QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
☑ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Common Stock, par value $0.01 per share | |||||
Title of Class | Outstanding at May 4, 2021 |
PAGES | |||||
MARCH 31, 2021 | DECEMBER 31, 2020 | ||||||||||
ASSETS | |||||||||||
CURRENT ASSETS: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Short-term investments | |||||||||||
Accounts receivable | |||||||||||
Prepaid and other current assets | |||||||||||
Total current assets | |||||||||||
PROPERTY AND EQUIPMENT, NET | |||||||||||
PATENTS, NET | |||||||||||
DEFERRED TAX ASSETS | |||||||||||
OTHER NON-CURRENT ASSETS, NET | |||||||||||
Total non-current assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
CURRENT LIABILITIES: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued compensation and related expenses | |||||||||||
Deferred revenue | |||||||||||
Dividends payable | |||||||||||
Other accrued expenses | |||||||||||
Total current liabilities | |||||||||||
LONG-TERM DEBT | |||||||||||
LONG-TERM DEFERRED REVENUE | |||||||||||
OTHER LONG-TERM LIABILITIES | |||||||||||
TOTAL LIABILITIES | |||||||||||
COMMITMENTS AND CONTINGENCIES | |||||||||||
SHAREHOLDERS’ EQUITY: | |||||||||||
Preferred Stock, $ | |||||||||||
Common Stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained earnings | |||||||||||
Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, | |||||||||||
Total InterDigital, Inc. shareholders’ equity | |||||||||||
Noncontrolling interest | |||||||||||
Total equity | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ |
FOR THE THREE MONTHS ENDED MARCH 31, | |||||||||||
2021 | 2020 | ||||||||||
REVENUES: | |||||||||||
Patent licensing royalties | $ | $ | |||||||||
Technology solutions | |||||||||||
Total Revenue | |||||||||||
OPERATING EXPENSES: | |||||||||||
Patent administration and licensing | |||||||||||
Development | |||||||||||
Selling, general and administrative | |||||||||||
Total Operating expenses | |||||||||||
Income from operations | |||||||||||
INTEREST EXPENSE | ( | ( | |||||||||
OTHER INCOME, NET | |||||||||||
Income before income taxes | |||||||||||
INCOME TAX PROVISION | ( | ( | |||||||||
NET INCOME (LOSS) | $ | $ | ( | ||||||||
Net loss attributable to noncontrolling interest | ( | ( | |||||||||
NET INCOME ATTRIBUTABLE TO INTERDIGITAL, INC. | $ | $ | |||||||||
NET INCOME PER COMMON SHARE — BASIC | $ | $ | |||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — BASIC | |||||||||||
NET INCOME PER COMMON SHARE — DILUTED | $ | $ | |||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING — DILUTED |
FOR THE THREE MONTHS ENDED MARCH 31, | |||||||||||
2021 | 2020 | ||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Unrealized gain (loss) on investments, net of tax | ( | ||||||||||
Comprehensive income (loss) | $ | $ | ( | ||||||||
Comprehensive loss attributable to noncontrolling interest | ( | ( | |||||||||
Total comprehensive income attributable to InterDigital, Inc. | $ | $ |
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Non-Controlling Interest | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2019 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to InterDigital, Inc. | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized gain on short-term investments | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Treasury Stock | Non-Controlling Interest | Total Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2020 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Adjustment to Retained Earnings related to adoption of ASU 2020-06 | — | — | — | ( | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net income attributable to InterDigital, Inc. | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss attributable to noncontrolling interest | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest distribution | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
Net change in unrealized loss on short-term investments | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
Dividends declared ($ | — | — | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net | — | ( | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||
BALANCE, MARCH 31, 2021 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, | |||||||||||
2021 | 2020 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income (loss) | $ | $ | ( | ||||||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash interest expense, net | |||||||||||
Non-cash change in fair-value | ( | ||||||||||
Change in deferred revenue | ( | ( | |||||||||
Deferred income taxes | ( | ( | |||||||||
Share-based compensation | |||||||||||
Other | |||||||||||
(Increase) decrease in assets: | |||||||||||
Receivables | |||||||||||
Deferred charges and other assets | ( | ||||||||||
Increase (decrease) in liabilities: | |||||||||||
Accounts payable | ( | ( | |||||||||
Accrued compensation and other expenses | ( | ( | |||||||||
Net cash used in operating activities | ( | ( | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Purchases of short-term investments | ( | ( | |||||||||
