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What changed in InterDigital, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of InterDigital, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+345 added−339 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-15)

Top changes in InterDigital, Inc.'s 2023 10-K

345 paragraphs added · 339 removed · 252 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

69 edited+44 added−25 removed47 unchanged
Biggest changeDue to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for patent licensing relationships or sale transactions. Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio.
Biggest changeCompetition With respect to our technology development activities and resulting commercialization efforts, we face competition from companies, including in-house development teams at other wireless and video technology companies, consumer electronics device companies, semiconductor companies, wireless operators, video streaming and cloud service companies, and other technology providers, developing other and similar technologies that are competitive with our technologies that we may market or set forth into the standards-setting arena. 9 Table of Contents Due to the exclusionary nature of patent rights, we do not compete, in a traditional sense, with other patent holders for patent licensing relationships or sale transactions.
We continue to grow a portfolio of technology related to Wi-Fi, Internet Standards, and Edge Computing, that includes, for example, improvements to the IEEE 802.11 PHY and MAC to increase peak data rates (802.11be - Extremely High Throughput), cloud gaming, and terminal mobility for edge services. 5 Table of Contents Advanced Video Coding and Transmission Technology An important and growing segment of wireless traffic is devoted to video streaming.
We continue to grow a portfolio of technology related to Wi-Fi, Internet Standards, and Edge Computing, that includes, for example, improvements to the IEEE 802.11 PHY and MAC to increase peak data rates (802.11be - Extremely High Throughput), cloud gaming, security, and terminal mobility for edge services. 5 Table of Contents Advanced Video Coding and Transmission Technology An important and growing segment of wireless traffic is devoted to video streaming.
We are developing evolutionary and revolutionary solutions that enable connectivity in both licensed and unlicensed spectrum, terrestrial and non-terrestrial networks to provide ubiquitous coverage, and across a large range of frequencies up to the terahertz (THz) wave bands. Segments outside of 3GPP primarily fall within the scope of the IEEE 802, IETF and ETSI standards.
We are developing evolutionary and revolutionary solutions that enable connectivity in both licensed and unlicensed spectrum, terrestrial and non-terrestrial networks to provide ubiquitous coverage, across a large range of frequencies up to the terahertz (THz) wave bands. Segments outside of 3GPP primarily fall within the scope of the IEEE 802 and IETF standards.
Refer to Note 9, " Obligations ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information about the Madison Arrangement. In 2016, InterDigital joined Avanci, the industry’s first marketplace for the licensing of cellular standards-essential technology for the IoT.
Refer to Note 10, " Obligations ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information about the Madison Arrangement. In 2016, InterDigital joined Avanci, the industry’s first marketplace for the licensing of cellular standards-essential technology for the IoT.
Since December 2017, Avanci has focused on the automotive market, and has signed patent license agreements with BMW Group, Audi, Porsche, Volkswagen, and Volvo Cars, among others, collectively representing over 80% of annual connected car shipments.
Since December 2017, Avanci has primarily focused on the automotive market, and has signed patent license agreements with BMW Group, Audi, Porsche, Volkswagen, and Volvo Cars, among others, collectively representing over 80% of annual connected car shipments.
The licensing platform brings together many of InterDigital’s peers in standards-essential technology leadership, and makes 2G, 3G, and 4G standards-essential patents available to IoT players in specific product segments with one flat-rate license.
The licensing platform brings together many of InterDigital’s peers in standards-essential technology leadership, and makes 2G, 3G, 4G, and 5G standards-essential patents available to IoT players in specific product segments with one flat-rate license.
Wireless industry standards are formal guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products.
Wireless industry standards are formal requirements and guidelines for engineers, designers, manufacturers and service providers that regulate and define the use of the radio frequency spectrum in conjunction with providing detailed specifications for wireless communications products.
These licensing efforts may be direct or executed in conjunction with licensing partnerships and other efforts, and may require the enforcement and defense of our intellectual property through litigation and other means. • Pursue strategic partnerships with other technology companies.
These licensing efforts may be direct or executed in conjunction with licensing partnerships and other efforts, and may require the enforcement and defense of our intellectual property through litigation and other means. • Pursue strategic research partnerships with other technology companies.
Our total rewards plans include base salary, short- and long-term incentives, healthcare benefits, retirement savings plans, physical and mental well-being programs, flexible work schedules, monetary and social recognition in each of our locations around the globe.
Our total rewards plans include base salary, short- and long-term incentives, healthcare benefits, retirement savings plans, physical and mental well-being programs, hybrid-work schedules, monetary and social recognition in each of our locations around the globe.
In fiscal 2022, revenues (in descendin g order) from Apple, Samsung, and Xiaomi eac h comprised 10% or more of our consolidated revenues. Additional information regarding revenue concentrations is provided in this Annual Report in Note 4, " Geographic/Customer Concentration " in the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K.
In fiscal 2023, revenues (in descendin g order) from Lenovo, Apple, Samsung, and Xiaomi eac h comprised 10% or more of our consolidated revenues. Additional information regarding revenue concentrations is provided in this Annual Report in Note 4, " Geographic/Customer Concentration " in the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K.
Last year we published white papers exploring how 5G and the emerging IoT ecosystem might shape sustainability efforts for the ICT industry. While the proliferation of connected devices can drive increases in energy consumption, innovative solutions can mitigate these outcomes to help lower our carbon footprint and engage more sustainably.
We have published white papers exploring how 5G and the emerging IoT ecosystem might shape sustainability efforts for the ICT industry. While the proliferation of connected devices can drive increases in energy consumption, innovative solutions can mitigate these outcomes to help lower our carbon footprint and engage more sustainably.
We agreed to renew our patent license agreement with Samsung and enter into binding arbitration to determine the final terms of the license, including the amount payable by Samsung under the new agreement.
In 2022, we agreed to renew our patent license agreement with Samsung and enter into binding arbitration to determine the final terms of the license, including the amount payable by Samsung under the new agreement.
To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so must first obtain a license from the holder of essential patent rights.
To manufacture, have made, sell, offer to sell or use such products on a non-infringing basis, a manufacturer or other entity doing so needs to obtain a license from the holder of essential patent rights.
Specifically, in the area of video research and standards, we have been actively engaged in video standards development work in the ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET).
We have been actively engaged in video standards development work in the ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET).
We are also a party to leases for several smaller research and/or office spaces, including in Brussels, Belgium; Espoo, Finland; Princeton, New Jersey, USA; Indianapolis, Indiana, USA; and Paris, France. In addition, we own an administrative office space in Washington, District of Columbia, USA.
We are also a party to leases for several smaller research and/or office spaces, including in Brussels, Belgium; Espoo, Finland; Indianapolis, Indiana, USA; Melville, New York, USA; Paris, France, and Beijing, China. In addition, we own an administrative office space in Washington, District of Columbia, USA.
International Trade Commission ("USITC" or the "Commission"). In a patent infringement lawsuit, we would typically seek damages for past infringement and/or an injunction against future infringement.
International Trade Commission ("USITC" or the "Commission"). In a patent infringement lawsuit, we would typically seek damages for past infringement, an injunction against future infringement, declaratory judgment and/or other relief.
We have continually provided minority and female leaders the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.
We have continually provided leaders from historically underrepresented groups the opportunity to attend targeted world-class external development programs that speak to the unique experiences these employees can face in the workplace while investing in their continued growth both personally and professionally.
Our Revenue Sources Device-based Licensing Revenue Companies making, importing, using or selling products compliant with the standards covered by our patent portfolio, including all manufacturers of mobile handsets, tablets and other devices, and many consumer electronics products, such as televisions, personal computers and other devices, require a license under our patents and will require licenses under patents that may issue from our pending patent applications.
Our Revenue Sources Device-based Licensing Revenue Companies making, importing, using or selling products compliant with the standards covered by our patent portfolio, including all manufacturers of mobile handsets, tablets and other devices, and many consumer electronics products, such as televisions, personal computers and other devices, require a license under our patents.
As an early and ongoing participant in the digital wireless market, InterDigital developed pioneering solutions for the cellular and Wi-Fi technologies in use today. That early involvement, and our continued development of advanced digital wireless technologies, have enabled us to create our significant worldwide portfolio of patents.
As an early and ongoing participant in the digital wireless market, InterDigital has developed pioneering solutions for the cellular and Wi-Fi technologies that enable wireless transmission of voice, data and multimedia content in use today. That early involvement and our continued development of advanced digital wireless technologies have enabled us to create our significant worldwide portfolio of patents.
We have successfully entered into patent license agreements with many of the leading mobile communications and consumer electronics companies globally, including Amazon Technologies, Inc. ("Amazon"), Apple Inc. ("Apple"), Huawei Investment & Holding Co., Ltd. (“Huawei”), Google LLC ("Google"), LG Electronics, Inc. ("LG"), Samsung Electronics Co., Ltd. ("Samsung"), Sony Corporation of America ("Sony"), and Xiaomi Corporation ("Xiaomi"), among others.
We have successfully entered into patent license agreements with many of the leading mobile communications and consumer electronics companies globally, including Amazon Technologies, Inc. ("Amazon"), Apple Inc. ("Apple"), Lenovo Group Limited ("Lenovo"), Google LLC ("Google"), LG Electronics, Inc. ("LG"), Samsung Electronics Co., Ltd. ("Samsung"), Sony Corporation of America ("Sony"), and Xiaomi Corporation ("Xiaomi"), among others.
Our patented inventions have been implemented in a wide variety of products and services, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles. InterDigital derives revenues primarily from licensing our patented innovations.
Our patented inventions have been implemented in a wide variety of products, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles.
Item 1. BUSINESS. Overview InterDigital, Inc. ("InterDigital") is a global research and development company focused primarily on wireless, visual and related technologies. We design and develop advanced technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services.
Item 1. BUSINESS. Overview InterDigital, Inc. ("InterDigital") is a global research and development company focused primarily on wireless, video, artificial intelligence ("AI"), and related technologies. We design and develop foundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services.
None of our employees based in the United States or Canada are unionized or subject to collective bargaining agreements. Management believes that its relations with our employees and works councils are good.
Our employees based in France are represented by works councils and subject to collective bargaining agreements. None of our employees based in the United States or Canada are unionized or subject to collective bargaining agreements. Management believes that its relations with our employees and works councils are strong and healthy.
Patent Portfolio As of December 31, 2022, our patent portfolio consisted of approximately 28,800 patents and patent applications worldwide. The patents and applications comprising our portfolio relate predominantly to cellular wireless standards, including 3G, 4G and 5G technologies, other wireless standards, including 802.11 (Wi-Fi) technology, and a variety of video technologies and standards, such as HEVC and VVC.
Patent Portfolio As of December 31, 2023, our patent portfolio consisted of more than 30,000 patents and patent applications worldwide. The patents and applications comprising our portfolio relate predominantly to cellular wireless standards, including 3G, 4G and 5G technologies, other wireless standards, including 802.11 (Wi-Fi) technology, and a variety of video technologies and standards, such as HEVC and VVC.
Those areas of research include: energy-efficient deep learning, aimed at reducing the energy-intensive rollout of AI into specific service areas; deep video compression, seeking to design novel video codecs based on deep learning techniques and optimized for different use cases (e.g., machine vision); AI for dynamic wireless environments, focused on learning and optimizing wireless systems, particularly when channel characteristics are highly dynamic.
Those areas of research include: energy-efficient deep learning, aimed at reducing the energy-intensive rollout of AI; deep video compression, seeking to design novel video codecs based on deep learning techniques and optimized for different use cases (e.g., for machine consumption); and AI for dynamic wireless environments, which could help enhance and optimize wireless systems, particularly when channel characteristics are highly dynamic.
Talent and Culture Research, learning and growth are fundamental to executing our promise to the world to invent the technologies that make life boundless. In addition, consistently evaluating our talent promotes opportunities to provide actionable learning experiences for our employees to further their career development.
Talent and Culture Research, learning and growth are fundamental to executing our promise to the world to invent the technologies that make life boundless. In addition, consistently evaluating our talent promotes opportunities to provide actionable learning experiences for our employees to further their career development. Our Talent Acquisition philosophy is based on InterDigital’s cultural attributes and business goals.
The horizontal technologies we develop are essential to support a variety of uses cases across several vertical market segments that use connected devices such as automobiles, wearables, smart homes, drones and other connected consumer electronic products.
The horizontal technologies we develop are essential to support a variety of use cases across several vertical market segments that use connected devices such as automobiles and autonomous vehicles, wearables, smart factories and smart homes, robots, drones and many other connected consumer electronic products including mobile phones and tablets.
As of December 31, 2022, InterDigital's wholly owned subsidiaries held a portfolio of approximately 28,800 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.
As of December 31, 2023, InterDigital's wholly owned subsidiaries held a portfolio of more than 30,000 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.
In 2022 and 2021, our total revenues were $457.8 million and $425.4 million, respectively. Additional information about our revenues, profits and assets, as well as additional financial data, is provided in the Consolidated Financial Statements and accompanying Notes in Part II, Item 8, of this Form 10-K.
Additional information about our revenues, profits and assets, as well as additional financial data, is provided in the Consolidated Financial Statements and accompanying Notes in Part II, Item 8, of this Form 10-K.
During third quarter 2022, we renewed a multi-year, royalty-bearing, worldwide and non-exclusive patent license agreement with Apple (the “Apple PLA”). The agreement sets forth terms covering the sale by Apple of its products and services, including, but not limited to, its 3G, 4G and future generation cellular and wireless-enabled products.
In 2022, we renewed a multi-year, royalty-bearing, worldwide and non-exclusive patent license agreement with Apple (the “Apple PLA”). The agreement sets forth terms covering the sale by Apple of its products and services, including, but not limited to, its 3G, 4G, and 5G cellular and wireless-enabled products. The term of the Apple PLA extends through September 30, 2029.
Our video technology portfolio includes patents and applications relating to standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.
We have contributed technology to video standards including standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.
Compensation & Benefits We provide a total compensation package that is targeted to be competitive with the markets in which we compete for talent, while allowing individual pay to vary equitably based on performance, skills and experience.
Compensation & Benefits Our compensation program is rooted in market competitive base salaries and incentives that reward contributions that advance the Company’s strategy and mission. We provide a total compensation package that is targeted to be competitive with the markets in which we compete for talent, while allowing individual pay to vary equitably based on performance, skills and experience.
The market is expected to recover beginning in the second half of 2023 due to the continued global uptake of 5G smartphones as well as the migration from feature phones to smartphones in emerging regions.
The market is expected to maintain this momentum in 2024 due to the continued global uptake of 5G smartphones as well as the migration from feature phones to smartphones in emerging regions.
Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies. Our video technology portfolio combines patents and applications that InterDigital obtained through the Technicolor Acquisitions and patents and applications created by internal development.
Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies.
Since our founding in 1972, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G.
As a leader in wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today's most advanced Wi-Fi technologies.
Patent Infringement and Declaratory Judgment Proceedings From time to time, if we believe a party is required to license our patents in order to manufacture, use and/or sell certain products and such party refuses to do so, we may agree with such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators) or, in certain circumstances, we may institute legal action against them.
The license covers Xiaomi’s cellular-enabled mobile devices under our standard essential patents related to 3G, 4G, 5G, WiFi and HEVC and extends through December 31, 2025. 8 Table of Contents Patent Infringement and Declaratory Judgment Proceedings From time to time, if we believe a party is required to license our patents in order to manufacture, use and/or sell certain products and such party refuses to do so, we may agree with such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators) or, in certain circumstances, we may institute legal action against them.
When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the Company can result in the payment of damages for past patent royalties, the setting of a royalty for future sales or issuance by the court of an injunction enjoining the infringer from manufacturing, using and/or selling the infringing product.
