2. REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three months ended March 31, 2024 and 2023 (in thousands):

		Three Months Ended March 31,
		2024		2023
Fixed fee license revenue	$	38,728	$	1,214
Per-unit royalty revenue		5,119		5,795
Total royalty and license revenue		43,847		7,009
Development, services, and other revenue		—		65
Total revenues	$	43,847	$	7,074

Per-unit Royalty Revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur. When we do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts. We develop such estimates based on a combination of available data including, but not limited to, approved customer forecasts, a look back at historical royalty reporting for each of our customers, and industry information available for the licensed products.

As a result of accruing per-unit royalty revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true up revenue to the actual amounts reported by our licensees. In the three months ended March 31, 2024, we recorded no adjustments to royalty revenue recognized in the previous quarter. We recorded adjustments of $0.4 million to increase royalty revenue during the three months ended March 31, 2023.

Contract Assets

As of March 31, 2024, we had contract assets of $6.5 million included within Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets. As of December 31, 2023, we had contract assets of $7.7 million included within Prepaid expenses and other current assets, and $0.1 million included within Other assets on the Condensed Consolidated Balance Sheets.

Contract assets decreased by $1.4 million from January 1, 2024 to March 31, 2024, primarily due to actual royalties billed during the three months ended March 31, 2024.

Fixed Fee License Revenue

We recognize revenue from a fixed fee license agreement when we have satisfied our performance obligations, which typically occurs upon the transfer of rights to our technology upon the execution of the license agreement. However, in certain contracts, we grant a license to our existing patent portfolio at the inception of the license agreement as well as rights to the portfolio as it evolves throughout the contract term. For such arrangements, we have concluded that there are two separate performance obligations:

• Performance Obligation A: Transfer of rights to our patent portfolio as it exists when the contract is executed; and

• Performance Obligation B: Transfer of rights to our patent portfolio as it evolves over the term of the contract, including access to new patent applications that the licensee can benefit from over the term of the contract.

If a fixed fee license agreement contains only Performance Obligation A, we recognize the revenue from the agreement at the inception of the contract. For fixed fee license agreements that contain both Performance Obligation A and B, we allocate the transaction price based on the standalone price for each of the two performance obligations. We use a number of factors primarily related to the attributes of our patent portfolio to estimate standalone prices related to Performance Obligation A and B. Once the transaction price is allocated, the portion of the transaction price allocable to Performance Obligation A is recognized in the period the license agreement is signed and the customer can benefit from rights provided in the contract. The portion allocable to Performance Obligation B is recognized on a straight-line basis over the contract term which best represents the ongoing and continuous nature of the patent prosecution process. For such contracts, a contract liability account is established and included within Deferred revenue on the Condensed Consolidated Balance Sheets. As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis.

On February 9, 2024, we entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta, pursuant to which the parties have agreed to terms for resolving the litigation matters described above (the “Litigation”) and Meta will license, on a non-exclusive basis, our patent portfolio for use in its products. We accounted for the License and Settlement Agreement in accordance with provisions of Accounting Standard Codification 606, Revenue from Contracts with Customers, (“ASC 606”), and recorded $0.6 million, based on the remaining performance obligations, as Deferred revenue-current on our Condensed Consolidated Balance Sheets as of March 31, 2024. We will recognize this deferred revenue once the remaining performance obligations are met. See Note 5. Contingencies of the Notes to Consolidated Financial Statements for more information on the Meta Agreement.

Deferred Revenue

On February 27, 2024, we entered into an agreement to renew of our license agreement with Nintendo Co., Ltd, (“Nintendo”). Under the terms of this agreement, Nintendo would obtain a license with respect to certain of our patents in return for $8.5 million of non-refundable, non-creditable fixed royalty revenue. The commencement date of this agreement is September 27, 2024. We received the $8.5 million fixed royalty payment from Nintendo in March 2024 and reported this payment as Deferred revenue-current on our Condensed Consolidated Balance Sheets.

Based on contracts signed and payments received as of March 31, 2024, we expect to recognize $20.5 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $17.2 million over one to three years and $3.3 million over more than three years.

As of December 31, 2023, total deferred revenue was $12.6 million. We recognized $1.2 million of deferred revenue during the three months ended March 31, 2024.

Capitalized Contract Costs

We capitalize certain incremental costs incurred, such as commissions and legal costs in order to obtain new contracts with our customers if we expect to recover these costs. The capitalized contract costs are amortized upon recognition of the related revenue. We capitalized $0.3 million of incremental costs incurred to obtain new contracts with customers in the three months ended March 31, 2024.