash flows provided by operating activities are principally derived from cash receipts from patent license agreements, offset by cash operating expenses and income tax payments. The $157.8 million change in net cash provided by operating activities was driven by increased cash operating expenses primarily due to increased revenue share costs from new patent license agreements and lower cash receipts primarily due to cash receipts from new agreements signed in both periods and timing of cash receipts from existing patent license agreements. The table below sets forth the significant items comprising our cash flows provided by operating activities during the nine months ended September 30, 2024 and 2023 (in thousands):