Sales of short-term investments | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Capitalized patent costs | ( | ( | |||||||||
Long-term investments | ( | ||||||||||
Net cash used in investing activities | ( | ( | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net proceeds from exercise of stock options | |||||||||||
Payments on long-term debt | ( | ||||||||||
Repurchase of common stock | ( | ( | |||||||||
Non-controlling interest distribution | ( | ||||||||||
Taxes withheld upon restricted stock unit vestings | ( | ( | |||||||||
Dividends paid | ( | ( | |||||||||
Net cash used in financing activities | ( | ( | |||||||||
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ( | |||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD | |||||||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD | $ | $ |
FOR THE THREE MONTHS ENDED MARCH 31, | |||||||||||
SUPPLEMENTAL CASH FLOW INFORMATION: | 2021 | 2020 | |||||||||
Interest paid | $ | $ | |||||||||
Income taxes paid, including foreign withholding taxes | |||||||||||
Non-cash investing and financing activities: | |||||||||||
Dividend payable | |||||||||||
Accrued capitalized patent costs and property and equipment | ( | ||||||||||
Unsettled repurchase of common stock |
Three months ended March 31, | |||||||||||||||||||||||
2021 | 2020 | Increase/(Decrease) | |||||||||||||||||||||
Variable patent royalty revenue | $ | $ | $ | % | |||||||||||||||||||
Fixed-fee royalty revenue | % | ||||||||||||||||||||||
Current patent royalties a | % | ||||||||||||||||||||||
Non-current patent royalties b | % | ||||||||||||||||||||||
Total patent royalties | % | ||||||||||||||||||||||
Current technology solutions revenue a | ( | ( | % | ||||||||||||||||||||
Total revenue | $ | $ | $ | % |
Revenue | |||||
Remainder 2021 | $ | ||||
2022 | |||||
2023 | |||||
2024 | |||||
2025 and beyond | |||||
Total Revenue | $ |
Three months ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Net income applicable to InterDigital, Inc. | $ | $ | |||||||||
Weighted-average shares outstanding: | |||||||||||
Basic | |||||||||||
Dilutive effect of stock options, RSUs, convertible securities and warrants | |||||||||||
Diluted | |||||||||||
Earnings per share: | |||||||||||
Basic | $ | $ | |||||||||
Dilutive effect of stock options, RSUs, convertible securities and warrants | |||||||||||
Diluted | $ | $ |
Three months ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Restricted stock units and stock options | |||||||||||
Convertible securities(a) | |||||||||||
Warrants | |||||||||||
Total |
March 31, | December 31, | March 31, | |||||||||||||||
2021 | 2020 | 2020 | |||||||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||||||||
Restricted cash included within prepaid and other current assets | |||||||||||||||||
Restricted cash included within other non-current assets | |||||||||||||||||
Total cash, cash equivalents and restricted cash | $ | $ | $ |
Fair Value as of March 31, 2021 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market and demand accounts (a) | $ | $ | $ | $ | |||||||||||||||||||
Commercial paper (b) | |||||||||||||||||||||||
U.S. government securities | |||||||||||||||||||||||
Corporate bonds, asset backed and other securities | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Fair Value as of December 31, 2020 | |||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Money market and demand accounts (a) | $ | $ | $ | $ | |||||||||||||||||||
Commercial paper(b) | |||||||||||||||||||||||
U.S. government securities | |||||||||||||||||||||||
Corporate bonds, asset backed and other securities | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||
Principal Amount | Carrying Value | Fair Value | Principal Amount | Carrying Value | Fair Value | ||||||||||||||||||||||||||||||
Senior Convertible Long-Term Debt | $ | $ | $ | $ | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||||||||||||||
Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||
Technicolor Patent Acquisition Long-Term Debt | $ | $ | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
Principal | $ | $ | |||||||||
Less: | |||||||||||
Unamortized interest discount(a) | ( | ||||||||||
Deferred financing costs(a) | ( | ( | |||||||||
Net carrying amount of the 2024 Notes | $ | $ |
Three months ended March 31, | |||||||||||||||||||||||
2021 | 2020 | ||||||||||||||||||||||
2024 Notes | 2024 Notes | 2020 Notes | Total | ||||||||||||||||||||
Contractual coupon interest | $ | $ | $ | $ | |||||||||||||||||||
Accretion of debt discount(a) | |||||||||||||||||||||||
Amortization of deferred financing costs | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Three months ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Interest and investment income | $ | $ | |||||||||
Other | |||||||||||
Other income, net | $ | $ |
March 31, 2021 | December 31, 2020 | ||||||||||
Tax receivables | $ | $ | |||||||||
Prepaid assets | |||||||||||
