InterDigital(IDCC) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS This section presents the company's unaudited condensed consolidated financial statements for Q1 2025 and 2024 Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Total current assets | $1,242,196 | $1,230,822 | | Total assets | $1,861,844 | $1,835,529 | | Liabilities & Equity | | | | Total current liabilities | $704,457 | $725,810 | | Total liabilities | $924,960 | $978,314 | | Total shareholders' equity | $936,884 | $857,215 | Condensed Consolidated Statements of Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | $210,507 | $263,542 | (20)% | | Total operating expenses | $78,675 | $159,804 | (51)% | | Income from operations | $131,832 | $103,738 | 27% | | Net income | $115,602 | $81,652 | 42% | | Net income per common share — Basic | $4.49 | $3.20 | 40% | | Net income per common share — Diluted | $3.45 | $2.88 | 20% | | Cash dividends declared per common share | $0.60 | $0.40 | 50% | Condensed Consolidated Statements of Comprehensive Income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net income | $115,602 | $81,652 | | Unrealized gain (loss) on investments, net of tax | $256 | $(495) | | Comprehensive income | $115,858 | $81,157 | Condensed Consolidated Statements of Shareholders' Equity | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Shareholders' Equity | $936,884 | $857,215 | | Retained Earnings | $1,875,398 | $1,775,823 | | Treasury Stock | $(1,732,644) | $(1,727,395) | Condensed Consolidated Statements of Cash Flows | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(19,989) | $50,773 | | Net cash provided by investing activities | $59,508 | $16,775 | | Net cash used in financing activities | $(42,951) | $(49,319) | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(3,432) | $18,229 | | Cash, cash equivalents and restricted cash, end of period | $548,115 | $461,190 | Notes to Condensed Consolidated Financial Statements 1. BASIS OF PRESENTATION - The unaudited condensed consolidated financial statements are prepared in accordance with Form 10-Q instructions and GAAP, with management's estimates and assumptions[23][24] - The company adopted ASU 2023-09 (Income Tax Disclosures) as of January 1, 2025, with no impact on this Form 10-Q as disclosures are annual[28] - The company is evaluating the impact of ASU 2024-04 (Convertible Debt Instruments) and ASU 2024-03 (Expense Disaggregation Disclosures)[29][30] 2. REVENUE | Revenue Category | March 31, 2025 (in thousands) | March 31, 2024 (in thousands) | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Smartphone | $183,991 | $80,280 | $103,711 | 129% | | CE, IoT/Auto | $26,267 | $182,543 | $(156,276) | (86)% | | Other | $249 | $719 | $(470) | (65)% | | Total Revenues | $210,507 | $263,542 | $(53,035) | (20)% | | Catch-up revenues | $84,785 | $166,678 | $(81,893) | (49)% | Expected Contracted Revenue (in thousands): | Period | Revenue | | :--- | :--- | | Remainder of 2025 | $341,744 | | 2026 | $362,495 | | 2027 | $350,978 | | 2028 | $259,821 | | 2029 | $206,185 | | Thereafter | $179,697 | | Total Revenue | $1,700,920 | - Contract assets increased from $162.8 million as of December 31, 2024, to $190.9 million as of March 31, 2025, included in 'Accounts receivable'[32] 3. CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS Cash, Cash Equivalents, and Restricted Cash (in thousands): | Metric | March 31, 2025 | December 31, 2024 | March 31, 2024 | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $536,639 | $527,360 | $440,242 | | Restricted cash | $11,476 | $24,187 | $20,948 | | Total cash, cash equivalents, and restricted cash | $548,115 | $551,547 | $461,190 | - Three licensees accounted for 87% and 84% of accounts receivable balances as of March 31, 2025, and December 31, 2024, respectively[37] Fair Value of Financial Assets (in thousands): | Asset Category | March 31, 2025 Total | December 31, 2024 Total | | :--- | :--- | :--- | | Money market and demand accounts | $509,097 | $535,745 | | Commercial paper | $100,297 | $78,870 | | U.S. government securities | $171,296 | $230,561 | | Corporate bonds, asset backed and other securities | $113,667 | $137,219 | | Total | $894,357 | $982,395 | Fair Value of Long-Term Debt (in thousands): | Debt Type | March 31, 2025 Fair Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | | 2027 Senior Convertible Long-Term Debt | $1,236,963 | $1,166,155 | | Technicolor Patent Acquisition Long-Term Debt | $16,067 | $17,102 | 4. OTHER ASSETS AND LIABILITIES Prepaid and Other Current Assets (in thousands): | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Prepaid assets | $23,134 | $38,952 | | Tax receivables | $16,947 | $16,691 | | Restricted cash | $11,476 | $24,187 | | Other current assets | $3,079 | $4,482 | | Total | $54,636 | $84,312 | Other Non-Current Assets, Net (in thousands): | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Tax receivables | $95,056 | $88,619 | | Goodwill | $22,421 | $22,421 | | Long-term investments | $19,375 | $19,851 | | Right-of-use assets | $14,545 | $15,218 | | Other non-current assets | $6,560 | $3,291 | | Total | $157,957 | $149,400 | Other Accrued Expenses (in thousands): | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued legal fees | $10,240 | $9,571 | | Other accrued expenses | $13,958 | $15,563 | | Total | $24,198 | $25,134 | Other Long-Term Liabilities (in thousands): | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Deferred compensation liabilities | $21,161 | $19,969 | | Operating lease liabilities | $15,055 | $15,772 | | Other long-term liabilities | $19,155 | $19,201 | | Total | $55,371 | $54,942 | 5. OBLIGATIONS - The 2027 Notes, with an aggregate principal of $460.0 million, are convertible and classified as current portion of long-term debt due to holder conversion rights[50][51] - The 2024 Notes matured on June 1, 2024, with the remaining $126.2 million principal repaid in cash and 0.3 million common shares issued[57] Convertible Notes Interest Expense (in thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Contractual coupon interest (2027 Notes) | $4,025 | $4,025 | | Contractual coupon interest (2024 Notes) | — | $631 | | Amortization of deferred financing costs | $502 | $616 | | Total Interest Expense | $4,527 | $5,272 | - The Technicolor Patent Acquisition long-term debt had an effective interest rate of approximately 14.5% at acquisition[60][61] 6. LITIGATION AND LEGAL PROCEEDINGS - The company entered binding arbitration with Lenovo in Q4 2024 to determine terms for a new patent license agreement, effective January 1, 2024[63] - A decision is expected soon in the arbitration with Samsung for a renewed patent license agreement effective January 1, 2023[64][65] - In the Tesla litigation, the UK Court of Appeal upheld the lower court's decision on March 6, 2025, and Tesla has applied to appeal to the Supreme Court[66][67] - On February 3, 2025, the company filed patent infringement claims against The Walt Disney Co and its subsidiaries in multiple jurisdictions[68][69][70][71] 7. INCOME TAXES Effective Tax Rate: | Period | Effective Tax Rate | | :--- | :--- | | Three Months Ended March 31, 2025 | 12.6% | | Three Months Ended March 31, 2024 | 19.2% | - The decrease in the effective tax rate is attributed to an increase in Foreign Derived Intangible Income deduction benefits and other tax benefits[73] Foreign Withholding Taxes Paid (in thousands): | Period | Amount Paid | | :--- | :--- | | Three Months Ended March 31, 2025 | $3,200 | | Three Months Ended March 31, 2024 | $9,300 | 8. NET INCOME PER SHARE Net Income Per Share (in thousands, except per share data): | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $115,602 | $81,652 | | Weighted-average shares outstanding — Basic | 25,741 | 25,510 | | Weighted-average shares outstanding — Diluted | 33,505 | 28,341 | | Earnings per share — Basic | $4.49 | $3.20 | | Earnings per share — Diluted | $3.45 | $2.88 | Securities Excluded from EPS Calculation (in thousands): | Security Type | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Warrants | 3,136 | 7,488 | | Total | 3,136 | 7,488 | 9. SEGMENT PERFORMANCE MEASURES AND EXPENSES - The company operates as one reportable segment, with the CEO assessing performance based on consolidated financial information[77] Significant Operating Expenses (in thousands): | Expense Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Departmental expenses | $41,337 | $44,466 | | Depreciation and amortization | $18,213 | $17,240 | | Intellectual property enforcement | $6,978 | $19,744 | | Share-based compensation | $9,498 | $9,386 | | Revenue share costs | $2,649 | $68,968 | | Other non-operating (income) expense, net | $(387) | $2,675 | | Income tax provision | $16,617 | $19,411 | | Net income | $115,602 | $81,652 | 