When we include claims of infringement in a patent infringement lawsuit, a favorable ruling for the Company can result in the payment of monetary damages for past manufacture, use and/or sale of the patented invention, the setting of terms and conditions for a license, issuance by the court of an injunction enjoining the infringer from manufacturing, using and/or selling infringing products and/or a declaration of FRAND compliance.
Our portfolio includes numerous patents and patent applications that we believe are or may be essential or may become essential to standards established by many Standards Development Organizations ("SDOs"), including cellular and other wireless communications and video technology standards.
Our portfolio includes numerous patents and patent applications that we believe are or may be essential to existing standards, or may become essential to future standards, established by many Standards Development Organizations ("SDOs"). We have contributed technology to wireless standards including the 3G, 4G, and 5G cellular standards and the IEEE 802 suite of standards.
Those efforts have focused on H.265/HEVC versions 1 to 4 and MPEG DASH, as well as development of the VCC/H.266 and the MPEG Immersive (MPEG-I) standards suite for the future. Beyond video standards, InterDigital R&I is conducting research in groundbreaking visual technologies such as immersive video and AI based video coding.
Those efforts have focused on H.265/High Efficiency Video Coding ("HEVC") versions 1 to 4, as well as development of the VCC/H.266 and the MPEG Immersive (MPEG-I) standards suite for the future.
We continue to be engaged in development efforts to build and enhance our 3GPP (as defined herein) technology portfolio in the current and future generations including 5G, 5G Advanced and 6G.
Many of our inventions are being used in all 2G, 3G, 4G and 5G wireless networks and mobile terminal devices. We continue to be engaged in development efforts to build and enhance our 3GPP (as defined herein) technology portfolio in the current and future generations including 5G, 5G Advanced and 6G.
We are committed to creating a workplace where employees feel valued, respected and challenged, while fostering an environment that attracts and engages a talented workforce who contribute to the company’s growth and sustained success. Our Compensation Committee is responsible for overseeing our policies and strategies related to culture and human capital, including diversity, equity and inclusion.
We are committed to creating a workplace where employees feel valued, respected, included, and challenged, while fostering an environment that attracts and engages a talented workforce who contribute to the company’s growth and sustained success.
InterDigital is one of the largest pure research and development and licensing companies in the world, with one of the most significant patent portfolios of fundamental wireless and video technologies.
We are also a leader in video processing and video encoding/decoding technology, with a significant AI research effort that intersects with both wireless and video technologies. InterDigital is one of the largest pure research and development and licensing companies in the world, with one of the most significant patent portfolios of fundamental wireless and video technologies.
In any device, piece of equipment, or service that contains intellectual property, the manufacturer or implementer may need to obtain licenses from multiple holders of intellectual property.
Other patent holders do not have the same rights to the inventions and technologies encompassed by our patent portfolio. In any device, piece of equipment, or service that contains intellectual property, the manufacturer or implementer may need to obtain licenses from multiple holders of intellectual property.
Artificial Intelligence The AI talent at InterDigital R&I is researching a variety of aspects of AI that can be applied to complex problems in video and wireless technologies.
We are researching a variety of aspects of AI that can be applied to complex problems in video and wireless technologies.
Upon entering into a new patent license agreement, the licensee typically agrees to pay consideration for sales made prior to the effective date of the license agreement, to the extent the licensee was previously unlicensed (i.e., past patent royalties), and also agrees to pay royalties or license fees on licensed products sold during the term of the agreement.
Upon entering into a new patent license agreement, consideration should be paid for sales made prior to the period in which the agreement was executed, to the extent those past sales were previously unlicensed (i.e., catch-up revenues), in addition to royalties or license fees on licensed products sold during the term of the agreement.
SDOs, which facilitate and govern the development of standards, typically ask participating companies to declare formally whether they believe they hold patents or patent applications essential or potentially essential to a particular standard and whether they are willing to license those patents on either a royalty-bearing basis on fair, reasonable and nondiscriminatory terms or on a royalty-free basis.
The consumer electronics industry also implements many of the same standards, including standards related to Wi-Fi and increasingly, cellular technologies, as well as a broad range of video coding standards that enable the efficient transmission and rendering of video content. 7 Table of Contents SDOs, which facilitate and govern the development of standards, typically ask participating companies to declare formally whether they believe they hold patents or patent applications essential or potentially essential to a particular standard and whether they are willing to license those patents on either a royalty-bearing basis on fair, reasonable and nondiscriminatory terms or on a royalty-free basis.
We license or intend to license our innovations worldwide to companies providing such products and services, including wireless communications, consumer electronics, personal computer, and automotive, as well as cloud-based services such as video streaming.
We license our innovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles and providers of cloud-based services such as video streaming.
Other Revenue Opportunities We also believe that companies providing certain video and other cloud-based services require a license under our patents and will require licenses under patents that may issue from our pending patent applications, and we intend to seek license agreements with such companies.
Service-based Licensing Revenue Opportunities We also believe that companies providing certain video streaming and other cloud services require a license under our patents and we intend to seek license agreements with such companies. Overview of Patent Licenses The majority of our revenue is generated from fixed-fee patent license agreements, with a smaller portion coming from variable royalty agreements.
We will seek to bring such technologies, as well as other technologies we may develop or acquire, to market through various methods including technology licensing, joint ventures and partnerships. Technology Research and Development InterDigital R&I InterDigital operates a diversified research and development operation, InterDigital Research & Innovation ("InterDigital R&I").
We will seek to bring such technologies, as well as other technologies we may develop or acquire, to market through various methods including technology licensing, joint ventures and partnerships. • Attract and retain top talent in wireless, video and AI research, patent portfolio creation, and licensing.
Our Leadership Essentials competency development model is available to all employees and provides a library of tools and resources for growth in the areas of thought leadership, results leadership, people leadership and self-leadership.
Our talent programs are instrumental in our ability to attract the right talent to the organization by offering learning opportunities and career advancement. Our Leadership Essentials competency development model is available to all employees and provides a comprehensive suite of tools and resources for growth across four key areas; thought leadership, results leadership, people leadership and self-leadership.
Our current research efforts are focused on a variety of areas related to future technology and devices, including cellular wireless technology, advanced video coding and transmission, and AI. Our capabilities in the development of advanced technologies are based on the efforts of a highly specialized engineering team, leveraging leading-edge equipment and software platforms.
InterDigital is also a leader in key video technologies, including emerging technologies such as immersive video and AI-based video coding. Our current research efforts are focused on a variety of areas related to future technology and devices, including cellular wireless technology, advanced video coding and transmission, and AI.
Binding arbitration to resolve the terms and conditions of a worldwide FRAND license to our relevant portfolio of SEPs is an efficient and cost-effective mechanism, as it allows the parties to avoid piecemeal litigation in multiple jurisdictions and ensures that an enforceable patent license agreement that is consistent with FRAND commitments will be in place at the end of the arbitration process. 9 Table of Contents Competition With respect to our technology development activities and resulting commercialization efforts, we face competition from companies, including in-house development teams at other wireless and consumer electronics device companies, semiconductor companies, wireless operators, and other technology providers, developing other and similar technologies that are competitive with our technologies that we may market or set forth into the standards-setting arena.
Binding arbitration to resolve the terms and conditions of a worldwide FRAND license to our relevant portfolio of SEPs is an efficient and cost-effective mechanism, as it allows the parties to avoid piecemeal litigation in multiple jurisdictions and ensures that an enforceable patent license agreement that is consistent with FRAND commitments will be in place at the end of the arbitration process.
We intend to grow our licensing revenue base by adding licensees in the wireless communications, consumer electronics, personal computer and automotive industries, and by expanding our licensing activities into additional product and services markets that utilize our innovations.
We intend to grow our licensing revenue base by adding licensees in the existing product markets that we serve, and by expanding our licensing activities into video streaming and other cloud-based services.
Enforcing our intellectual property through legal action is an important alternative to bilateral negotiations with respect to licensees who engage in the pernicious practice of "holdout". In recent years, courts in various jurisdictions have addressed “holdout” behavior, recognizing that FRAND obligations are bilateral and failure of implementers to act in a FRAND manner can result in certain penalties.
In recent years, courts in various jurisdictions have addressed “holdout” behavior, recognizing that fair, reasonable and non-discriminatory ("FRAND") obligations are bilateral and failure of implementers to act in a FRAND manner can result in certain penalties.
Our Strategy Our strategy is to continue to be a leading innovator, designer and developer of fundamental, horizontal technologies and to monetize our patented innovations primarily through licensing the products and services that implement them across vertical markets. To execute our strategy, we intend to: • Grow and enhance our patent portfolio through continued investment in advanced research and development.
Our Strategy Our strategy is to continue to be a leading innovator, designer and developer of fundamental, horizontal technologies and to receive fair compensation from the companies that implement our patented innovations in their products and services across licensing programs.
Automobiles represent a significant opportunity within the IoT market, with approximately 40 million connected vehicles shipped in 2022, which is expected to grow significantly in the future. 7 Table of Contents Overview of Standardization To achieve economies of scale and support interoperability among different participants, many wireless and consumer electronics products have been designed to operate in accordance with certain industry standards.
Collectively, the Video Services market is expected to grow from $350 billion of annual revenue in 2023 to $480 billion of annual revenue by 2027. Overview of Standardization To achieve economies of scale and support interoperability among different participants, many wireless and consumer electronics products have been designed to operate in accordance with certain industry standards.
We have a rich history in developing advanced technologies that address the challenges of video as it relates to mobile, and we further enhanced our capabilities in this area with the completion of the acquisition of the Technicolor R&I team.
We have a rich history in developing advanced technologies that address the challenges of video as it relates to mobile. Specifically, in the area of video research, we have a long history of research and innovation in technologies that provide the basis for nearly all of the modern video codecs.
However, the definitions may evolve or change over time, including after we have characterized certain transactions. Business Activities 2022 Patent Licensing Activity During 2022, we entered an agreement with Samsung for binding arbitration to take a new license and eight direct patent license agreements, including agreements with Apple, Amazon, Panasonic, Zebra, and LG as discussed below.
However, the definitions may evolve or change over time, including after we have characterized certain transactions. Business Activities 2023 Patent Licensing Activity During 2023, we entered into eight patent license agreements as discussed below. Direct Licenses In 2023, we signed a multi-year, worldwide, non-exclusive, royalty bearing license with Lenovo, covering InterDigital’s HEVC patents (the "Lenovo HEVC PLA").
While our business activities do not entail the same concerns related to manufacturing or raw materials sourcing and disposal, we implemented a corporate sustainability strategy to address the following: • investing in best practices to track and reduce our carbon footprint, including environmental considerations, tracking, and reporting related to data center needs of energy and emissions efficiencies; • establishing a goal of achieving carbon neutrality within the next four years; and • building environmental stewardship into our operations by encouraging vendors to match or exceed our commitment to the environment.
While our business activities do not entail the same concerns related to manufacturing or raw materials sourcing and disposal, our corporate sustainability strategy addresses the following: • investing in best practices to track and reduce our carbon footprint, including environmental considerations, tracking, and reporting related to data center needs; • implemented a hybrid work program, allowing employees to work from for home part of the week; • investigating and reducing unnecessary energy consumption; and • selected a location for our new Rennes office that is certified by BREEM (Building Research Establishment Environmental Assessment Method), a sustainability assessment method.
We believe that the benefits to be derived from 5G are substantial and will be felt throughout society. 10 Table of Contents Human Capital Overview We strive to make InterDigital a great place to work for all employees.
We believe that the benefits to be derived from 5G are substantial and will be felt throughout society. 10 Table of Contents The foregoing discussion includes information regarding ESG matters that we believe may be of interest to our shareholders generally.
We conducted a culture survey in 2022 that provided relevant insight and guidance into how we can continually align the preferences of our employees with the programs and investments we offer. We believe that our workplace culture, values, and competitive employee compensation are critical to maintaining low levels of attrition, thereby enabling us to attract and retain talent.
We believe that our workplace culture, values, and competitive employee compensation are critical to maintaining low levels of attrition, thereby enabling us to attract and retain talent. For the year ended December 31, 2023, our voluntary attrition percentage was less than 3%.
Total global cellular IoT device shipments are expected to grow from approximately 500 million in 2022 to almost 700 million by 2027.
Total global cellular IoT device shipments are expected to grow from approximately 400 million in 2023 to approximately 700 million by 2027. Automobiles represent a significant opportunity within the IoT market, with approximately 50 million connected vehicles shipped in 2023, which is expected to grow significantly in the future.
With a workforce that is approximately 70% male employees and 30% female employees, and approximately 37% self-identified as diverse within the United States, we recognize that we are on a journey and there is more yet to be done.
Still, with approximately 72% male employees and 28% female employees, we recognize that there is more to be done.
In 2022, we hosted a Fireside Chat: Women in the Workplace, where female executives and a renowned expert on gender equality led a discussion on women in the workplace. In addition, core principles of our culture of inclusion are reflected in the mandatory all-employee training programs we offer on our policies against harassment and discrimination of any kind.
We have also continued to maintain the core principles of our culture of inclusion are reflected in the mandatory all-employee training programs we offer on our policies against harassment and discrimination of any kind. The diversity in our workforce is clear given that our approximately 450 person workforce originates from over sixty countries.
As of December 31, 2022, we had approximately 425 employees worldwide, of whom approximately 220 were based outside of the U.S, and nearly all of whom were full-time. Our employees based in France are represented by works councils and subject to collective bargaining agreements.
Our Human Capital Committee (formerly known as the Compensation Committee) is responsible for overseeing our policies and strategies related to our culture and human capital, including diversity, equity and inclusion. As of December 31, 2023, we had approximately 450 employees worldwide, of whom approximately 230 were based outside of the U.S, and nearly all of whom were full-time.
Convida Wireless intends to license its patented innovations to companies providing IoT products and services. Overview of Smartphone, Consumer Electronics, and IoT Industries The primary markets for our wireless and video technologies are the smartphone and consumer electronics and IoT/Automotive markets.
Overview of Smartphone, Consumer Electronics, IoT, and Video Services Industries The primary markets for our wireless and video technologies are the smartphone, consumer electronics, IoT/Automotive, and Video Services markets. The smartphone market, with an estimated 1.2 billion units shipped worldwide in 2023, is driven by several large, global brands.
Wireless Technology We have a long history of developing cellular technologies, including those related to CDMA and TDMA and OFDM/OFDMA and MIMO. Many of our inventions are being used in all 2G, 3G, 4G and 5G wireless networks and mobile terminal devices.
In 2023, 2022, and 2021, our research and innovation costs were $78.3 million, $74.3 million, and $89.4 million, respectively, and the largest portion of this expense has been personnel costs. Wireless Technology We have a long history of developing cellular technologies, including those related to CDMA and TDMA and OFDM/OFDMA and MIMO.
The determination by the panel will be in the form of a patent license agreement that will be final, binding, and non-appealable, subject to certain limited exceptions. The Company expects the arbitration to conclude within approximately 18 months. In 2021, we entered into a multi-year, worldwide, non-exclusive, royalty bearing license with Xiaomi.
In 2021, we entered into a multi-year, worldwide, non-exclusive, royalty bearing license with Xiaomi.
With the acquisitions of the patent licensing business (the "Technicolor Patent Acquisition") and research and innovation unit of visual technology industry leader Technicolor SA ("Technicolor") (together, the "Technicolor Acquisitions"), we are a leader in video processing, encoding/decoding, and display technology, with a significant Artificial Intelligence ("AI") research effort that intersects with both wireless and visual technologies.
Our video technology portfolio combines patents and applications that InterDigital obtained through the acquisitions of the patent licensing business and research and innovation unit of visual technology industry leader Technicolor SA and patents and applications created by internal development.
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Those wireless standards include 3G, 4G and the IEEE 802 suite of standards, as well as patents and patent applications that we believe are or may become essential to 5G standards that currently exist or are under development.