Unsettled repurchase of common stock | |||||||||||
Operating lease receivable | |||||||||||
Other current assets | |||||||||||
Total Prepaid and other current assets | $ | $ |
March 31, 2021 | December 31, 2020 | Increase / (Decrease) | |||||||||||||||
Cash and cash equivalents | $ | 396,156 | $ | 473,474 | $ | (77,318) | |||||||||||
Restricted cash included within prepaid and other current assets | 3,688 | 3,108 | 580 | ||||||||||||||
Restricted cash included within other non-current assets | 1,081 | 1,081 | — | ||||||||||||||
Short-term investments | 488,559 | 453,173 | 35,386 | ||||||||||||||
Total cash, cash equivalents, restricted cash and short-term investments | $ | 889,484 | $ | 930,836 | $ | (41,352) |
Three months ended March 31, | |||||||||||||||||
2021 | 2020 | Increase / (Decrease) | |||||||||||||||
Net cash used in operating activities | $ | (9,842) | $ | (26,885) | $ | 17,043 |
Three months ended March 31, | |||||||||||||||||
2021 | 2020 | Increase / (Decrease) | |||||||||||||||
Cash Receipts: | |||||||||||||||||
Patent royalties | $ | 56,107 | $ | 33,464 | $ | 22,643 | |||||||||||
Technology solutions | 1,881 | 973 | 908 | ||||||||||||||
Total cash receipts | 57,988 | 34,437 | 23,551 | ||||||||||||||
Cash Outflows: | |||||||||||||||||
Cash operating expenses a | 48,360 | 49,264 | (904) | ||||||||||||||
Income taxes paid b | 4,328 | 2,228 | 2,100 | ||||||||||||||
Total cash outflows | 52,688 | 51,492 | 1,196 | ||||||||||||||
Other working capital adjustments | (15,142) | (9,830) | (5,312) | ||||||||||||||
Cash flows used in operating activities | $ | (9,842) | $ | (26,885) | $ | 17,043 |
2024 Notes | |||||||||||||||||
Market Price Per Share | Shares Issuable Upon Conversion of the 2024 Notes | Shares Issuable Upon Exercise of the 2024 Warrant Transactions | Total If-Converted Method Incremental Shares | Shares Deliverable to InterDigital upon Settlement of the 2024 Note Hedge Transactions | Incremental Shares Issuable (a) | ||||||||||||
(Shares in thousands) | |||||||||||||||||
$85 | 215 | — | 215 | (215) | — | ||||||||||||
$90 | 476 | — | 476 | (476) | — | ||||||||||||
$95 | 710 | — | 710 | (710) | — | ||||||||||||
$100 | 921 | — | 921 | (921) | — | ||||||||||||
$105 | 1,111 | — | 1,111 | (1,111) | — | ||||||||||||
$110 | 1,284 | 25 | 1,309 | (1,284) | 25 | ||||||||||||
$115 | 1,442 | 238 | 1,680 | (1,442) | 238 | ||||||||||||
$120 | 1,587 | 433 | 2,020 | (1,587) | 433 | ||||||||||||
$125 | 1,721 | 613 | 2,334 | (1,721) | 613 | ||||||||||||
$130 | 1,844 | 779 | 2,623 | (1,844) | 779 |
Three months ended March 31, | |||||||||||||||||||||||
2021 | 2020 | Total Increase/(Decrease) | |||||||||||||||||||||
Variable patent royalty revenue | $ | 7,096 | $ | 5,946 | $ | 1,150 | 19 | % | |||||||||||||||
Fixed-fee royalty revenue | 69,296 | 66,347 | 2,949 | 4 | % | ||||||||||||||||||
Current patent royalties a | 76,392 | 72,293 | 4,099 | 6 | % | ||||||||||||||||||
Non-current patent royalties b | 3,781 | 705 | 3,076 | 436 | % | ||||||||||||||||||
Total patent royalties | 80,173 | 72,998 | 7,175 | 10 | % | ||||||||||||||||||
Current technology solutions revenue a | 2,190 | 3,212 | (1,022) | (32) | % | ||||||||||||||||||
Total revenue | $ | 82,363 | $ | 76,210 | $ | 6,153 | 8 | % |
Three months ended March 31, | |||||||||||
2021 | 2020 | ||||||||||
Apple | 34% | 37% | |||||||||
Samsung | 24% | 26% | |||||||||
Huawei | 13% | —% | |||||||||
LG | N/A | 10% |
Three months ended March 31, | |||||||||||||||||||||||
2021 | 2020 | Increase/(Decrease) | |||||||||||||||||||||
Patent administration and licensing | $ | 36,574 | $ | 40,108 | $ | (3,534) | (9) | % | |||||||||||||||
Development | 22,583 | 18,818 | 3,765 | 20 | % | ||||||||||||||||||
Selling, general and administrative | 11,217 | 12,603 | (1,386) | (11) | % | ||||||||||||||||||
Total operating expenses | $ | 70,374 | $ | 71,529 | $ | (1,155) | (2) | % |
Increase/(Decrease) | |||||
Patent maintenance | $ | (2,486) | |||
Corporate initiatives | (1,952) | ||||
Intellectual property enforcement and non-patent litigation | 1,247 | ||||
Personnel-related costs, including performance-based compensation | 2,253 | ||||
Other | (217) | ||||
Total decrease in operating expenses | $ | (1,155) |
Three months ended March 31, | |||||||||||||||||||||||
2021 | 2020 | Change | |||||||||||||||||||||
Interest expense | $ | (6,990) | $ | (10,545) | $ | 3,555 | 34 | % | |||||||||||||||
Interest and investment income | 553 | 2,877 | (2,324) | (81) | % | ||||||||||||||||||
Other income, net | 171 | 3,146 | (2,975) | (95) | % | ||||||||||||||||||
Total non-operating expense | $ | (6,266) | $ | (4,522) | $ | (1,744) | (39) | % |
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs (3) | |||||||||||||||||||
January 1, 2021 - January 31, 2021 | — | $ | — | — | $ | 71,464,670 | |||||||||||||||||
February 1, 2021 - February 28, 2021 | — | $ | — | — | $ | 71,464,670 | |||||||||||||||||
March 1, 2021 - March 31, 2021 | 91,167 | $ | 63.05 | 91,167 | $ | 65,715,055 | |||||||||||||||||
Total | 91,167 | $ | 63.05 | 91,167 | $ | 65,715,055 |