10. OTHER INCOME, NET Other Income, Net (in thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Interest and investment income | $9,264 | $11,778 | | Other | $994 | $(2,531) | | Other income, net | $10,258 | $9,247 | Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses the company's Q1 2025 financial condition and operational results compared to the prior year OVERVIEW - In March 2025, InterDigital signed a new license agreement with vivo Mobile, bringing the total to seven of the ten largest smartphone vendors under license[82] - In April 2025, a new multi-year license agreement was signed with HP Inc for Wi-Fi and video decoding technologies[83] - The quarterly cash dividend was increased by $0.15 per share to $0.60 per share, and $20.8 million was returned to shareholders in Q1 2025[84] - As of March 31, 2025, the company held $894.8 million in cash, restricted cash, and short-term investments[86] - 92% of Q1 2025 revenues were from fixed-fee agreements, which can lead to timing differences between cash collection and revenue recognition[87] Projected Amortization of Deferred Revenue (in thousands): | Period | Deferred Revenue | | :--- | :--- | | Remainder of 2025 | $140,156 | | 2026 | $141,119 | | 2027 | $39,486 | | 2028 | $1,141 | | 2029 | $1,206 | | Thereafter | $1,270 | | Total Revenue | $324,378 | CRITICAL ACCOUNTING POLICIES AND ESTIMATES - There have been no material changes to the company's critical accounting policies from those disclosed in the 2024 Form 10-K[93] FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES - The company's primary liquidity sources are believed to be sufficient for short-term and long-term financing needs[94] Cash, Cash Equivalents, Restricted Cash, and Short-Term Investments (in thousands): | Metric | March 31, 2025 | December 31, 2024 | Increase / (Decrease) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $536,639 | $527,360 | $9,279 | | Restricted cash | $11,476 | $24,187 | $(12,711) | | Short-term investments | $346,653 | $430,848 | $(84,195) | | Total | $894,768 | $982,395 | $(87,627) | - The net decrease in total cash and investments was due to cash used in financing, investing, and operating activities[95] Net Cash (Used in) Provided by Operating Activities (in thousands): | Period | Net Cash (Used in) Provided by Operating Activities | | :--- | :--- | | Three Months Ended March 31, 2025 | $(19,989) | | Three Months Ended March 31, 2024 | $50,773 | | Change | $(70,762) | - The $70.8 million decrease in operating cash flow was driven by lower cash receipts in Q1 2025, primarily due to large catch-up revenues in Q1 2024[96] Cash Flows from Investing and Financing Activities (in thousands): | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by investing activities | $59,508 | $16,775 | $42,733 | | Net cash used in financing activities | $(42,951) | $(49,319) | $6,368 | | Taxes withheld on restricted stock unit vestings | $(32,177) | $(8,635) | $(23,542) | | Share repurchases | $(5,249) | $(28,868) | $23,619 | | Proceeds from exercise of stock options | $7,316 | $0 | $7,316 | - The combined deferred revenue balance decreased by $35.8 million to $324.4 million as of March 31, 2025, due to amortization[100] RESULTS OF OPERATIONS Revenues by Category (in thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Smartphone | $183,991 | $80,280 | $103,711 | 129% | | CE, IoT/Auto | $26,267 | $182,543 | $(156,276) | (86)% | | Other | $249 | $719 | $(470) | (65)% | | Total Revenues | $210,507 | $263,542 | $(53,035) | (20)% | | Catch-up revenues | $84,785 | $166,678 | $(81,893) | (49)% | - Total revenues decreased by $53.0 million (20%) primarily due to catch-up revenues from the Samsung TV agreement in Q1 2024[110] Licensees Accounting for 10% or More of Total Revenue: | Customer | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Customer A | 43% | —% | | Customer B | 16% | 13% | | Customer C | 12% | 71% | Operating Expenses by Category (in thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Research and portfolio development | $47,430 | $49,375 | $(1,945) | (4)% | | Licensing | $17,677 | $96,589 | $(78,912) | (82)% | | General and administrative | $13,568 | $13,840 | $(272) | (2)% | | Total Operating expenses | $78,675 | $159,804 | $(81,129) | (51)% | - The $81.1 million decrease in total operating expenses was primarily driven by a $66.3 million decrease in revenue share costs and