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In addition, our patented inventions have been implemented in a wide variety of services, such as video streaming and other cloud-based services. InterDigital derives revenues primarily from licensing our patented innovations. In 2023 and 2022, our total revenues were $549.6 million and $457.8 million, respectively.
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In addition, InterDigital was among the first companies to participate in standardization and platform development efforts related to Machine-to-Machine ("M2M") communications and IoT technology. InterDigital R&I is also a leader in key video technologies, including emerging technologies such as immersive video and AI-based video coding.
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To execute our strategy, we intend to: • Grow and enhance our patent portfolio through continued investment in advanced research and development.
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Over the last three years, investment in research and portfolio development expense has ranged from $185.2 million to $204.4 million, and the largest portion of this expense has been personnel costs and amortization. Additional information about our research and portfolio development expenses is provided under the heading " Operating Expenses ," in Part II, Item 7, of this Form 10-K.
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Our business success is dependent on our ability to attract, grow, and retain top talent, such as specialized engineering and other technical talent. Technology Research and Development InterDigital R&I InterDigital operates a diversified research and development operation, InterDigital Research & Innovation ("InterDigital R&I").
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Our issued patents expire at differing times ranging from 2023 through 2043.
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The InterDigital R&I team’s technical expertise is recognized by the worldwide wireless and video standards bodies where our delegates hold key leadership positions. Our capabilities in the development of advanced technologies are based on the efforts of a highly specialized engineering team, leveraging leading-edge equipment and software platforms.
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Overview of Patent Licenses The majority of our revenue is generated from fixed-fee patent license agreements, with a smaller portion coming from variable royalty agreements.
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InterDigital R&I is now conducting research in groundbreaking technologies preparing for the next generation of video codecs beyond VVC, investigating new media coding such as point cloud compression, haptics or avatars using both traditional and AI-based techniques. Even codecs, such as AV1/VP9, developed by non-standard groups use fundamental techniques we have been instrumental in developing.
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In 2020, Sisvel International N.A. announced that it had launched a licensing program covering VP9 and AV1 video coding formats, which we have joined as a licensor. In 2012, we formed a joint venture with Sony called Convida Wireless.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny such delays in the negotiation or entry into patent license agreements and receipt of the associated revenue stream could cause our revenue and cash flow to decline. 13 Table of Contents Royalty rates, or other terms, under our patent license agreements could be subject to determination through arbitration or other third-party adjudications or regulatory or court proceedings, and arbitrators, judges or other third-party adjudicators or regulators could determine that our patent royalty rates should be at levels lower than our agreed or historical rates or otherwise make determinations resulting in less favorable terms and conditions under our patent license agreements.
Biggest changeRoyalty rates, or other terms, under our patent license agreements could be subject to determination through arbitration or other third-party adjudications or regulatory or court proceedings, and arbitrators, judges or other third-party adjudicators or regulators could make unfavorable determinations.
Historically, we strive for the terms of our patent license agreements, including our royalty rates, to be reached through arms-length bilateral negotiations with our licensees. We could agree, as we recently did with Samsung pursuant to a binding arbitration agreement, to have royalty rates, and any other disputed terms, set by third party adjudicators (such as arbitrators).
Historically, we strive for the terms of our patent license agreements, including our royalty rates, to be reached through arms-length bilateral negotiations with our licensees. We could agree, as we did with Samsung pursuant to a binding arbitration agreement, to have royalty rates, and any other disputed terms, set by third party adjudicators (such as arbitrators).
A significant portion of our licensees, potential licensees and customers are international, and our licensees, potential licensees and customers sell their products to markets throughout the world. In addition, in recent years, we have expanded, and we may continue to expand, our international operations, opening offices in France, Belgium and Finland.
A significant portion of our licensees, potential licensees and customers are international, and our licensees, potential licensees and customers sell their products to markets throughout the world. In addition, in recent years, we have expanded, and we may continue to expand, our international operations, opening offices in China, France, Belgium and Finland.
Although we endeavor to renew such license agreements prior to their expiration, due to various factors, including the technology and business needs and competitive positions of our licensees and, at times, reluctance on the part of our licensees to participate in renewal discussions, we may not be able to renegotiate the license agreements on acceptable terms before or after the expiration of the license agreement, or at all.
Although we endeavor to renew license agreements prior to their expiration, due to various factors, including the technology and business needs and competitive positions of our licensees and, at times, reluctance on the part of our licensees to participate in renewal discussions, we may not be able to renegotiate the license agreements on acceptable terms before the expiration of the license agreement, or at all.
For example, accounting principles may require us to recognize revenue before the actual amount is certain, which could add to uncertainty in our revenue guidance. The variability and unpredictability of our results of operations or other operating metrics could result in our failure to meet our expectations or those of industry or financial analysts.
For example, accounting principles sometimes require us to recognize revenue before the actual amount is certain, which could add to uncertainty in our revenue guidance. The variability and unpredictability of our results of operations or other operating metrics could result in our failure to meet our expectations or those of industry or financial analysts.
Our shareholders may not receive the level of dividends provided for in our dividend policy or any dividend at all, and any decrease in or suspension of the dividend could cause our stock price to decline. Our current dividend policy contemplates the payment of a regular quarterly cash dividend of $0.35 per share on our outstanding common stock.
Our shareholders may not receive the level of dividends provided for in our dividend policy or any dividend at all, and any decrease in or suspension of the dividend could cause our stock price to decline. Our current dividend policy contemplates the payment of a regular quarterly cash dividend of $0.40 per share on our outstanding common stock.
Such parties may also seek to obtain a determination that our patents are not infringed, are not essential or are unenforceable. Litigation may be also required to enforce our intellectual property rights, protect our trade secrets, enforce patent license and confidentiality agreements or determine the validity, enforceability and scope of proprietary rights of others.
Such parties may also seek to obtain a determination that our patents are not infringed, are not essential or are unenforceable. Litigation may be also required to protect our trade secrets, enforce patent license and confidentiality agreements or determine the validity, enforceability and scope of proprietary rights of others.
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.
Any potential changes in the law, the IPR policies of standards bodies or other developments that reduce the available forums or the types 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.
In addition, in the event that there is a material decrease in shipments of licensed products by one of our per-unit licensees, our revenues from such licensee could significantly decline and our future revenue and cash flow could be adversely affected. Additionally, there is significant concentration among participants in the wireless communications industry, and these trends may continue.
In addition, in the event that there is a material decrease in shipments of licensed products by one of our per-unit licensees, our revenues from such licensee could significantly decline and our future revenue and cash flow could be adversely affected. Additionally, there is significant concentration in the wireless communications industry in general, and these trends may continue.
In turn, we have faced, and could continue to face, counterclaims and other legal proceedings that challenge the essential nature of our patents, or that claim that our patents are invalid, unenforceable or not infringed.
In turn, we have faced, and expect to continue to face, counterclaims and other legal proceedings that challenge the essential nature of our patents, or that claim that our patents are invalid, unenforceable or not infringed.
The extent to which COVID-19 and any other potential future public health crises, pandemics or similar events could adversely impact our business, financial condition and results of operations is dependent upon numerous factors, many of which are highly uncertain, rapidly changing and uncontrollable.
The extent to which any potential future public health crises, pandemics or similar events could adversely impact our business, financial condition and results of operations is dependent upon numerous factors, many of which are highly uncertain, rapidly changing and uncontrollable.
There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful. Moreover, certain of our technologies have not been fully tested in commercial use, and it is possible that they may not perform as expected.
There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful. Moreover, certain of our technologies have not been tested for commercial use, and it is possible that they may not perform as expected.
We earn a significant amount of our revenues from a limited number of licensees or customers, and we expect that a significant portion of our revenues will continue to come from a limited number of licensees or customers for the foreseeable future. For example, in 2022, Apple, Samsung, and Xiaomi each comprised 10% or more of our consolidated revenues.
We earn a significant amount of our revenues from a limited number of licensees or customers, and we expect that a significant portion of our revenues will continue to come from a limited number of licensees or customers for the foreseeable future. For example, in 2023, Apple, Samsung, Lenovo, and Xiaomi each comprised 10% or more of our consolidated revenues.
From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that these audits will be numerous enough and/or effective to that end.
From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we cannot give assurances that these audits will be sufficient or effective.
Our stock repurchase program, including the tender offer that we initiated during first quarter 2023, may not return value to shareholders as it was designed to do because the market price of the stock may decline below the levels at which we repurchased shares of stock.
Our stock repurchase program, including the tender offer that we completed during 2023, may not return value to shareholders as it was designed to do because the market price of the stock may decline below the levels at which we repurchased shares of stock.
Accordingly, we are subject to the risks and uncertainties of operating internationally and could be affected by a variety of uncontrollable and changing factors, including, but not limited to: difficulty in protecting our intellectual property in foreign jurisdictions; enforcing contractual commitments in foreign jurisdictions or against foreign corporations; government regulations, tariffs and other applicable trade barriers; biased enforcement of foreign laws and regulations to promote industrial or economic policies at our expense; retaliatory practices by foreign actors; currency control regulations; export license requirements and restrictions on the use of technology; social, economic and political instability; costly, time consuming and changing regulatory regimes; natural disasters, acts of terrorism, widespread illness and war; potentially adverse tax consequences; general delays in remittance of and difficulties collecting non-U.S. payments; foreign labor regulations; anti-corruption laws; public health issues; and difficulty in staffing and managing operations remotely.
Our international operations could exacerbate the other risk factors we have identified, and we could be affected by a variety of uncontrollable and changing factors, including, but not limited to: difficulty in protecting our intellectual property in foreign jurisdictions; enforcing contractual commitments in foreign jurisdictions or against foreign corporations; government regulations, tariffs and other applicable trade barriers; biased enforcement of foreign laws and regulations to promote industrial or economic policies at our expense; retaliatory practices by foreign actors; currency control regulations; export license requirements and restrictions on the use of technology; social, economic and political instability; costly, time consuming and changing regulatory regimes; natural disasters, acts of terrorism, widespread illness and war; potentially adverse tax consequences; general delays in remittance of and difficulties collecting non-U.S. payments; foreign labor regulations; anti-corruption laws; public health issues; and difficulty in staffing and managing operations remotely.
The validity of their and our assumptions, the timing and scope of wireless markets, economic conditions, customer buying patterns, timeliness of equipment development, pricing of products, growth in wireless telecommunications services that would be delivered on wireless devices and availability of capital for infrastructure improvements could affect these predictions.
The validity of their and our assumptions, the timing and scope of wireless markets , economic conditions, customer buying patterns, timeliness of equipment development, pricing of products, growth in wireless telecommunications services that would be delivered on wireless devices and availability of capital for infrastructure improvements could affect these predictions. Projections on the size of various markets may be inaccurate.
The cost of enforcing and defending our intellectual property and of defending our licensing practices has been and may continue to be significant. As a result, we could be subject to significant legal fees and costs, including in certain jurisdictions the costs and fees of opposing counsel if we are unsuccessful.
The cost of enforcing and defending our intellectual property and of defending our licensing practices has been and may continue to be significant, in particular with rising fees from outside counsel. As a result, we could be subject to significant legal fees and costs, including in certain jurisdictions the costs and fees of opposing counsel if we are unsuccessful.
Any further concentration or sale within the wireless industry among handset providers and/or original design manufacturers ("ODMs") may reduce the number of licensing opportunities or, in some instances, result in the reduction, loss or elimination of existing royalty obligations.
Any further concentration or sale within the wireless industry among handset providers may reduce the number of licensing opportunities or, in some instances, result in the reduction, loss or elimination of existing royalty obligations.
If the technologies in which we invest do not become patented or are not adopted by the relevant standards, or are not adopted by and deployed in the mainstream markets, at all or at the rate or within time periods that we expect, or in the case of open source solutions, do not infringe our technology, our business, financial condition and operating results could be adversely affected.
If the technologies in which we invest do not become patented, are not adopted by the relevant standards, or are not adopted by and deployed in the mainstream markets, at all or at the rate or within time periods that we expect, our business, financial condition and operating results could be adversely affected.
If there is a delay in renegotiating and renewing a license agreement prior to its expiration, there could be a gap in time during which we may be unable to recognize revenue from that licensee or we may be forced to renegotiate and renew the license agreement on terms that are more favorable to such licensee, and, as a result, our revenue and cash flow could be materially adversely affected.
If there is a delay in renegotiating and renewing a license agreement prior to its expiration, there could be a gap in time during which we may be unable to recognize revenue from that licensee or we may be forced to renegotiate and renew the license agreement on terms that are more favorable to such licensee.
If we cannot implement an effective compliance mechanism for cross-border privacy and security matters, we may face increased exposure to regulatory actions, substantial fines and other penalties. Further, these areas are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty. We regularly make strategic decisions about our patent portfolio.
If we cannot implement an effective compliance mechanism for cross-border privacy and security matters, we may face increased exposure to regulatory actions, substantial fines and other penalties. Further, these areas are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
In addition, if we fail to renegotiate and renew our license agreements at all or on terms that are favorable to us, our revenue and cash flow could be materially adversely affected.
If we fail to renegotiate and renew our license agreements prior to their expiration, at all or on terms that are favorable to us, our forecasts, revenue and cash flow could be materially adversely affected.
Our indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under such indebtedness. Our total indebtedness as of December 31, 2022 was approximately $616.8 million.
Our indebtedness could adversely affect our business, financial condition and results of operations and our ability to meet our payment obligations under such indebtedness. Our total indebtedness as of December 31, 2023 was approximately $615.2 million.
Our business and operations could suffer in the event of security breaches. Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated. These attempts, which in some cases could be related to industrial or other espionage, include covertly introducing malware to computers and networks and impersonating authorized users, among others.
Attempts by others to gain unauthorized access to information technology systems are becoming more sophisticated. These attempts, which in some cases could be related to industrial or other espionage, include covertly introducing malware to computers and networks and impersonating authorized users, among others.
Consequently, we approach companies and seek to establish license agreements for using our inventions. We expend significant time and effort identifying users and potential users of our inventions and negotiating license agreements with companies that may be reluctant to take licenses.
We expend significant time and effort identifying users and potential users of our inventions and negotiating license agreements with companies that may be reluctant to take licenses.
Some third parties have challenged, and we expect will continue to challenge, the infringement, validity and enforceability of certain of our patents. In some instances, certain of our patent claims could be substantially narrowed or declared invalid, unenforceable, not essential or not infringed.
Setbacks in defending and enforcing our patent rights could cause our revenue and cash flow to decline. Some third parties have challenged, and we expect will continue to challenge, the infringement, validity and enforceability of certain of our patents. In some instances, certain of our patent claims could be substantially narrowed or declared invalid, unenforceable, not essential or not infringed.
Delays or failure to enter into licensing or other relationships to facilitate technology development efforts or delays or failure to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows or impair our ability to remain competitive.
Delays or failure to enter into licensing or other relationships to facilitate technology development efforts or delays or failure to enter into technology licensing agreements to secure integration of additional functionality could impair our ability to introduce into the market portions of our technology and resulting products, cause us to miss critical market windows or impair our ability to remain competitive. 23 Table of Contents Our business and operations could suffer in the event of security breaches.
In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have an adverse effect on our consolidated financial condition or results of operations.
In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have an adverse effect on our consolidated financial condition or results of operations. Market projections and data are forward-looking in nature.
The U.S. and Chinese governments are regularly engaged in various trade discussions, and the U.S. State Department originally issued a travel advisory in January 2019 and reissued this travel advisory on January 11, 2023 along with updates to COVID-19 information which, among other things, advised U.S. citizens to exercise increased caution in China due to arbitrary enforcement of local laws.
The U.S. and Chinese governments are regularly engaged in various trade discussions, and the U.S. State Department originally issued a travel advisory in January 2019 and reissued this travel advisory on January 11, 2023 advising U.S. citizens to exercise increased caution in China due to arbitrary enforcement of local laws.