Exhibit Number | Exhibit Description | |||||||
10.1 | ||||||||
10.2 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1+ | ||||||||
32.2+ | ||||||||
101.INS | Inline Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
101.SCH | Inline Schema Document | |||||||
101.CAL | Inline Calculation Linkbase Document | |||||||
101.DEF | Inline Definition Linkbase Document | |||||||
101.LAB | Inline Labels Linkbase Document | |||||||
101.PRE | Inline Presentation Linkbase Document | |||||||
104 | Inline Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101) |
+ | This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that InterDigital, Inc. specifically incorporates it by reference. |
INTERDIGITAL, INC. | ||||||||
Date: May 6, 2021 | /s/ LIREN CHEN | |||||||
Liren Chen | ||||||||
President and Chief Executive Officer | ||||||||
Date: May 6, 2021 | /s/ RICHARD J. BREZSKI | |||||||
Richard J. Brezski | ||||||||
Chief Financial Officer |
WILLIAM J. MERRITT, an individual | ||||||||
Date: March 16, 2021 | /s/ William J. Merritt | |||||||
William J. Merritt | ||||||||
INTERDIGITAL, INC. | ||||||||
Date: March 16, 2021 | /s/ Richard Gulino | |||||||
Richard Gulino | ||||||||
Chief Legal Officer |
Chief Executive Officer Terms of Employment | |||||
Name | Liren Chen (“Executive”) | ||||
Employing Entity | InterDigital, Inc. | ||||
Title | President and Chief Executive Officer | ||||
Board of Directors | Member of Board of Directors of InterDigital, Inc. | ||||
Start Date | April 5, 2021 | ||||
Principal Place of Employment | An InterDigital facility to be mutually agreed upon. | ||||
Base Salary | $690,000 | ||||
Short Term Incentive Plan (“STIP”) | Annual Bonus (“STIP”) target of at least 100% annual base salary; payouts under the STIP are determined based upon a combination of personal and company performance and are contingent upon your continued employment through the end of the calendar year. Maximum bonus payout is 200% of target based on superior achievement. | ||||
Sign-on Cash Bonus | $1,500,000 payable in three (3) equal installments as follows: 1/3 upon start date (with first paycheck) 1/3 upon 6-month anniversary of start date 1/3 1-year anniversary of start date Must be employed at time of payment to receive installment, provided, however, that if Executive is involuntarily terminated without Cause (defined below), resigns for Good Reason (defined below), dies or becomes disabled, then payment of the remaining installment (if applicable) shall be made upon Executive’s termination. |
Participation in the Long-Term Compensation Plan (“LTCP”) | A 2021 Long Term Incentive target of $3,300,000, allocated as follows*: 1/3 granted in time-based RSUs that will vest in three (3) equal installments, on the anniversary of grant date; 1/3 granted in performance-based RSUs, vesting, if at all, based on achievement of the 2021 LTCP Goal(s) and continued employment with InterDigital through vest date; and 1/3 granted in performance-based stock options with a 10-year term, vesting, if at all, based on achievement of the 2021 LTCP Goal(s) and continued employment with InterDigital through vest date; additionally, shares acquired upon exercise must be held for a period of 2 years following the date of vesting. Goal achievement for performance based RSUs and options at threshold will result in 50% payout; at target will result in 100% payout; and at maximum will result in 200% payout; achievement between the threshold and target or target and maximum will result in a payout determined by linear interpolation. 2021 LTCP Goal(s) will be finalized in Q1-2021 and will measure achievement of performance goals on December 31, 2023 and/or December 31, 2025; long-term compensation goals typically have a 3 to 5 year performance period and vest by March 15 of the year following the end of the performance period. In the event of termination without Cause (defined below), for Good Reason (defined below), death or disability, annual LTCP awards will vest as follows3: Time-based RSUs will vest on a pro-rated basis; and Performance-based RSUs and options will vest on a pro-rated basis, if termination without Cause, resignation for Good Reason, death or disability occurs during the last year of the performance period, based on actual achievement. In the event of termination without Cause (defined below), for Good Reason (defined below), death or disability, in connection with or during 24 months following a change in control, annual LTCP awards will vest as follows: Time-based RSUs will vest in full; and Performance-based RSUs and options will vest in full, with performance deemed satisfied at the greater of “target” or actual achievement (as measured on the date of termination). | ||||
3 Each grant is subject to the terms and conditions of the accompanying Award Agreement and 2017 InterDigital Stock Plan. |