a $12.8 million decrease in IP enforcement costs[112][113] Non-Operating Income (Expense), Net (in thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Increase/(Decrease) | Change % | | :--- | :--- | :--- | :--- | :--- | | Interest expense | $(9,871) | $(11,922) | $2,051 | 17% | | Interest and investment income | $9,264 | $11,778 | $(2,514) | (21)% | | Other income (expense), net | $994 | $(2,531) | $3,525 | 139% | | Total non-operating income (expense), net | $387 | $(2,675) | $3,062 | 114% | - The change in non-operating income was primarily due to a $2.2 million foreign currency translation net gain in Q1 2025[115] STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 — FORWARD-LOOKING STATEMENTS - The report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially[117] - Key risks include delays in license agreements, resolution of legal proceedings, and macroeconomic conditions[117][121] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No material changes have occurred in the company's market risk disclosures since the 2024 Form 10-K - No material changes in quantitative and qualitative market risk from the disclosures included in the 2024 Form 10-K[119] Item 4. CONTROLS AND PROCEDURES Management confirms the effectiveness of disclosure controls and procedures with no material changes to internal controls - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 31, 2025[120] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are likely to materially affect, internal controls[120] PART II — OTHER INFORMATION Item 1. LEGAL PROCEEDINGS This section incorporates legal proceedings information by reference from Note 6 of the financial statements - Legal proceedings information is incorporated by reference from Note 6, 'Litigation and Legal Proceedings,' to the Notes to Condensed Consolidated Financial Statements[123] Item 1A. RISK FACTORS This section highlights updated risks, particularly concerning United States-China relations, referencing the 2024 Form 10-K - Reference is made to Part I, Item 1A, 'Risk Factors' in the 2024 Form 10-K, with no material changes except for the specific risk related to United States-China relations[124] - The company's business may be adversely affected by a deterioration in United States-China relations or broader geopolitical conditions[125][126][127] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS The company repurchased 24,000 shares in Q1 2025, with $224.3 million remaining under its authorization Issuer Purchases of Equity Securities (Q1 2025): | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | January 1, 2025 - January 31, 2025 | — | $— | $229,532,849 | | February 1, 2025 - February 28, 2025 | — | $— | $229,532,849 | | March 1, 2025 - March 31, 2025 | 24,000 | $218.67 | $224,284,034 | | Total | 24,000 | $218.67 | | - The Share Repurchase Program has no expiration date and was authorized for $300 million in June 2014, with additional authorizations totaling $735 million through December 2023[130] Item 3. DEFAULTS UPON SENIOR SECURITIES This item is marked as not applicable, indicating no defaults upon senior securities - This item is not applicable[132] Item 4. MINE SAFETY DISCLOSURES This item is marked as not applicable, indicating no mine safety disclosures - This item is not applicable[133] Item 5. OTHER INFORMATION This section details Rule 10b5-1 trading arrangements adopted or modified by officers during Q1 2025 Rule 10b5-1 Trading Arrangements (Q1 2025): | Officer | Action | Date | Rule 10b5-1 | Non-Rule 10b5-1 | Maximum Shares to be Sold | Expiration Date | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | John Markley, Jr. | Terminate | March 17, 2025 | X | | 856 | June 30, 2025 | | John Markley, Jr. | Adopt | March 18, 2025 | X | | 1,370 | June 30, 2025 | | Rajesh Pankaj | Adopt | March 20, 2025 | X | | 9,000 | March 31, 2026 | | Joshua Schmidt | Adopt | March 21, 2025 | X | | 8,331 | March 31, 2026 | Item 6. EXHIBITS This section lists all exhibits filed with the Quarterly Report on Form 10-Q - The exhibits include certifications of the Principal Executive Officer and Principal Financial Officer, and various interactive data files[135] SIGNATURES Signatures The report is duly signed by the CEO and CFO on May 1, 2025 - The report was signed by Liren Chen, President and Chief Executive Officer, and Richard J. Brezski, Chief Financial Officer, on May 1, 2025[140]