These factors include, but are not limited to: (i) the duration and scope of the pandemic; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic or other event, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on our customers, including those that are presently unlicensed, and other business partners; (iv) the impact on U.S. and global economies and the timing and rate of economic recovery; (v) potential adverse effects on the financial markets and access to capital; (vi) potential goodwill or other impairment charges; (vii) increased cybersecurity risks as a result of pervasive remote working conditions; (viii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families; (ix) the ability of our customers to timely satisfy their payment obligations to us; and (x) fluctuations in global shipments of handsets and consumer electronics devices. 20 Table of Contents Many of our employees have the flexibility to work remotely on at least a part-time basis, which could impair our ability to maintain our collaborative and innovative culture, and may cause disruptions among our employees, including decreases in productivity, challenges in communications between on-site and off-site employees and, potentially, employee dissatisfaction and attrition.
These factors include, but are not limited to: (i) the duration and scope of the pandemic or other event; (ii) governmental, business and individual actions that have been and continue to be taken in response to the pandemic or other event, including travel restrictions, quarantines, social distancing, work-from-home and shelter-in-place orders and shut-downs; (iii) the impact on our customers, including those that are presently unlicensed, and other business partners; (iv) the impact on U.S. and global economies and the timing and rate of economic recovery; (v) potential adverse effects on the financial markets and access to capital; (vi) potential goodwill or other impairment charges; (vii) increased cybersecurity risks as a result of pervasive remote working conditions; (viii) our ability to effectively carry out our operations due to any adverse impacts on the health and safety of our employees and their families; (ix) the ability of our customers to timely satisfy their payment obligations to us; and (x) fluctuations in global shipments of handsets and consumer electronics devices. 20 Table of Contents We face risks from doing business and maintaining offices in international markets.
If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the applicable convertible note hedge transactions.
Our exposure to the credit risk of the option counterparties is not secured by any collateral. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at that time under the applicable convertible note hedge transactions.
Currently, there is an ongoing discussion within the EC regarding potential regulations and policy changes that could determine how and whether a patent is essential to a standard.
There are regularly discussions within the EC regarding potential regulations and policy changes that could determine how and whether a patent is essential to a standard.
In such an event, the market price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties we describe below are not the only ones facing us.
In such an event, the market price of our common stock could decline and you could lose all or part of your investment. The risks and uncertainties we describe below are not the only ones facing us. Additional risks not presently known to us or that we currently deem immaterial may also affect our business.
We can provide no assurance as to the financial stability or viability of the option counterparties. Provisions of the 2024 Notes and 2027 Notes could discourage an acquisition of us by a third party. Certain provisions of the 2024 Notes and the 2027 Notes could make it more difficult or more expensive for a third party to acquire us.
We can provide no assurance as to the financial stability or viability of the option counterparties. 25 Table of Contents Provisions of the 2024 Notes and 2027 Notes could discourage an acquisition of us by a third party.
In addition, litigation, arbitration and administrative proceedings require significant key employee involvement for significant periods of time, which could divert these employees from other business activities. 14 Table of Contents 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 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.
The patents and applications comprising our portfolio have fixed terms, and, if we fail to anticipate or respond adequately to these changes through the development or acquisition of new patentable inventions, patents or other technology, we could miss a critical market opportunity, reducing or eliminating our ability to capitalize on our patents, technology solutions or both. 21 Table of Contents Our use of open source software could materially adversely affect our business, financial condition, operating results and cash flow.
The patents and applications comprising our portfolio have fixed terms, and, if we fail to anticipate or respond adequately to these changes through the development or acquisition of new patentable inventions, patents or other technology, we could miss a critical market opportunity, reducing or eliminating our ability to capitalize on our patents, technology solutions or both.
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.
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. 15 Table of Contents Rulings in our legal proceedings, as well as those of third parties, may affect our strategies for patent prosecution, licensing and royalty rate setting and enforcement.
Finally, adverse legal decisions related to our licensing practices could have an adverse effect on our ability to enter into license agreements, which, in turn, could cause our cash flow and revenue to decline. 16 Table of Contents We are subject to risks resulting from the concentration of our revenues from a limited number of licensees or customers, and in the wireless industry generally.
Such decisions could also cause serious reputational harm. Finally, adverse legal decisions related to our licensing practices could have an adverse effect on our ability to enter into license agreements, which, in turn, could cause our cash flow and revenue to decline. 16 Table of Contents We are subject to risks resulting from customer concentration.
This could also have a negative impact on royalties we are able to obtain from future licensees, which may have an adverse effect on our revenue and cash flow.
This could also have a negative impact on royalties we are able to obtain from future licensees, which may have an adverse effect on our revenue and cash flow. Prospective customers may delay, and in some cases have delayed, negotiations on the basis of an adverse decision.
The potential effect, if any, of any of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the market price of our common stock. 25 Table of Contents We are subject to counterparty risk with respect to the convertible note hedge transactions.
The potential effect, if any, of any of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time, but any of these activities could adversely affect the market price of our common stock.
The respective option counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that such option counterparties may default under the respective convertible note hedge transactions. Our exposure to the credit risk of the option counterparties is not secured by any collateral.
We are subject to counterparty risk with respect to the convertible note hedge transactions. The respective option counterparties are financial institutions or affiliates of financial institutions, and we will be subject to the risk that such option counterparties may default under the respective convertible note hedge transactions.
The high amount of capital required to obtain radio frequency licenses, deploy and expand wireless networks and obtain new subscribers, as well as the cost of new handsets could slow the growth of the wireless communications industry and adversely affect our business.
The inaccuracy of any of these projections and/or market data could adversely affect our business prospects, operating results and financial condition. 22 Table of Contents The high amount of capital required to obtain radio frequency licenses, deploy and expand wireless networks and obtain new subscribers, as well as the cost of new handsets could slow the growth of the wireless communications industry and adversely affect our business.
Our revenue may be affected by the deployment of future-generation wireless standards in place of 3G, 4G and 5G technologies or future-generation video standards, by the timing of such deployment, or by the need to extend or modify certain existing license agreements to cover subsequently issued patents.
Depending upon the payment structure of any new patent license agreements into which we may enter, such cash flow fluctuations may continue in the future. 19 Table of Contents Our revenue may be affected by the deployment of future-generation wireless standards in place of 3G, 4G and 5G technologies or future-generation video standards, by the timing of such deployment, or by the need to extend or modify certain existing license agreements to cover subsequently issued patents.
Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time consuming, incomplete and subject to dispute.
The standard terms of our per-unit license agreements require our licensees to document the sale of licensed products and report this data to us on a quarterly basis. Although our standard license terms give us the right to audit books and records of our licensees to verify this information, audits can be expensive, time consuming, incomplete and subject to dispute.
We continue to monitor and evaluate our strategies for prosecution, licensing and enforcement with regard to these developments; however, any resulting change in such strategies may have an adverse impact on our business and financial condition. 15 Table of Contents Our plans to renew license agreements with current licensees as well as additional handset manufacturers in China may be adversely affected by a deterioration in United States-China trade and geopolitical relations, our customers facing economic uncertainty there or our failure to establish a positive reputation in China, which could materially adversely affect our long-term business, financial condition and operating results.
Our plans to renew license agreements with current licensees as well as additional handset manufacturers in China may be adversely affected by a deterioration in United States-China trade and geopolitical relations, our customers facing economic uncertainty there or our failure to establish a positive reputation in China, which could materially adversely affect our long-term business, financial condition and operating results.
In addition, to the extent that any future security breach results in inappropriate disclosure of our employees’, licensees’, or customers’ confidential and /or personal information, we may incur liability or additional costs to remedy any damages caused by such breach. 23 Table of Contents Our business is subject to a variety of domestic and international laws, rules and policies and other obligations regarding data protection.
In addition, to the extent that any future security breach results in inappropriate disclosure of our employees’, licensees’, or customers’ confidential and /or personal information, we may incur liability or additional costs to remedy any damages caused by such breach.
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.
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. Further, the cost and loss of efficiency related to turnover, particularly at senior levels, may be significant.
In addition, to the extent that other terms and conditions for our patent license agreements are determined through such means, such terms and conditions could be less favorable than our historical terms and conditions, which may have an adverse effect on our licensing business.
In addition, to the extent that other terms and conditions for our patent license agreements are determined through such means, such terms and conditions could be less favorable than our historical terms and conditions, which may have an adverse effect on our licensing business. 14 Table of Contents We could continue to be involved in a number of costly litigation, arbitration and administrative proceedings to enforce or defend our intellectual property rights and to defend our licensing practices.
Further, if wireless carriers consolidate with companies that utilize technologies that are competitive with our technologies or that are not covered by our patents, we could lose market opportunities, which could negatively impact our revenues and financial condition. Setbacks in defending and enforcing our patent rights could cause our revenue and cash flow to decline.
Further, if wireless carriers consolidate with companies that utilize technologies that are competitive with our technologies or that are not covered by our patents, we could lose market opportunities, which could negatively impact our revenues and financial condition. We face competition from companies developing other or similar technologies.
Furthermore, if there is a delay in the standardization and/or deployment of 5G or future video coding standards, our business and revenue could be negatively impacted. 19 Table of Contents The licenses that we grant under our patent license agreements typically only cover products designed to operate in accordance with specified technologies and that were manufactured or deployed or anticipated to be manufactured or deployed at the time of entry into the agreement.
The licenses that we grant under our patent license agreements typically only cover products designed to operate in accordance with specified technologies and that were manufactured or deployed or anticipated to be manufactured or deployed at the time of entry into the agreement.
In 2021, Lenovo initiated a proceeding before the Wuhan Intermediate People’s Court to determine a worldwide rate for our 3G, 4G, and 5G SEPs, and in 2022, Oppo initiated a proceeding before the Guangzhou Intellectual Property Court to determine a worldwide rate for our 3G, 4G, 5G, 802.11 and HEVC SEPs.
We currently face similar proceedings that Oppo initiated before the Guangzhou Intellectual Property Court to determine a worldwide rate for our 3G, 4G, 5G, 802.11 and HEVC SEPs.
In addition, if the cost of cellular handsets increases, customers may be less likely to replace their existing devices with new devices. The growth of our business could be adversely affected if either of these events occur. 22 Table of Contents Market projections and data are forward-looking in nature.
In addition, if the cost of cellular handsets increases, customers may be less likely to replace their existing devices with new devices. The growth of our business could be adversely affected if either of these events occur. We regularly make strategic decisions about our patent portfolio.
We may be affected by existing and proposed laws and regulations, as well as government policies and practices related to cybersecurity, privacy and data protection.
Our business is subject to a variety of domestic and international laws, rules and policies and other obligations regarding data protection. We may be affected by existing and proposed laws and regulations, as well as government policies and practices related to cybersecurity, privacy and data protection.
Any assets that we divest could turn out to be more valuable than we had anticipated and we may not realize the anticipated benefits of any strategic decision about our patent portfolio.
Any assets that we divest could turn out to be more valuable than we had anticipated and we may not realize the anticipated benefits of any strategic decision about our patent portfolio. It can be difficult for us to verify royalty amounts owed to us under our per-unit licensing agreements, and this may cause us to lose potential revenue.
Further, such extensions, modifications or new license agreements may adversely affect our revenue on the sale of products covered by the license prior to any extension, modification or new license. Our plans to expand our revenue opportunities may not be successful.
Further, such extensions, modifications or new license agreements may adversely affect our revenue on the sale of products covered by the license prior to any extension, modification or new license. We may not be able to attract and retain qualified employees . Competition for top talent is substantial. In order to be successful, we must attract, develop, and retain employees.
We face challenges in entering into new patent license agreements. One of the most significant challenges we face is that most potential licensees do not voluntarily seek to enter into license agreements with us before they commence manufacturing and/or selling devices that use our patented inventions.
Most implementers of our technology do not voluntarily seek to enter into license agreements with us before they commence manufacturing and/or selling devices that use our patented inventions. The process of identifying users of our inventions and negotiating license agreements with reluctant prospective licensees requires significant time, effort and expense.
Such scrutiny has in the past resulted in enforcement actions against Qualcomm and other licensing companies, and could lead to additional investigations of, or enforcement actions against, us. Such inquiries and/or enforcement actions could impact the availability of injunctive and monetary relief, which may adversely affect our strategies for patent prosecution, licensing and enforcement and increase our costs of operation.
Such inquiries and/or enforcement actions could impact the availability of injunctive and monetary relief, which may adversely affect our strategies for patent prosecution, licensing and enforcement and increase our costs of operation. Such inquiries and/or enforcement actions could also result in monetary fines, penalties or other remedies or sanctions that could adversely affect our business and financial condition.
In particular, in 2021, the IP Tribunal of the Supreme People’s Court of the People’s Republic of China (SPC) affirmed its position that in certain SEP licensing disputes, Chinese courts can set worldwide royalty rates.
In particular, in 2021, the IP Tribunal of the Supreme People’s Court of the People’s Republic of China (SPC) affirmed its position that in certain SEP licensing disputes, Chinese courts can set worldwide royalty rates, and in December 2023, the Chongqing First Intermediate People’s Court issued such a decision setting a worldwide rate for Nokia’s cellular patents in response to a complaint filed by Oppo.
We also are subject to risks specific to the individual countries in which we and our licensees, potential licensees and customers do business.
Managing operations and complying with relevant laws and regulations in China may be particularly complex, costly and time-consuming. We also are subject to risks specific to the individual countries in which we and our licensees, potential licensees and customers do business.
In the event of successful challenges by current or prospective licensees based on these doctrines that result in a material decrease to our patent licensing revenue, our financial condition and operating results may be materially adversely affected. 18 Table of Contents We have in the past and may in the future make acquisitions or engage in other strategic transactions that could result in significant changes, costs and/or management disruption and that may fail to enhance shareholder value or produce the anticipated benefits.
In the event of successful challenges by current or prospective licensees based on these doctrines that result in a material decrease to our patent licensing revenue, our financial condition and operating results may be materially adversely affected. 21 Table of Contents Our use of open source software could materially adversely affect our business, financial condition, operating results and cash flow.
For example, in 2021, Samsung, Apple and Xiaomi collectively accounted for approximately 50% of worldwide smartphone shipments. Although the rollout of 5G handsets is still in its early stages, we anticipate a similar level of concentration in worldwide shipments of those units as well.
For example, in 2022, Samsung, Apple and Xiaomi collectively accounted for approximately 50% of worldwide smartphone shipments, and we anticipate a similar level of concentration in worldwide shipments for 2023 and beyond.
Our strategy is based on our own projections and on analyst, industry observer and expert projections, which are forward-looking in nature and are inherently subject to risks and uncertainties.
Our strategy is based on our own projections and on analyst, industry observer and expert projections, which are forward-looking in nature and are inherently subject to risks and uncertainties. We utilize these projections in various ways, including key strategic decisions that we regularly make regarding the direction of our business, research and licensing efforts.
In addition, market data upon which we rely is based on third party reports that may be inaccurate. The inaccuracy of any of these projections and/or market data could adversely affect our operating results and financial condition.
In addition, market data upon which we rely is based on third party reports that may be inaccurate.
Additional risks not presently known to us or that we currently deem immaterial may also affect our business. 12 Table of Contents Risks Related to Our Business Challenges relating to our ability to enter into new license agreements and renew existing license agreements could cause our revenue and cash flow to decline.
Risks Related to Our Business Challenges relating to our ability to enter into new license agreements and renew existing license agreements could cause our revenue and cash flow to decline. We face challenges in entering into new patent license agreements.
Court of Appeals for the Federal Circuit, have taken some actions that have been viewed as unfavorable to patentees, including us.
For example, in the past, the USITC and U.S. courts, including the U.S. Supreme Court, have taken actions that have been viewed as unfavorable to patentees, including us.
The legal doctrines of patent exhaustion and implied license may be subject to different judicial interpretations.