InterDigital Deferred Compensation Plan | Discretionary Company Contribution to the InterDigital Deferred Compensation Plan in the amount of $3,000,000, which will vest $1,500,000 on your start date, and $500,000 on each of January 1, 2022, January 1, 2023, and January 1, 2024; provided, however that vesting will accelerate in full the event of termination without Cause (defined below), for Good Reason (defined below), death or disability. Contribution invested in investment options eligible as part of the InterDigital Deferred Compensation Program which are similar to those under our 401(k) plan and subject to the terms and conditions of the InterDigital Deferred Compensation Program. Company stock is not an available investment option included in the Deferred Compensation Program. | ||||
New Hire Equity Award | Equity award of $7,500,000, allocated as follows: $3,500,000 time-based RSUs, that will vest in 3 equal installments on the anniversary of start date; $2,000,000 performance based RSUs vesting, if at all, based on achievement of the Diversified Revenue Platform Goals (as described in the attached) and continued employment through the vest date; $2,000,000 in performance-based options with a 10-year term, vesting, if at all, based on the achievement of the Diversified Revenue Platform Goals and continued employment through the vest date; additionally, shares acquired upon exercise must be held for a period of 2 years following the date of vesting. New Hire equity awards will be granted the later of the 15th of the month of commencement of employment or 3 days post-employment commencement. In the event of termination without Cause (defined below), for Good Reason (defined below), death or disability, new hire time-based RSUs will vest in full upon termination date. In the event of termination without Cause (defined below), for Good Reason (defined below), death or disability, in connection with or during 24 months following a change in control, New Hire equity awards will vest as follows: Time-based RSUs will vest in full; and Performance-based RSUs and options will vest in full, with performance deemed satisfied at the greater of “target” or actual achievement (as measured on the date of termination). |
Relocation | You will receive relocation assistance through InterDigital’s relocation service provider, Global Mobility Solutions, when needed to have your primary place of residence located within commuting distance of an agreed upon InterDigital facility. | ||||
Benefits | You will be eligible to participate in health and welfare benefit programs in effect from time to time as are made available to other similarly situated employees of InterDigital and in accordance with and subject to the terms and conditions of such plans or programs. | ||||
Severance | Participation in Executive Severance & Change in Control Plan with the following modified terms: If your employment is terminated without Cause or for Good Reason during the first twelve (12) months of employment with InterDigital, you will receive: •Lump sum payment equal to 300% (300% if such termination occurs within 24 months following Change in Control) of sum of base salary and STIP Target; •18 months (24 months if such termination occurs within 24 months following Change in Control) COBRA premium reimbursement for self and family; •Accelerated vesting of outstanding equity awards as provided in individual award agreements. If your employment is terminated without Cause or for Good Reason between the first and second anniversary of your start date, you will receive: •Lump sum payment equal to 200% (250% if such termination occurs within 24 months following Change in Control) of sum of base salary and STIP Target; •18 months (24 months if such termination occurs within 24 months following Change in Control) COBRA premium reimbursement for self and family; •Accelerated vesting of outstanding equity awards as provided in individual award agreements. If your employment is terminated without Cause or for Good Reason after the second anniversary of your start date, you will receive: •Lump sum payment equal to 200% (250% if such termination occurs within 24 months following Change in Control) of base salary; •18 months (24 months if such termination occurs within 24 months following Change in Control) COBRA premium reimbursement for self and family; •Accelerated vesting of outstanding equity awards as provided in individual award agreements. |
Definitions: | For purposes of this term sheet: “Cause” means (i) acts or omissions constituting gross negligence, recklessness or willful misconduct on the part of Executive with respect to Executive’s obligations to the Company, in each case which results in material harm to the business or reputation of the Company; (ii) Executive’s willful and material breach of his Nondisclosure and Assignment of Ideas Agreement (“NDAIA”); or (iii) Executive’s conviction or entry of a plea of nolo contendere for fraud, misappropriation or embezzlement, any felony, or any crime of moral turpitude; or (iv) the Executive’s willful neglect of duties as determined in the sole and exclusive discretion of the Board of Directors. “Good Reason” means Executive’s termination of his employment in accordance with the next sentence after the occurrence of one or more of the following events without Executive’s express written consent: (i) a material diminution in Executive’s base salary or target bonus opportunity under the incentive plan as in effect for the year in which the termination occurs; (ii) a material diminution in Executive’s title, authority, duties or responsibilities; (iii) a material failure to comply with payment of Executive’s compensation; (iv) relocation of Executive’s primary office more than 50 miles from Executive’s then-current office; or (v) any other action or inaction that constitutes a material breach by the Company of the Executive Severance Policy or NDAIA Good Reason shall only exist if Executive provides a notice of termination for Good Reason to the Company within ninety (90) days after the initial existence of such grounds and the Company has had thirty (60) days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within ninety (60) days following the end of such sixty (60) day period within which the Company was entitled to remedy the course of conduct constituting Good Reason but failed to do so, then Executive shall be deemed to have waived his right to terminate for Good Reason with respect to such grounds. |
Date: May 6, 2021 | /s/ Liren Chen | |||||||
Liren Chen | ||||||||
President and Chief Executive Officer |
Date: May 6, 2021 | /s/ Richard J. Brezski | |||||||
Richard J. Brezski | ||||||||
Chief Financial Officer |
Date: May 6, 2021 | /s/ Liren Chen | |||||||
Liren Chen | ||||||||
President and Chief Executive Officer |
Date: May 6, 2021 | /s/ Richard J. Brezski | |||||||
Richard J. Brezski | ||||||||
Chief Financial Officer |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2021 |
Dec. 31, 2020 |
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SHAREHOLDERS’ EQUITY: | ||
Preferred stock, par value (in USD per share) | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized (in shares) | 14,399,000 | 14,399,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in USD per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 71,476,000 | 71,389,000 |
Common stock, shares outstanding (in shares) | 30,812,000 | 30,816,000 |
Treasury stock, shares of common held at cost (in shares) | 40,664,000 | 40,573,000 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Statement of Comprehensive Income [Abstract] | ||
Net income (loss) | $ 3,958 | $ (1,661) |
Unrealized gain (loss) on investments, net of tax | (70) | 32 |
Comprehensive income (loss) | 3,888 | (1,629) |
Comprehensive loss attributable to noncontrolling interest | (1,613) | (1,777) |
Total comprehensive income attributable to InterDigital, Inc. | $ 5,501 | $ 148 |
Condensed Consolidated Statements of Shareholders' Equity (Parenthetical) - $ / shares |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Statement of Stockholders' Equity [Abstract] | ||
Dividends declared (in USD per share) | $ 0.35 | $ 0.35 |
Accounting Standards Update [Extensible List] | iidc:AccountingStandardsUpdate202006Member |
Basis of Presentation |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited, condensed consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position of InterDigital, Inc. (individually and/or collectively with its subsidiaries referred to as “InterDigital,” the “Company,” “we,” “us” or “our,” unless otherwise indicated) as of March 31, 2021, the results of our operations for the three months ended March 31, 2021 and 2020 and our cash flows for the three months ended March 31, 2021 and 2020. The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the detailed schedules, information and notes necessary to state fairly the financial condition, results of operations and cash flows in conformity with United States generally accepted accounting principles (“GAAP”). The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for year-end financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (our “2020 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February 18, 2021. Definitions of capitalized terms not defined herein appear within our 2020 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. We have one reportable segment. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. InterDigital has analyzed the impact of the ongoing Coronavirus pandemic (“COVID-19”) on its financial statements as of March 31, 2021. InterDigital has determined that the changes to its significant judgments and estimates as a result of COVID-19 did not have a material impact on its financial statements. The potential impact of COVID-19 will continue to be analyzed going forward. Change in Accounting Policies There have been no material changes or updates to our existing accounting policies from the disclosures included in our 2020 Form 10-K, except as indicated below in "New Accounting Guidance". Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year presentation. Supplemental Cash Flow Information The following table presents additional supplemental cash flow information for the three months ended March 31, 2021 and 2020 (in thousands):