Our commercialization, licensing and/or M&A activities could lead to patent exhaustion or implied license issues that could materially adversely affect our business. The legal doctrines of patent exhaustion and implied license may be subject to different judicial interpretations.
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. We face competition from companies developing other or similar technologies.
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. 18 Table of Contents Scrutiny by antitrust authorities may affect our strategies for patent prosecution, licensing and enforcement and may increase our costs of doing business and/or lead to monetary fines, penalties or other remedies or sanctions.
Scrutiny by antitrust authorities may affect our strategies for patent prosecution, licensing and enforcement and may increase our costs of doing business and/or lead to monetary fines, penalties or other remedies or sanctions. Domestic and foreign antitrust authorities regularly review their policies with respect to the use of SEPs, including the enforcement of such patents against competitors and others.
Domestic and foreign antitrust authorities regularly review their policies with respect to the use of SEPs, including the enforcement of such patents against competitors and others. Such scrutiny has in the past resulted in enforcement actions against Qualcomm and other licensing companies, and could lead to additional investigations of, or enforcement actions against, us.
We cannot ensure that the validity and enforceability of our patents will be maintained or that our patents will be determined to be applicable to any particular product or standard. Moreover, third parties could attempt to circumvent certain of our patents through design changes.
For example, in limited cases, certain of our patents have been held invalid by courts in proceedings initiated by counterparties to our litigation proceedings. We cannot ensure that the validity and enforceability of our patents will be maintained or that our patents will be determined to be applicable to any particular product or standard.
The extent to which the COVID-19 pandemic or any other potential future public health crises, pandemics or similar events will adversely impact our business, financial condition and results of operations is highly uncertain and cannot be predicted. The COVID-19 pandemic has created significant worldwide uncertainty, volatility and economic disruption.
A potential public health crisis, pandemic or similar event could adversely impact our business, financial condition and results of operations. As we saw with the COVID-19 pandemic, any such event can create significant worldwide uncertainty, volatility and economic disruption.
Absence of change could result in ETSI no longer being recognized as an official Standards Developing Organization by the EC. 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.
This review is currently being discussed and debated inside the European Parliament and the European Council and any change to the legal or regulatory landscape as a result of this review could impact our ability to negotiate license agreements on favorable terms or at all, while also limiting our potential legal remedies and materially impacting our business.
Due to the nature of our business, we could continue to be involved in a number of costly litigation, arbitration and administrative proceedings to enforce or defend our intellectual property rights and to defend our licensing practices. While some companies seek licenses before they commence manufacturing and/or selling devices that use our patented inventions, most do not.
While some companies seek licenses before they commence manufacturing and/or selling devices or services that use our patented inventions, most do not. Consequently, we approach companies and seek to establish license agreements for using our inventions.
Given these challenges relating to our ability to enter into new license agreements, we cannot ensure that all prospective licensees will be identified or, if they are identified, will be persuaded during negotiations to enter into a patent license agreement with us, either at all or on terms acceptable to us, and, as a result, our revenue and cash flow could materially decline.
Given these challenges, we cannot ensure that we will be able to enter into patent license agreements either at all or on terms acceptable to us. Additionally, given the large number of implementers using our patented inventions, we may not be able to identify all potential licensees.
However, if we believe that a third party is required to take a license to our patents in order to manufacture, sell, offer for sale, import or use products, we have in the past commenced, and may in the future commence, legal or administrative action against the third party if they refuse to enter into a license agreement with us.
However, if a third party implementer is unwilling to take a license on reasonable terms or in a reasonable time frame, or at all, we have in the past commenced, and may in the future commence, legal or administrative actions against such third parties to enforce our intellectual property rights.
As a result, our cash flow has historically fluctuated from period to period. Depending upon the payment structure of any new patent license agreements into which we may enter, such cash flow fluctuations may continue in the future.
As a result, our cash flow has historically fluctuated from period to period.
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 (EC) has also initiated several processes to review the EU’s IP policies, in particular as they relate to SEPs and FRAND.
Additionally, the European Commission (“EC”) has initiated a review of the EU’s IP policies as they relate to SEPs and FRAND.
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As a result, we must approach companies that are reluctant to take licenses and attempt to establish license agreements with them. The process of identifying potential users of our inventions and negotiating license agreements with reluctant prospective licensees requires significant time, effort and expense.
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Some infringers may act in bad faith, by attempting to hold out on taking a license altogether or behaving opportunistically in license negotiations. Even good faith negotiations are often very long and complex, involving significant company time and resources.
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Once discussions with unlicensed companies have commenced, we face the additional challenges imposed by the significant negotiation issues that arise from time to time. Some infringers may act in bad faith, by behaving opportunistically to try to impact license negotiations.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table sets forth information with respect to our principal leased properties: Location Approximate Square Feet Principal Use Lease Expiration Date Wilmington, Delaware 5,768 Corporate headquarters November 2025 Rennes, France 50,000 Office and research space May 2023 Conshohocken, Pennsylvania 30,300 Office and research space September 2029 New York, New York 19,400 Office and research space July 2030 Montreal, Quebec 11,918 Office and research space June 2026 Rennes, France 10,083 Office and research space August 2031 Los Altos, California 4,900 Office and research space November 2027 We are also a party to leases for several smaller research and/or office spaces, including in Brussels, Belgium; Espoo, Finland; Indianapolis, Indiana, USA; London, United Kingdom; Paris, France; and Princeton, New Jersey, USA.
Biggest changeThe following table sets forth information with respect to our principal leased properties: Location Approximate Square Feet Principal Use Lease Expiration Date Wilmington, Delaware 7,190 Corporate headquarters November 2025 Rennes, France 33,000 Office and research space August 2031 Conshohocken, Pennsylvania 30,300 Office and research space September 2029 New York, New York 19,400 Office and research space July 2030 Montreal, Quebec 11,918 Office and research space June 2026 Los Altos, California 4,900 Office and research space November 2027 We are also a party to leases for several smaller research and/or office spaces, including in Brussels, Belgium; Espoo, Finland; Indianapolis, Indiana, USA; London, United Kingdom; Melville, New York, USA; Paris, France, and Beijing, China.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. LEGAL PROCEEDINGS. See Note 11, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K for a description of our material legal proceedings, which is incorporated herein by reference. 26 Table of Contents Item 4. MINE SAFETY DISCLOSURES.
Biggest changeItem 3. LEGAL PROCEEDINGS. See Note 12, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K for a description of our material legal proceedings, which is incorporated herein by reference. Item 4. MINE SAFETY DISCLOSURES. Not applicable. 27 Table of Contents PART II
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Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividends Cash dividends on outstanding common stock declared in 2022 and 2021 were as follows (in thousands, except per share data): 2022 Per Share Total Cumulative by Fiscal Year First quarter $ 0.35 $ 10,803 $ 10,803 Second quarter 0.35 10,380 21,183 Third quarter 0.35 10,382 31,565 Fourth quarter 0.35 10,384 41,949 $ 1.40 $ 41,949 2021 First quarter $ 0.35 $ 10,766 $ 10,766 Second quarter 0.35 10,794 21,560 Third quarter 0.35 10,740 32,300 Fourth quarter 0.35 10,741 43,041 $ 1.40 $ 43,041 Since 2018, the Company has paid a quarterly cash dividend of $0.35 per share.
Biggest changeDividends Cash dividends on outstanding common stock declared in 2023 and 2022 were as follows (in thousands, except per share data): 2023 Per Share Total Cumulative by Fiscal Year First quarter $ 0.35 $ 9,449 $ 9,449 Second quarter 0.35 9,273 18,722 Third quarter 0.40 10,348 29,070 Fourth quarter 0.40 10,226 39,296 $ 1.50 $ 39,296 2022 First quarter $ 0.35 $ 10,803 $ 10,803 Second quarter 0.35 10,380 21,183 Third quarter 0.35 10,382 31,565 Fourth quarter 0.35 10,384 41,949 $ 1.40 $ 41,949 We increased the quarterly cash dividend from $0.35 to $0.40 per share beginning with the dividend paid in fourth quarter 2023.
(2) Shares were purchased pursuant to the Company’s share repurchase program (the “Share 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 2017, December 2018, May 2019, and May 2022, respectively, and an additional $333 million in December 2022.
(2) Shares were purchased pursuant to the Company’s share repurchase program (the “Share 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 2017, December 2018, May 2019, and May 2022, respectively, an additional $333 million in December 2022, and an additional $235 million in December 2023.
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. 28 Table of Contents Performance Graph The following graph compares five-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Telecommunications index and the Russell 2000 index.
We currently expect to continue to pay comparable dividends 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. 28 Table of Contents Performance Graph The following graph compares five-year total shareholder return on common stock with the cumulative total returns of the Nasdaq Telecommunications index and the Russell 2000 index.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information The Nasdaq Global Select Market (“Nasdaq”) is the principal market for our common stock, which is traded under the symbol "IDCC." Holders As of February 13, 2023, there were 452 holders of record of our common stock.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information The Nasdaq Global Select Market (“Nasdaq”) is the principal market for our common stock, which is traded under the symbol "IDCC." Holders As of February 13, 2024, there were 408 holders of record of our common stock.
The Share Repurchase Program has no expiration date. (3) Amounts shown in this column reflect the amounts remaining under the Share Repurchase Program.
The Share Repurchase Program has no expiration date. (3) Amounts shown in this column reflect the amounts remaining under the Share Repurchase Program at the end of the period. Item 6. [ RESERVED]
Period Total Number of Shares (or Units) Purchased (1) Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchases as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (3) October 1, 2022 - October 31, 2022 — $ — — $ 67,019,447 November 1, 2022 - November 30, 2022 — $ — — $ 67,019,447 December 1, 2022 - December 31, 2022 — $ — — $ 400,000,000 Total — $ — — (1) Total number of shares purchased during each period reflects share purchase transactions that were completed (i.e., settled) during the period indicated.
Period Total Number of Shares (or Units) Purchased (1) Average Price Paid Per Share (or Unit) Total Number of Shares (or Units) Purchases as Part of Publicly Announced Plans or Programs (2) Maximum Number (or Approximate Dollar Value) of Shares (or Units) That May Yet Be Purchased Under the Plans or Programs (3) October 1, 2023 - October 31, 2023 274,000 $ 79.73 274,000 $ 79,882,188 November 1, 2023 - November 30, 2023 160,504 $ 88.33 160,504 $ 65,701,580 December 1, 2023 - December 31, 2023 36,611 $ 96.90 36,611 $ 296,259,145 Total 471,115 $ 83.99 471,115 (1) Total number of shares purchased during each period reflects share purchase transactions that were completed (i.e., settled) during the period indicated.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2017 to 12/31/2022. 12/17 12/18 12/19 12/20 12/21 12/22 InterDigital, Inc. 100.00 88.78 74.48 85.13 102.57 72.56 Russell 2000 100.00 88.99 111.70 134.00 153.85 122.41 Nasdaq Telecommunications 100.00 77.39 91.90 101.16 103.32 75.55 The above performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of InterDigital under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 29 Table of Contents Issuer Purchases of Equity Securities Repurchase of Common Stock The following table provides information regarding Company purchases of its common stock during fourth quarter 2022.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2018 to 12/31/2023. 12/18 12/19 12/20 12/21 12/22 12/23 InterDigital, Inc. 100.00 83.89 95.89 115.54 81.73 182.79 Russell 2000 100.00 125.52 150.58 172.90 137.56 160.85 Nasdaq Telecommunications 100.00 118.74 130.71 133.51 97.62 108.00 The above performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing of InterDigital under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 29 Table of Contents Issuer Purchases of Equity Securities Repurchase of Common Stock The following table provides information regarding Company purchases of its common stock during fourth quarter 2023.
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As of December 31, 2022, there was $400.0 million remaining under the share repurchase authorization, of which up to $200 million is subject to the modified Dutch auction tender offer commenced by the Company in January 2023. . Item 6. [ RESERVED]

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe caution readers that actual results and outcomes could differ materially from those expressed in or anticipated by such forward-looking statements due to a variety of factors, including those 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 macroeconomic uncertainty could have on our financial position, results of operations and cash flows; • changes in our business strategy; • changes or inaccuracies in our expectations with respect to royalty payments by our customers; and • risks related to our assumptions and application of relevant accounting standards.
Biggest changeWe caution readers that actual results and outcomes could differ materially from those expressed in or anticipated by such forward-looking statements due to a variety of factors, including those set forth below: • unanticipated delays, difficulties or accelerations in the execution of patent license agreements; • the resolution of current legal proceedings, including any awards or judgments relating to such proceedings, additional or related legal proceedings, including appeals, changes in the schedules or costs associated with such proceedings or adverse rulings; • 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 expand our revenue opportunities by entering into licensing arrangements with video streaming and other cloud-based service providers; • 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; • our continued ability to develop new technologies and secure new patents, including the risk of unexpected delays or difficulties related to the development of our technologies; • risks associated with our capital allocation strategies, including risks associated with our planned dividend payments and share repurchases; • 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 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 macroeconomic uncertainty could have on our financial position, results of operations and cash flows; • impacts from acts of terrorism, war or political or civil unrest, or any responses thereto, in the United States or elsewhere; • changes in our business strategy; • changes or inaccuracies in our expectations with respect to royalty payments by our customers; and • risks related to our assumptions and application of relevant accounting standards, including with respect to revenue recognition.
We analyze the risk of a significant revenue reversal considering both the likelihood and magnitude of the reversal and, if necessary, constrain the amount of estimated revenues recognized in order to mitigate this risk, which may result in recognizing revenues less than amounts we expect we are most likely to receive. These aforementioned estimates may require significant judgment.
We analyze the risk of a significant revenue reversal considering both the likelihood and magnitude of the reversal and, if necessary, constrain the amount of estimated revenues in order to mitigate this risk, which may result in recognizing revenues less than amounts we expect we are most likely to receive. These aforementioned estimates may require significant judgment.
Our patented inventions have been implemented in a wide variety of products and services, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles.
Our patented inventions have been implemented in a wide variety of products, including smartphones, other wireless communication devices and infrastructure equipment, such as tablets, and base stations, consumer electronics and Internet of Things ("IoT") products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices and connected automobiles.
Intellectual Property Rights Enforcement If we believe a party is required to license our patents in order to manufacture, use and/or sell certain products and such party refuses to do so, we typically offer such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators).
Intellectual Property Rights Enforcement If we believe a party is required to license our patents in order to manufacture, use and/or sell certain products or services and such party refuses to do so, we typically offer such party to have royalty rates, or other terms, set by third party adjudicators (such as arbitrators).
(b) Refer to Note 10, " Commitments ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for details of our defined benefit plan obligations. Estimated future benefit payments included above are through 2030.
(b) Refer to Note 11, " Commitments ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for details of our defined benefit plan obligations. Estimated future benefit payments included above are through 2030.
As a result, in periods where the average market price of our common stock is above the conversion price or strike price, as applicable, under the if-converted method, 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 include that number in the total diluted shares outstanding for the period. 43 Table of Contents Under the if-converted method, changes in the price per share of our common stock can have a significant impact on the number of shares that we must include in the fully diluted earnings per share calculation.
As a result, in periods where the average market price of our common stock is above the conversion price or strike price, as applicable, under the if-converted method, 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 include that number in the total diluted shares outstanding for the period. 42 Table of Contents Under the if-converted method, changes in the price per share of our common stock can have a significant impact on the number of shares that we must include in the fully diluted earnings per share calculation.
Refer to Note 9, " Obligations ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
Refer to Note 10, " Obligations ," within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for further information.
Non-cash revenue: Q1 Q2 Q3 Q4 YTD Fixed fee cash receipts (a) $ 43,803 $ 3,339 $ 26,662 $ 384,252 $ 458,056 Other cash receipts (b) 8,592 16,620 6,403 20,154 51,769 Change in deferred revenue 50,741 76,959 (274,034) 60,931 (85,403) Change in receivables (7,475) 25,163 354,242 (349,861) 22,069 Other 5,657 2,576 1,491 1,579 11,303 Total Revenue $ 101,318 $ 124,657 $ 114,764 $ 117,055 $ 457,794 Net cash (used in) provided by operating activities $ (17,972) $ (33,768) $ (18,729) $ 356,508 $ 286,039 2021 Cash vs.
Non-cash revenue: Q1 Q2 Q3 Q4 Total Fixed fee cash receipts (a) $ 43,803 $ 3,339 $ 26,662 $ 384,252 $ 458,056 Other cash receipts (b) 8,592 16,620 6,403 20,154 51,769 Decrease (increase) in deferred revenue 50,741 76,959 (274,034) 60,931 (85,403) Increase (decrease) in receivables (7,475) 25,163 354,242 (349,861) 22,069 Other 5,657 2,576 1,491 1,579 11,303 Total Revenue $ 101,318 $ 124,657 $ 114,764 $ 117,055 $ 457,794 Net cash (used in) provided by operating activities $ (17,972) $ (33,768) $ (18,729) $ 356,508 $ 286,039 2021 Cash vs.
Under our patent license agreements, we typically receive one or a combination of the following forms of payment as consideration for permitting our licensees to use our patented inventions in their applications and products Consideration for Past Patent Royalties Consideration related to a licensee’s product sales from prior periods may result from a negotiated agreement with a licensee that utilized our patented inventions prior to signing a patent license agreement with us or from the resolution of a disagreement or arbitration with a licensee over the specific terms of an existing license agreement.
Under our patent license agreements, we typically receive one or a combination of the following forms of payment as consideration for permitting our licensees to use our patented inventions in their applications and products. 36 Table of Contents Consideration for Past Patent Royalties Consideration related to a licensee’s product sales from prior periods may result from a negotiated agreement with a licensee that utilized our patented inventions prior to signing a patent license agreement with us or from the resolution of a disagreement or arbitration with a licensee over the specific terms of an existing license agreement.
Refer to Note 11, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K for a description of our material legal proceedings.
Refer to Note 12, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K for a description of our material legal proceedings.
There is no liability associated with the revenue-share agreement at December 31, 2022, as there are no minimum or maximum payments under the revenue-sharing arrangement, and, except in certain circumstances, the arrangement continues through December 31, 2038.
There is no liability associated with the revenue-share agreement at December 31, 2023, as there are no minimum or maximum payments under the revenue-sharing arrangement, and, except in certain circumstances, the arrangement continues through December 31, 2038.
The matters are more fully discussed in Note 11, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K.
The matters are more fully discussed in Note 12, “ Litigation and Legal Proceedings ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K.
The following table reconciles the timing differences between cash receipts and recognized revenue on a quarterly basis for each of the last three years, including the resulting operating cash flow (in thousands): 2022 Cash vs.
The following table reconciles the timing differences between cash receipts and recognized revenue on a quarterly basis for each of the last three years, including the resulting operating cash flow (in thousands): 2023 Cash vs.
Achievement rates can vary by performance cycle and from period to period, resulting in variability in our compensation expense. We account for compensation costs associated with share-based compensation based on the fair value of the instruments issued. The estimated value of stock options includes assumptions around expected life, stock volatility and dividends.
Achievement rates can vary by performance cycle and from period to period, resulting in variability in our compensation expense. 38 Table of Contents We account for compensation costs associated with share-based compensation based on the fair value of the instruments issued. The estimated value of stock options includes assumptions around expected life, stock volatility and dividends.
We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law. 49 Table of Contents
We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law. 48 Table of Contents
The following section generally discusses our financial condition and results of operations for our fiscal year ended December 31, 2022 compared to our fiscal year ended December 31, 2021.
The following section generally discusses our financial condition and results of operations for our fiscal year ended December 31, 2023 compared to our fiscal year ended December 31, 2022.
A discussion regarding our financial condition and results of operations for December 31, 2021 compared to our fiscal year ended December 31, 2020 can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2021, filed with the Securities and Exchange Commission (the “SEC”) on February 17, 2022.
A discussion regarding our financial condition and results of operations for December 31, 2022 compared to our fiscal year ended December 31, 2021 can be found in Part II, Item 7 of our Annual Report on Form 10-K for fiscal year 2022, filed with the Securities and Exchange Commission (the “SEC”) on February 15, 2023.
During periods in which the average market price of our common stock is above the applicable conversion price of the Convertible Notes ($77.49 per share for the 2027 Notes and $81.29 per share for the 2024 Notes as of December 31, 2022) or above the strike price of the warrants ($106.37 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of December 31, 2022), the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted earnings per share.
During periods in which the average market price of our common stock is above the applicable conversion price of the Convertible Notes ($77.49 per share for the 2027 Notes and $81.29 per share for the 2024 Notes as of December 31, 2023) or above the weighted average strike price of the warrants ($106.35 per share for the 2027 Warrant Transactions and $109.43 per share for the 2024 Warrant Transactions as of December 31, 2023), the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted earnings per share.
Throughout the following discussion and elsewhere in this Form 10-K, we refer to “recurring revenues” and “non-recurring revenues.” For variable and dynamic fixed-fee license agreements, “non-recurring revenue” 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.
Throughout the following discussion and elsewhere in this Form 10-K, 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.
During 2022, we agreed to have a panel of arbitrators establish the royalties to be paid by Samsung Electronics for a worldwide license to certain of the Company’s patents, as well as any other terms to a patent license agreement on which the parties are not able to agree.
During 2022, we agreed to have a panel of arbitrators establish the royalties to be paid by Samsung Electronics for a worldwide license to certain of the Company’s patents, as well as any other terms to a patent license agreement on which the parties are not able to agree, and the arbitration proceeding is ongoing.
We filed these actions after lengthy periods of negotiation and after the refusal of our counterparties to accept our various proposals to them, including our proposal to have a third party adjudicator set a royalty rate and resolve certain other terms upon which we could not mutually agree.
We filed these actions, other than our arbitration with Samsung, after lengthy periods of negotiation and after the refusal of our counterparties to accept our various proposals to them, including our proposals to have a third party adjudicator set a royalty rate and resolve certain other terms upon which we could not mutually agree.
Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the December 31, 2022 deferred revenue balance by $189.1 million over the next twelve months. 42 Table of Contents Convertible Notes Refer to Note 9, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for definitions of capitalized terms used below.
Based on current license agreements, we expect the amortization of dynamic fixed-fee royalty payments to reduce the December 31, 2023 deferred revenue balance by $153.6 million over the next twelve months. 41 Table of Contents Convertible Notes Refer to Note 10, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for definitions of capitalized terms used below.
(c) Purchase obligations consist of agreements to purchase goods and services that are legally binding on us, as well as accounts payable. Our consolidated balance sheet as of December 31, 2022 includes a $16.1 million non-current liability for uncertain tax positions.
(c) Purchase obligations consist of agreements to purchase goods and services that are legally binding on us, as well as accounts payable. Our consolidated balance sheet as of December 31, 2023 includes a $14.4 million non-current liability for uncertain tax positions.
The $11.2 million loss on extinguishment of long-term debt was related to the partial repurchase of the 2024 Notes, as described further in Note 9, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
In 2022, we recognized a $11.2 million loss on extinguishment of long-term debt related to the partial repurchase of the 2024 Notes, as described further in Note 10, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
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.
These market factors, as well as the impacts of the COVID-19 pandemic and the Ukraine-Russia and Israel-Hamas 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.
Management's Discussion and Analysis of Financial Condition and Results of Operations” and other information regarding our current beliefs, plans and expectations, including, without limitation, the matters set forth below.
Business” and “Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” and other information regarding our current beliefs, plans and expectations, including, without limitation, the matters set forth below.
As of December 31, 2022, we have recorded long-term debt of $30.7 million related to the Technicolor Patent Acquisition. Additionally, we are subject to a revenue-sharing arrangement with Technicolor resulting from the Technicolor Acquisitions.
As of December 31, 2023, we have recorded long-term debt of $29.0 million related to the Technicolor Patent Acquisition. Additionally, we are subject to a revenue-sharing arrangement with Technicolor resulting from the Technicolor Acquisitions.
Tax windfalls and shortfalls related to share-based compensation was shortfalls of $0.4 million for the year ended 2022, and windfalls for the years ended 2021 and 2020 of $0.8 million and $0.2 million, respectively.
Tax windfalls and shortfalls related to share-based compensation was windfalls of $3.1 million and $0.8 million for the years ended 2023 and 2021, respectively, and shortfalls for the year ended 2022 of $0.4 million.
During 2022, we purchased $272.0 million of short-term marketable securities, net of sales, and capitalized $42.8 million of patent costs and property and equipment purchases.
During 2023, we purchased $38.7 million of short-term marketable securities, net of sales, and capitalized $44.6 million of patent costs and property and equipment purchases. During 2022, we purchased $272.0 million of short-term marketable securities, net of sales, and capitalized $42.8 million of patent costs and property and equipment purchases.
Non-cash revenue: Q1 Q2 Q3 Q4 YTD Fixed fee cash receipts (a) $ 47,312 $ 3,050 $ 143,050 $ 123,050 $ 316,462 Other cash receipts (b) 10,676 17,808 7,739 15,556 51,779 Change in deferred revenue 23,429 63,230 (150,703) 80,912 16,868 Change in receivables (3,507) (499) 129,655 (110,546) 15,103 Other 4,453 4,146 13,755 2,843 25,197 Total Revenue $ 82,363 $ 87,735 $ 143,496 $ 111,815 $ 425,409 Net cash (used in) provided by operating activities $ (9,842) $ (27,259) $ 96,264 $ 71,229 $ 130,392 2020 Cash vs.
Non-cash revenue: Q1 Q2 Q3 Q4 Total Fixed fee cash receipts (a) $ 47,312 $ 3,050 $ 143,050 $ 123,050 $ 316,462 Other cash receipts (b) 10,676 17,808 7,739 15,556 51,779 Decrease (increase) in deferred revenue 23,429 63,230 (150,703) 80,912 16,868 Increase (decrease) in receivables (3,507) (499) 129,655 (110,546) 15,103 Other 4,453 4,146 13,755 2,843 25,197 Total Revenue $ 82,363 $ 87,735 $ 143,496 $ 111,815 $ 425,409 Net cash (used in) provided by operating activities $ (9,842) $ (27,259) $ 96,264 $ 71,229 $ 130,392 (a) Fixed fee cash receipts are comprised of cash receipts from Dynamic Fixed-Fee Agreement royalties, including the associated catch-up revenues.
Excluding this valuation allowance, our effective tax rate would have been 19.3% and 16.7% in 2022 and 2021, respectively. 48 Table of Contents FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Such statements include certain information in “Part I, Item 1. Business” and “Part II, Item 7.
Excluding the impact of valuation allowance, our effective tax rate would have been 12.4% and 19.3% in 2023 and 2022, respectively. 47 Table of Contents FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Such statements include certain information in “Part I, Item 1.
The change in Other was primarily due to fair value adjustments of our investments resulting in a $3.7 million net loss in 2022, compared to a $9.1 million net gain in 2021 and due to foreign currency translation losses arising from euro translation of our foreign subsidiaries of $3.9 million in 2022, compared to $3.0 million in 2021.
The change in Other was primarily due to fair value adjustments of our investments and pension obligation resulting in $12.1 million of net gains in 2023, compared to $2.4 million of net losses in 2022 and due to a foreign currency translation net gain arising from euro translation of our foreign subsidiaries of $1.0 million in 2023, compared to $3.9 million foreign currency translation net loss in 2022.
Subsequently our Board of Directors authorized five $100 million increases to the program, respectively, and an additional $333 million in December 2022, bringing the total amount of the Share Repurchase Program to $1.1 billion. Since 2014, we have repurchased $733.0 million of shares at an average price of $52.22, adjusted for dividends.
Subsequently our Board of Directors authorized five $100 million increases to the program, an additional $333 million in December 2022, and an additional $235 million in December 2023, bringing the total amount of the Share Repurchase Program to nearly $1.4 billion. Since 2014, we have repurchased $1.1 billion of shares at an average price of $58.36, adjusted for dividends.
In 2022, 2021, and 2020, we recognized $53.9 million, $73.7 million and $22.2 million, respectively, of non-current patent royalties and patent sales as more fully discussed below. In 2022, fixed-fee royalties accounted for 90% of our recurring revenues. These fixed-fee revenues are not affected by the related licensees’ success in the market or the general economic climate.
In 2023, 2022, and 2021, we recognized $141.2 million, $53.9 million and $73.7 million, respectively, of catch-up revenues as more fully discussed below. In 2023, fixed-fee royalties accounted for 89% of our recurring revenues. These fixed-fee revenues are not affected by the related licensees’ success in the market or the general economic climate.
Agreements with Multiple Performance Obligations During 2022, we signed four new fixed-fee agreements that had multiple performance obligations.
Agreements with Multiple Performance Obligations During 2023, we signed two new fixed-fee agreements that had multiple performance obligations.
As of December 31, 2022, InterDigital's wholly owned subsidiaries held a portfolio of approximately 28,800 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.
As of December 31, 2023, InterDigital's wholly owned subsidiaries held a portfolio of more than 30,000 patents and patent applications related to wireless communications, video coding, display technology, and other areas relevant to communications and entertainment products and services.
Since January 2014, we have paid $355.1 million in dividends, bringing our total return of capital over the last nine years to $1.1 billion.
Since January 2014, we have paid $394.4 million in dividends, bringing our total return of capital over the last ten years to nearly $1.5 billion.
These litigations, arbitrations and other proceedings are important means to enforce our intellectual property rights. We are a party to other disputes and legal actions not related to our intellectual property, but also arising in the ordinary course of our business.
We are a party to other disputes and legal actions not related to our intellectual property, but also arising in the ordinary course of our business.
Changes in any of a number of these assumptions could have had a substantial impact on the relative fair value assigned to each performance obligation for accounting purposes. These inputs and assumptions represent management's best estimates at the time of the transaction.
Changes in any of a number of these assumptions could have had a substantial impact on the relative fair value assigned to each performance obligation for accounting purposes.
For more information on this transaction, refer to Note 9, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K.
For more information regarding this arrangement, refer to Note 10, “ Obligations ,” to the Notes to Consolidated Financial Statements included below in Part II, Item 8 of this Form 10-K.
The impact that a five percent change in the aggregate amount allocated to past patent royalties under these agreements would have had on 2022 revenue is summarized in the following table (in thousands): Change in amount allocated Allocation to past patent royalties +5% -%5 Change in Revenue $ 2,669 $ (2,669) 38 Table of Contents Revenue from Non-financial Sources During 2022, 2021 and 2020, approximately 4%, 5% and 7%, respectively, of our total revenue was based on the estimated fair value of patents.
These inputs and assumptions represent management's best estimates at the time of the transaction. 37 Table of Contents The impact that a five percent change in the aggregate amount allocated to past patent royalties under these agreements would have had on 2023 revenue is summarized in the following table (in thousands): Change in amount allocated Allocation to past patent royalties +5% -%5 Change in Revenue $ 3,887 $ (3,887) Revenue from Non-financial Sources During 2023, 2022 and 2021, approximately 3%, 4% and 5%, respectively, of our total revenue was based on the estimated fair value of patents.
Our video technology portfolio includes patents and applications relating to standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.
We have contributed technology to video standards including standards established by ISO/IEC Moving Picture Expert Group (MPEG), the ITU-T Video Coding Expert Group (VCEG), the Joint Collaborative Team on Video Coding (JCT-VC) and the Joint Video Expert Team (JVET), among others.
Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from these estimates and any such differences may be material to the financial statements.
Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from these estimates and any such differences may be material to the financial statements.
(b) Income taxes paid include foreign withholding taxes. Cash provided by or used in investing and financing activities Net cash used in investing activities in 2022 was $314.7 million, a $494.3 million change from $179.6 million net cash provided by investing activities in 2021.