New Accounting Guidance Accounting Standards Update: Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). The amendments in this ASU are intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 with early adoption allowed. We adopted this guidance as of January 1, 2021 and the adoption did not have a material impact on our consolidated financial statements. Accounting Standards Update: Simplifying the Accounting for Convertible Instruments In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The amendments in this ASU are intended to simplify accounting for convertible debt instruments and convertible preferred stock by removing certain accounting models which separate the embedded conversion features from the host contract. ASU 2020-06 also amends certain guidance in ASC 260 on the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption is permitted for fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective methods of transition. We elected to early adopt this standard on a modified retrospective approach as of January 1, 2021. This adoption increased Long-term debt by $50.2 million at January 1, 2021, which was comprised of $51.6 million of unamortized interest discount and was partially offset by a net increase of $1.4 million equity component of deferred financing costs. This was due to the standard no longer requiring bifurcation of the embedded conversion feature from the host contract on the 2024 Notes, as defined in Note 7, "Obligations." This adoption also reduced non-cash interest expense starting in 2021 due to the removal of the accretion of the debt discount on the 2024 Notes. Lastly, the adoption requires the use of the if-converted method of calculating diluted earnings per share rather than the treasury stock method for convertible instruments and requires the inclusion of the potential effect of shares settled in cash or shares in the diluted earnings per share calculation. Due to the reduction in non-cash interest expense, this adoption increased both basic and diluted earnings per share by $0.09 for the three months ended March 31, 2021.
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
REVENUE | REVENUE Disaggregated Revenue The following table presents the disaggregation of our revenue for the three months ended March 31, 2021 and 2020 (in thousands):
a. Recurring revenues are comprised of current patent royalties, inclusive of Dynamic Fixed-Fee Agreement royalties, and current technology solutions revenue. b. Non-recurring revenues are comprised of non-current patent royalties, which primarily include past patent royalties and royalties from static agreements, as well as patent sales. During the three months ended March 31, 2021, we recognized $62.7 million of revenue that had been included in deferred revenue as of the beginning of the period. As of March 31, 2021, we had contract assets of $9.4 million and $8.9 million included within "Accounts receivable" and "Other non-current assets, net" in the condensed consolidated balance sheet, respectively. As of December 31, 2020, we had contract assets of $9.7 million and $8.9 million included within "Accounts receivable" and "Other non-current assets, net" in the condensed consolidated balance sheet, respectively. Contracted Revenue Based on contracts signed and committed as of March 31, 2021, we expect to recognize the following revenue from Dynamic Fixed-Fee Agreement payments over the term of such contracts (in thousands):
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Income Taxes |
3 Months Ended |
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Mar. 31, 2021 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES In the three months ended March 31, 2021 and 2020, the Company had an effective tax rate of 30.8% and 1,144.7%, respectively. The effective tax rate in both periods was impacted by losses in certain jurisdictions where the Company presently has recorded a valuation allowance against the related tax benefit. Excluding this valuation allowance, our first quarter 2021 and 2020 effective tax rate would have been 12.0% and 65.5% respectively. During the first quarter 2021 and 2020, the Company recorded discrete net expense of $0.3 million primarily related to share-based compensation. The effective tax rate reported in any given year will continue to be influenced by a variety of factors, including timing differences between the recognition of book and tax revenue, the level of pre-tax income or loss, the foreign vs. domestic classification of the Company’s customers, and any discrete items that may occur. During the three months ended March 31, 2021 and 2020, the Company paid approximately $3.6 million and $2.0 million, respectively, in foreign source creditable withholding tax.