(b) Income taxes paid include foreign withholding taxes. Cash provided by or used in investing and financing activities Net cash used in investing activities in 2023 was $85.2 million, a $229.5 million change from $314.7 million in 2022.
As described in Note 7, "Obligations," 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 or a combination thereof ("net share settlement").
As described in Note 10, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K, 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 or a combination thereof ("net share settlement").
In 2022, our intellectual property enforcement costs increased to $44.4 million, from $34.3 million and $28.6 million in 2021 and 2020, respectively. These costs represented 62% of our total licensing costs of $71.4 million in 2022.
In 2023, our intellectual property enforcement costs increased to $48.8 million, from $44.4 million and $34.3 million in 2022 and 2021, respectively. These costs represented 61% of our total licensing costs of $79.4 million in 2023.
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.
Additionally, in October 2021, we expanded our restructuring efforts to include general and administrative functions largely centered in the U.S.
Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies. Our video technology portfolio combines patents and applications that InterDigital obtained through the Technicolor Acquisitions and patents and applications created by internal development.
Our wireless portfolio has largely been built through internal development, supplemented by joint development projects with other companies, and select acquisitions of patents and companies.
Since our founding in 1972, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G.
As a leader in wireless technology, our engineers have designed and developed a wide range of innovations that are used in wireless products and networks, from the earliest digital cellular systems to 5G and today's most advanced Wi-Fi technologies.
The table below sets forth the total number of shares repurchased and the dollar value of shares repurchased under the Share Repurchase Program, cash dividends on outstanding common stock declared, and the total capital returned to our shareholders (in thousands): Share Repurchase Program Cash Dividends Declared Total Capital Returned to Shareholders # of Shares Value Per Share Value 2022 1,224 $ 74,445 $ 1.40 $ 41,949 $ 116,394 2021 458 30,000 1.40 43,041 73,041 2020 6 349 1.40 43,111 43,460 2019 2,962 196,269 1.40 43,718 239,987 2018 1,478 110,505 1.40 47,922 158,427 2017 107 7,693 1.30 45,122 52,815 2016 1,304 64,685 1.00 34,359 99,044 2015 1,836 96,410 0.80 28,726 125,136 2014 3,554 152,625 0.70 27,153 179,778 Total 12,929 $ 732,981 $ 10.80 $ 355,101 $ 1,088,082 2027 Senior Convertible Notes On May 27, 2022, we issued the $460.0 million aggregate principal of 2027 Notes.
The table below sets forth the total number of shares repurchased and the dollar value of shares repurchased under the Share Repurchase Program, cash dividends on outstanding common stock declared, and the total capital returned to our shareholders (in thousands): Share Repurchase Program Cash Dividends Declared Total Capital Returned to Shareholders # of Shares Value Per Share Value 2023 4,411 $ 339,704 $ 1.50 $ 39,296 $ 379,000 2022 1,224 74,445 1.40 41,949 116,394 2021 458 30,000 1.40 43,041 73,041 2020 6 349 1.40 43,111 43,460 2019 2,962 196,269 1.40 43,718 239,987 2018 1,478 110,505 1.40 47,922 158,427 2017 107 7,693 1.30 45,122 52,815 2016 1,304 64,685 1.00 34,359 99,044 2015 1,836 96,410 0.80 28,726 125,136 2014 3,554 152,625 0.70 27,153 179,778 Total 17,340 $ 1,072,685 $ 12.30 $ 394,397 $ 1,467,082 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.
We negotiated resolutions to the matters involving ZTE, Huawei and Xiaomi in December 2019, April 2020 and July 2021, respectively, while our matters with Lenovo continue to proceed. During 2021, we filed patent infringement actions against Oppo, OnePlus and realme.
We negotiated resolutions to the matters involving ZTE, Huawei and Xiaomi in October 2019, April 2020 and July 2021, respectively, and resolution with Lenovo on our HEVC patents in September 2023. Other open matters with Lenovo continue to proceed. During 2021, we filed patent infringement actions against Oppo, OnePlus and realme, which proceedings are ongoing.
Cash flows from operations We generated the following cash flows from our operating activities in 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 Increase / (Decrease) Cash flows provided by operating activities $ 286,039 $ 130,392 $ 155,647 41 Table of Contents 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.
Refer to the sections below for further discussion of these items. 40 Table of Contents Cash flows from operations We generated the following cash flows from our operating activities in 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Increase / (Decrease) Cash flows provided by operating activities $ 213,733 $ 286,039 $ (72,306) 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.
Our portfolio includes numerous patents and patent applications that we believe are or may be essential or may become essential to standards established by many Standards Development Organizations ("SDOs"), including cellular and other wireless communications and video technology standards.
Our portfolio includes numerous patents and patent applications that we believe are or may be essential to existing standards, or may become essential to future standards, established by many Standards Development Organizations ("SDOs"). We have contributed technology to wireless standards including the 3G, 4G, and 5G cellular standards and the IEEE 802 suite of standards.
Additionally, we recognized a $1.9 million gain on a contract termination in 2021. Income Taxes In 2022, based on the statutory federal tax rate net of discrete federal and state taxes, our effective tax rate is 21.7%. as compared to an effective tax of 27.0% in 2021.
Income Taxes In 2023, based on the statutory federal tax rate net of discrete federal and state taxes, our effective tax rate is 10.0%, as compared to an effective tax of 21.7% in 2022.
We utilize the straight-line method as we believe that it best depicts efforts expended to develop and transfer updates to the customer evenly throughout the term of the agreement. 37 Table of Contents Static fixed-fee license agreements are fixed-price contracts that generally do not include updates to technology we create after the inception of the license agreement or in which the customer does not stand to substantively benefit from those updates during the term.
Static fixed-fee license agreements are fixed-price contracts that generally do not include updates to technology we create after the inception of the license agreement or in which the customer does not stand to substantively benefit from those updates during the term.
Assuming net share settlement upon conversion, the following tables illustrate how, based on the $460.0 million aggregate principal amount of the 2027 Notes and the $126.2 million aggregate principal amount of the 2024 Notes outstanding as of December 31, 2022, and the approximately 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 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 if-converted method, for purposes of calculating diluted earnings per share ("Total If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the 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 Note Hedge Transactions: 2027 Notes Market Price Per Share Shares Issuable Upon Conversion of the 2027 Notes Shares Issuable Upon Exercise of the 2027 Warrant Transactions Total Treasury Stock Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2027 Note Hedge Transactions Incremental Shares Issuable (a) $80 186 — 186 (186) — $85 524 — 524 (524) — $90 825 — 825 (825) — $95 1,094 — 1,094 (1,094) — $100 1,336 — 1,336 (1,336) — $105 1,555 — 1,555 (1,555) — $110 1,754 196 1,950 (1,754) 196 $115 1,936 445 2,381 (1,936) 445 $120 2,103 674 2,777 (2,103) 674 $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 Treasury Stock Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2024 Note Hedge Transactions Incremental Shares Issuable (a) $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. 44 Table of Contents Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2022 (in thousands): Payments Due by Period Total Less Than 1 year 1-3 Years 3-5 Years Thereafter 2024 and 2027 Notes (a) $ 586,174 $ — $ 126,174 $ 460,000 $ — Contractual interest payments on the 2024 and 2027 Notes (a) 76,235 18,623 33,462 24,150 — Operating lease obligations 28,724 4,772 8,086 7,817 8,049 Defined benefit plan obligations (b) 3,111 254 146 391 2,320 Purchase obligations (c) 11,697 11,697 — — — Total contractual obligations $ 705,941 $ 35,346 $ 167,868 $ 492,358 $ 10,369 (a) Refer to Note 9, “ Obligations ,” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for details of our 2024 Notes and 2027 Notes.
Assuming net share settlement upon conversion, the following tables illustrate how, based on the $460.0 million aggregate principal amount of the 2027 Notes and the $126.2 million aggregate principal amount of the 2024 Notes outstanding as of December 31, 2023, and the approximately 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 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 if-converted method, for purposes of calculating diluted earnings per share ("Total If-Converted Method Incremental Shares"), (iv) the number of shares of our common stock deliverable to us upon settlement of the 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 Note Hedge Transactions (in thousands): 2027 Notes Market Price Per Share Shares Issuable Upon Conversion of the 2027 Notes Shares Issuable Upon Exercise of the 2027 Warrant Transactions Total Treasury Stock Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2027 Note Hedge Transactions Incremental Shares Issuable (a) $80 186 — 186 (186) — $85 524 — 524 (524) — $90 825 — 825 (825) — $95 1,094 — 1,094 (1,094) — $100 1,336 — 1,336 (1,336) — $105 1,555 — 1,555 (1,555) — $110 1,754 197 1,951 (1,754) 197 $115 1,936 446 2,382 (1,936) 446 $120 2,103 675 2,778 (2,103) 675 $125 2,256 886 3,142 (2,256) 886 2024 Notes Market Price Per Share Shares Issuable Upon Conversion of the 2024 Notes Shares Issuable Upon Exercise of the 2024 Warrant Transactions Total Treasury Stock Method Incremental Shares Shares Deliverable to InterDigital upon Settlement of the 2024 Note Hedge Transactions Incremental Shares Issuable (a) $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. 43 Table of Contents Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023 (in thousands): Payments Due by Period Total Less Than 1 year 1-3 Years 3-5 Years Thereafter 2024 and 2027 Notes (a) $ 586,174 $ 126,174 $ — $ 460,000 $ — Contractual interest payments on the 2024 and 2027 Notes (a) 56,111 17,158 32,200 6,753 — Operating lease obligations 25,804 4,290 8,561 7,525 5,428 Defined benefit plan obligations (b) 4,304 399 202 567 3,136 Purchase obligations (c) 11,255 11,255 — — — Total contractual obligations $ 683,648 $ 159,276 $ 40,963 $ 474,845 $ 8,564 (a) The table above represents the payment made on the maturity dates of the 2024 and 2027 Notes.
The below table summarizes our supplemental compensation expense for 2022, 2021 and 2020, in thousands: 2022 2021 2020 Short-term incentive compensation $ 24,341 $ 18,820 $ 16,166 Time-based awards (a) 10,521 8,528 6,668 Performance-based awards (a) 8,155 17,933 2,347 Other share-based compensation 4,901 3,962 2,580 Total supplemental compensation expense $ 47,918 $ 49,243 $ 27,761 (a) For 2022, 2021 and 2020, approximately 8%, 7%, and 12%, respectively, of the aggregate expense associated with time-based and performance-based awards related to cash awards.
The below table summarizes our supplemental compensation expense for 2023, 2022 and 2021, in thousands: 2023 2022 2021 Short-term incentive compensation $ 19,780 $ 24,341 $ 18,820 Time-based awards (a) 26,426 15,422 12,490 Performance-based awards (a) 10,035 8,155 17,933 Total supplemental compensation expense $ 56,241 $ 47,918 $ 49,243 (a) For 2023, 2022 and 2021, approximately 3%, 8%, and 7%, respectively, of the aggregate expense associated with time-based and performance-based awards related to cash awards.
Change in estimate Estimated value of patents acquired in connection with PLAs +5% -%5 Revenue $ 925 $ (925) Less: Patent amortization 1,054 (1,054) Pre-tax income $ (129) $ 129 Compensation Programs We use a variety of compensation programs to attract, retain and motivate our employees, and to align employee compensation more closely with company performance.
The impact that a five-percent change in the estimated aggregate value of the patents acquired would have had on 2023 revenue, patent amortization and pre-tax income is summarized in the following table (in thousands): Change in estimate Estimated value of patents acquired in connection with PLAs +5% -5% Revenue $ 730 $ (730) Less: Patent amortization 841 (841) Pre-tax income $ (111) $ 111 Compensation Programs We use a variety of compensation programs to attract, retain and motivate our employees, and to align employee compensation more closely with company performance.
InterDigital is one of the largest pure research and development and licensing companies in the world, with one of the most significant patent portfolios of fundamental wireless and video technologies.
We are also a leader in video processing and video encoding/decoding technology, with a significant AI research effort that intersects with both wireless and video technologies. InterDigital is one of the largest pure research and development and licensing companies in the world, with one of the most significant patent portfolios of fundamental wireless and video technologies.
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.
During 2023, we did not recognize any restructuring expenses and the Company considers the plan to be complete. 34 Table of Contents Impact of Macroeconomic and Geopolitical Factors We have been actively monitoring the impact of the current macroeconomic environment in the U.S. and globally characterized by inflation, supply chain issues, rising interest rates, labor shortages, and the potential for a recession.
The remaining accounts receivable is primarily related to variable patent royalty revenue. 90% 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.
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 shows the projected amortization of our current and long term deferred revenue as of December 31, 2022 (in thousands): Deferred Revenue 2023 $ 189,059 2024 125,652 2025 106,224 2026 1,011 2027 1,076 Thereafter 3,617 Total $ 426,639 Return of Capital In June 2014, our Board of Directors authorized a $300 million share repurchase program (the “Share Repurchase Program”).
The following table shows the projected amortization of our current and long term deferred revenue as of December 31, 2023 (in thousands): Deferred Revenue 2024 $ 153,597 2025 129,022 2026 78,777 2027 12,450 2028 1,141 Thereafter 2,476 Total $ 377,463 Return of Capital In June 2014, our Board of Directors authorized a $300 million share repurchase program (the “Share Repurchase Program”).
These agreements can include, without limitation, performance obligations related to the settlement of past patent infringement liabilities, patent and/or know-how licensing royalties on covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and access to a portfolio of technology at a point in time along with promises to provide any technology updates to the portfolio during the term. 36 Table of Contents In accordance with US GAAP, we use a five-step model to achieve the core underlying principle that an entity should recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services.
These agreements can include, without limitation, performance obligations related to the settlement of past patent infringement liabilities, patent and/or know-how licensing royalties on covered products sold by licensees, access to a portfolio of technology as it exists at a point in time, and access to a portfolio of technology at a point in time along with promises to provide any technology updates to the portfolio during the term.
For more information on the restructuring activities refer to Note 20, " Restructuring Activities " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. 47 Table of Contents Non-Operating Expense The following table compares 2022 non-operating expense to 2021 non-operating expense (in thousands): For the Year Ended December 31, 2022 2021 Change Interest expense $ (29,496) $ (25,225) $ (4,271) (17) % Interest and investment income 14,452 1,690 12,762 755 % Loss on extinguishment of long-term debt (11,190) — (11,190) 100 % Other (6,719) 9,885 (16,604) (168) % Total non-operating expense $ (32,953) $ (13,650) $ (19,303) (141) % Interest expense increased $4.3 million due to the interest on the 2027 Notes issued during second quarter 2022.
For more information on the restructuring activities refer to Note 20, " Restructuring Activities " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. 46 Table of Contents Non-Operating Income (Expense), Net The following table compares 2023 non-operating income to 2022 non-operating expense (in thousands): For the Year Ended December 31, 2023 2022 Change Interest expense $ (44,817) $ (29,496) $ (15,321) (52) % Interest and investment income 46,628 14,452 32,176 223 % Loss on extinguishment of long-term debt — (11,190) 11,190 100 % Other 11,184 (6,719) 17,903 266 % Total non-operating income (expense), net $ 12,995 $ (32,953) $ 45,948 139 % Interest expense increased $15.3 million primarily due to significant financing expense resulting from a previously announced patent license agreement and additional interest on the 2027 Notes that were issued during second quarter 2022.
For grants that cliff vest, we amortize the associated unrecognized compensation cost on a straight-line basis over their vesting term. 39 Table of Contents In the event of canceled awards, we adjust compensation expense recognized to date as they occur. Tax windfalls and shortfalls related to the tax effects of employee share-based compensation are included in our tax provision.
In the event of canceled awards, we adjust compensation expense recognized to date as they occur. Tax windfalls and shortfalls related to the tax effects of employee share-based compensation are included in our tax provision.
The Smartphone revenue grouping consists primarily of smartphones and also includes other wireless communication devices and infrastructure equipment, such as tablets, and base stations.
The Smartphone revenue grouping consists primarily of smartphones and also includes other wireless communication devices and infrastructure equipment, such as tablets, and base stations. The CE, IoT/Auto revenue grouping consists of consumer electronics and IoT products, such as televisions, laptops, gaming consoles, set-top boxes, streaming devices, and connected automobiles.
Due to the uncertainty regarding the timing and amount of future payments related to these items, the amounts are excluded from the contractual obligations table above. 45 Table of Contents RESULTS OF OPERATIONS 2022 Compared with 2021 Revenues The following table compares 2022 revenues to 2021 revenues (in thousands): For the Year Ended December 31, 2022 2021 Total Increase/(Decrease) Recurring revenues: Smartphone $ 351,064 $ 315,098 $ 35,966 11 % CE, IoT/Auto 51,717 31,721 19,996 63 % Other 1,107 4,881 (3,774) (77) % Total recurring revenues 403,888 351,700 52,188 15 % Non-recurring revenues a 53,906 73,709 (19,803) (27) % Total revenues $ 457,794 $ 425,409 $ 32,385 8 % (a) Non-recurring revenues are comprised of past patent royalties and revenues from static agreements.
Due to the uncertainty regarding the timing and amount of future payments related to these items, the amounts are excluded from the contractual obligations table above. 44 Table of Contents RESULTS OF OPERATIONS 2023 Compared with 2022 Revenues The following table compares 2023 revenues to 2022 revenues (in thousands): For the Year Ended December 31, 2023 2022 Total Increase/(Decrease) Recurring revenues: Smartphone $ 347,124 $ 351,064 $ (3,940) (1) % CE, IoT/Auto 59,858 51,717 8,141 16 % Other 1,410 1,107 303 27 % Total recurring revenues 408,392 403,888 4,504 1 % Catch-up revenues a 141,196 53,906 87,290 162 % Total revenues $ 549,588 $ 457,794 $ 91,794 20 % (a) Catch-up revenues are comprised of past patent royalties and revenues from static fixed-fee agreements.
In 2022 and 2021, the following licensees or customers accounted for 10% or more of our total revenues: For the Year Ended December 31, 2022 2021 Customer A 30% 28% Customer B 17% 18% Customer C 13% 14% Customer D 10% 46 Operating Expenses The following table summarizes the change in operating expenses by category (in thousands): For the Year Ended December 31, 2022 2021 Increase/(Decrease) Research and portfolio development $ 185,202 $ 200,484 $ (15,282) (8) % Licensing 71,419 64,625 6,794 11 % General and administrative 47,377 61,217 (13,840) (23) % Restructuring activities 3,280 27,877 (24,597) (88) % Total operating expenses $ 307,278 $ 354,203 $ (46,925) (13) % Operating expenses decreased 13% to $307.3 million in 2022 from $354.2 million in 2021.
In 2023 and 2022, the following licensees or customers accounted for 10% or more of our total revenues: For the Year Ended December 31, 2023 2022 Customer A 27% —% Customer B 24% 30% Customer C 14% 17% Customer D 11% 13% 45 Operating Expenses The following table summarizes the change in operating expenses by category (in thousands): For the Year Ended December 31, 2023 2022 Increase/(Decrease) Research and portfolio development $ 195,285 $ 185,202 $ 10,083 5 % Licensing 79,397 71,419 7,978 11 % General and administrative 53,291 47,377 5,914 12 % Restructuring activities — 3,280 (3,280) (100) % Total operating expenses $ 327,973 $ 307,278 $ 20,695 7 % Operating expenses increased 7% to $328.0 million in 2023 from $307.3 million in 2022.
For static fixed-fee license agreements, we typically classify the associated revenue as non-recurring revenue. 30 Table of Contents Business InterDigital, Inc. ("InterDigital") is a global research and development company focused primarily on wireless, visual and related technologies. We design and develop advanced technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services.
For static fixed-fee license agreements, we typically classify the associated revenue as catch-up revenues. 30 Table of Contents Business InterDigital, Inc. ("InterDigital") is a global research and development company focused primarily on wireless, video, artificial intelligence ("AI"), and related technologies.
The remaining patent license agreements that have not yet been renewed contributed $15.4 million of recurring revenue in 2022. Ten of our revenue generating patent license agreements are scheduled to expire during 2023. Collectively, these agreements accounted for $55.2 million, or approximately 14%, of recurring revenue in 2022.
Seven of our revenue generating patent license agreements were scheduled to expire during 2024, of which two agreements were renewed during 2023. Collectively, the five expiring agreements not yet renewed accounted for $17.6 million, or approximately 4%, of recurring revenues in 2023.
Cash, cash equivalents, restricted cash and short-term investments As of December 31, 2022 and December 31, 2021, we had the following amounts of cash, cash equivalents, restricted cash and short-term investments (in thousands): December 31, 2022 December 31, 2021 Increase / (Decrease) Cash and cash equivalents $ 693,479 $ 706,282 $ (12,803) Restricted cash included within prepaid and other current assets 9,682 5,861 3,821 Restricted cash included within other non-current assets — 1,081 (1,081) Short-term investments 508,298 235,345 272,953 Total cash, cash equivalents, restricted cash and short-term investments $ 1,211,459 $ 948,569 $ 262,890 The net increase in cash, cash equivalents, restricted cash and short-term investments was attributable to cash provided by operating activities of $286.0 million and cash provided by financing activities of $18.6 million.
Cash, cash equivalents, restricted cash, and short-term investments As of December 31, 2023 and December 31, 2022, we had the following amounts of cash, cash equivalents, restricted cash, and short-term investments (in thousands): December 31, 2023 December 31, 2022 Increase / (Decrease) Cash and cash equivalents $ 437,076 $ 693,479 $ (256,403) Restricted cash included within prepaid and other current assets 5,885 9,682 (3,797) Short-term investments 569,280 508,298 60,982 Total cash, cash equivalents, restricted cash, and short-term investments $ 1,012,241 $ 1,211,459 $ (199,218) The net decrease in cash, cash equivalents, restricted cash, and short-term investments was attributable to cash used in financing activities of $388.8 million and cash used in investing activities of $46.5 million, excluding sales and purchases of short-term investments, partially offset by cash provided by operating activities of $213.7 million.
The table below sets forth the significant items comprising our cash flows provided by operating activities during the years ended December 31, 2022 and 2021 (in thousands): For the Year Ended December 31, 2022 2021 Increase / (Decrease) Cash Receipts: Patent royalties $ 509,517 $ 364,348 $ 145,169 Technology solutions 308 3,893 (3,585) Total cash receipts 509,825 368,241 141,584 Cash Outflows: Cash operating expenses (a) (204,153) (234,046) 29,893 Income taxes paid, net of refunds (b) (6,805) (23,091) 16,286 Total cash outflows (210,958) (257,137) 46,179 Other working capital adjustments (12,828) 19,288 (32,116) Cash flows provided by operating activities $ 286,039 $ 130,392 $ 155,647 (a) Cash operating expenses include operating expenses less depreciation of fixed assets, amortization of patents, and non-cash compensation.
The table below sets forth the significant items comprising our cash flows provided by operating activities during the years ended December 31, 2023 and 2022 (in thousands): For the Year Ended December 31, 2023 2022 Increase / (Decrease) Total Cash Receipts $ 486,333 $ 509,825 $ (23,492) Cash Outflows: Cash operating expenses (a) (211,525) (204,153) (7,372) Income taxes paid (b) (59,202) (6,805) (52,397) Total cash outflows (270,727) (210,958) (59,769) Other working capital adjustments (1,873) (12,828) 10,955 Cash flows provided by operating activities $ 213,733 $ 286,039 $ (72,306) (a) Cash operating expenses include operating expenses less depreciation of fixed assets, amortization of patents, and non-cash compensation.
New Accounting Guidance Refer to Note 2, " Summary of Significant Accounting Policies and New Accounting Guidance " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a discussion of recently issued accounting guidance. 40 Table of Contents Legal Proceedings We are routinely involved in disputes associated with enforcement and licensing activities regarding our intellectual property, including litigations, arbitrations and other proceedings.
As a result of this agreement, the Company does not anticipate any tax consequences. New Accounting Guidance Refer to Note 2, " Summary of Significant Accounting Policies and New Accounting Guidance " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for a discussion of recently issued accounting guidance.
For more information on this transaction, refer to Note 9, " Obligations " within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K. • In 2022, we incurred $1.5 million of one-time supplemental compensation costs driven by licensing successes achieved during 2022. • In 2022, we recognized $3.3 million of restructuring expenses including a $2.4 million asset impairment, $0.3 million of severance and other benefits, and $0.5 million of associated outside services and other costs.
See Note 12, “ Litigation and Legal Proceedings ,” within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of this Form 10-K for more information on this matter. • In 2023, we incurred $3.0 million of nonrecurring share-based compensation costs driven by licensing successes. • In 2023, we incurred a $2.5 million impairment on Convida's sale of a portion of its patent portfolio.
Between 2014 and 2022, we paid approximately $134.6 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open.
In the event that the IRS or another taxing jurisdiction levies an assessment in the future, it is possible the assessment could have a material adverse effect on our consolidated financial condition or results of operations. 39 Table of Contents Between 2014 and 2023, we paid approximately $138.1 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open.
Critical Accounting Policies and Estimates Our consolidated financial statements are based on the selection and application of GAAP, which require us to make estimates and assumptions that affect the amounts reported in both our consolidated financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty.
Income Tax Provision • In 2023, we recognized a $11.7 million tax benefit resulting from the release of a valuation allowance from certain foreign jurisdictions and interest due on a federal refund. 35 Table of Contents Critical Accounting Policies and Estimates Our consolidated financial statements are based on the selection and application of GAAP, which require us to make estimates and assumptions that affect the amounts reported in both our consolidated financial statements and the accompanying notes.
Non-recurring revenues in 2022 were primarily attributable to seven of the above disclosed license agreements signed in 2022 and revenues from new connected automobile license agreements. In each of 2022 and 2021, 70% of our total revenues were attributable to companies that individually accounted for 10% or more of our total revenues.
In 2023 and 2022, 76% and 60% of our total revenues were attributable to companies that individually accounted for 10% or more of our total revenues, respectively.
Revenue In 2022, 2021, and 2020, our total revenues were $457.8 million, $425.4 million, and $359.0 million, respectively. Our recurring revenues in 2022, 2021 and 2020 were $403.9 million, $351.7 million, and $336.8 million, respectively.
In addition, our patented inventions have been implemented in a wide variety of services, such as video streaming and other cloud-based services. Revenue In 2023, 2022, and 2021, our total revenues were $549.6 million, $457.8 million, and $425.4 million, respectively. Our recurring revenues in 2023, 2022 and 2021 were $408.4 million, $403.9 million, and $351.7 million, respectively.
We license or intend to license our innovations worldwide to companies providing such products and services, including wireless communications, consumer electronics, personal computer, and automotive, as well as cloud-based services such as video streaming.
We design and develop foundational technologies that enable connected, immersive experiences in a broad range of communications and entertainment products and services. We license our innovations worldwide to companies providing such products and services, including makers of wireless communications devices, consumer electronics, IoT devices, cars and other motor vehicles and providers of cloud-based services such as video streaming.
This increase was partially offset by the above noted decrease in revenue share costs. General and administrative expense: The $13.8 million decrease in general and administrative expense was primarily due to the above-noted decreases in personnel-related costs and consulting costs. Restructuring Activities: Restructuring expenses associated with our overall restructuring plan decreased due to the plan being substantially complete in 2022.
Restructuring Activities: Restructuring expenses associated with our overall restructuring plan decreased due to the plan being substantially complete in 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeDue to foreign currency fluctuations, any such agreement could result in foreign currency gain or loss. 50 Table of Contents Investment Risk — We are exposed to market risk as it relates to changes in the market value of our short-term and long-term investments in addition to the liquidity and creditworthiness of the underlying issuers of our investments.
Biggest changeIf the matter had been resolved as of December 31, 2023, we would have recognized a loss up to $13.8 million based on exchange rates and prior competent authority resolutions. 49 Table of Contents Investment Risk — We are exposed to market risk as it relates to changes in the market value of our short-term and long-term investments in addition to the liquidity and creditworthiness of the underlying issuers of our investments.
The following table provides information about our interest-bearing securities that are sensitive to changes in interest rates as of December 31, 2022. The table presents principal cash flows, weighted-average yield at cost and contractual maturity dates. Additionally, we have assumed that these securities are similar enough within the specified categories to aggregate these securities for presentation purposes.
The following table provides information about our interest-bearing securities that are sensitive to changes in interest rates as of December 31, 2023. The table presents principal cash flows, weighted-average yield at cost and contractual maturity dates. Additionally, we have assumed that these securities are similar enough within the specified categories to aggregate these securities for presentation purposes.
The warrants along with any shares issuable upon conversion of the 2024 and 2027 Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or convertible 2024 and 2027 Notes. 51 Table of Contents
The warrants along with any shares issuable upon conversion of the 2024 and 2027 Notes will have a dilutive effect on our earnings per share to the extent that the average market price of our common stock for a given reporting period exceeds the applicable strike price or conversion price of the warrants or convertible 2024 and 2027 Notes. 50 Table of Contents
Our marketable securities, consisting of government obligations, corporate bonds and commercial paper, are primarily classified as available-for-sale with a fair value of $567.6 million as of December 31, 2022. Equity Risk — We are exposed to changes in the market-traded price of our common stock as it influences the calculation of earnings per share.
Our marketable securities, consisting of government obligations, corporate bonds and commercial paper, are primarily classified as available-for-sale with a fair value of $581.5 million as of December 31, 2023. Equity Risk — We are exposed to changes in the market-traded price of our common stock as it influences the calculation of earnings per share.
Interest Rate Risk — We invest our cash in a number of diversified high quality investment-grade fixed and floating rate securities with a fair value of $1,211.5 million as of December 31, 2022. Our exposure to interest rate risks is not significant due to the short average maturity, quality and diversification of our holdings.
Interest Rate Risk — We invest our cash in a number of diversified high quality investment-grade fixed and floating rate securities with a fair value of $1.0 billion as of December 31, 2023. Our exposure to interest rate risks is not significant due to the short average maturity, quality and diversification of our holdings.
Between 2014 and 2022, we paid approximately $134.6 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open.
Between 2014 and 2023, we paid approximately $138.1 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open.
Bank Liquidity Risk — As of December 31, 2022, we had approximately $643.8 million in operating accounts that are held with domestic and international financial institutions. The majority of these balances are held with domestic financial institutions.
Bank Liquidity Risk — As of December 31, 2023, we had approximately $430.7 million in operating accounts that are held with domestic and international financial institutions. The majority of these balances are held with domestic financial institutions.
It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits.
It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits. Due to foreign currency fluctuations, any such agreement could result in foreign currency gain or loss.
Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (in thousands) 2023 2024 2025 2026 2027 Thereafter Total Money market and demand accounts $643,825 — — — — — $643,825 Short-term investments $557,666 $9,968 — — — — $567,634 Average Interest rate 4.2 % 5.0 % — % — % — % — % 4.2 % Cash and cash equivalents and available-for-sale securities are recorded at fair value.
Interest Rate Sensitivity Principal Amount by Expected Maturity Average Interest Rates (in thousands) 2024 2025 2026 2027 2028 Thereafter Total Money market and demand accounts $430,707 — — — — — $430,707 Short-term investments $489,752 $39,133 $52,649 — — — $581,535 Average interest rate 5.1 % 4.7 % 4.6 % — % — % — % 5.0 % Cash and cash equivalents and available-for-sale securities are recorded at fair value.

Other IDCC 10-K year-over-year comparisons