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Net Income (Loss) Per Share |
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NET INCOME (LOSS) PER SHARE | NET INCOME (LOSS) PER SHARE Basic Earnings Per Share ("EPS") is calculated by dividing net income or loss available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if options or other securities with features that could result in the issuance of common stock were exercised or converted to common stock or resulting from the unvested outstanding RSUs. The following tables reconcile the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):
Shares of common stock issuable upon the exercise or conversion of certain securities have been excluded from our computation of EPS because the strike price or conversion rate, as applicable, of such securities was greater than the average market price of our common stock and, as a result, the effect of such exercise or conversion would have been anti-dilutive. Set forth below are the securities and the weighted average number of shares of common stock underlying such securities that were excluded from our computation of EPS for the periods presented (in thousands):
______________________________ (a)As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock. Convertible Notes and Warrants Refer to Note 7, "Obligations," for information about the Company's convertible notes and warrants and related conversion and strike prices. During periods in which the average market price of the Company's common stock is above the applicable conversion price of the Company's convertible notes, or above the strike price of the Company's outstanding warrants, the impact of conversion or exercise, as applicable, would be dilutive and such dilutive effect is reflected in diluted EPS. As a result, in periods where the average market price of the Company's common stock is above the conversion price or strike price, as applicable, under the if-converted method, the Company calculates the number of shares issuable under the terms of the convertible notes and the warrants based on the average market price of the stock during the period, and includes that number in the total diluted shares outstanding for the period.
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Litigation and Legal Proceedings |
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Mar. 31, 2021 | |
Litigation Settlement [Abstract] | |
LITIGATION AND LEGAL PROCEEDINGS | LITIGATION AND LEGAL PROCEEDINGS COURT PROCEEDINGS Lenovo UK Proceeding On August 27, 2019, the Company and certain of its subsidiaries filed a claim in the UK High Court against Lenovo Group Limited and certain of its subsidiaries. The claim, as amended, alleges infringement of five of the Company's patents relating to 3G and/or 4G/LTE standards: European Patent (U.K.) Nos. 2,363,008; 2,421,318; 2,485,558; 2,557,714; and 3,355,537. The UK High Court held case management conferences on October 6, 2020 and December 16, 2020, a disclosure hearing on January 19, 2021 and pre-trial review hearings for the first trial on January 28, 2021 and February 8, 2021. At those hearings, the UK High Court entered a schedule for the technical and non-technical FRAND proceedings. Two technical trials were scheduled for March 2021 and June 2021 and the non-technical FRAND trial is scheduled in January 2022. There are additional technical trials scheduled for the remaining patents following the FRAND trial. The first technical trial was completed, and the Company is awaiting the court’s decision regarding the merits. District of Delaware Patent Proceeding On August 28, 2019, the Company and certain of its subsidiaries filed a complaint in the United States District Court for the District of Delaware (the "Delaware District Court") against Lenovo Holding Company, Inc. and certain of its subsidiaries alleging that Lenovo infringes eight of InterDigital's U.S. patents—U.S. Patent Nos. 8,085,665; 8,199,726; 8,427,954; 8,619,747; 8,675,612; 8,797,873; 9,203,580; and 9,456,449—by making, using, offering for sale, and/or selling Lenovo wireless devices with 3G and/or 4G LTE capabilities. As relief, InterDigital is seeking: (a) a declaration that InterDigital is not in breach of its relevant FRAND commitments with respect to Lenovo; (b) to the extent Lenovo does not agree to negotiate a worldwide patent license, does not agree to enter into binding international arbitration to set the terms of a FRAND license, and does not agree to be bound by the FRAND terms to be set by the UK High Court in the separately filed UK proceedings described above, an injunction prohibiting Lenovo from continued infringement; (c) damages, including enhanced damages for willful infringement and supplemental damages; and (d) attorneys’ fees and costs. On September 16, 2020, the Delaware District Court entered a schedule for the case, setting a patent jury trial for December 5, 2022.On March 8, 2021, the Delaware District Court held a claim construction hearing. The ruling is pending. District of Delaware Antitrust Proceeding On April 9, 2020, Lenovo (United States) Inc. and Motorola Mobility LLC filed a complaint in the Delaware District Court against the Company and certain of its subsidiaries. The complaint alleges that the Company defendants have violated Sections 1 and 2 of the Sherman Act in connection with, among other things, their licensing of 3G and 4G standards essential patents ("SEPs"). The complaint further alleges that the Company defendants have violated their commitment to the ETSI with respect to the licensing of 3G and 4G SEPs on FRAND terms and conditions. The complaint seeks, among other things (i) rulings that the Company defendants have violated Sections 1 and 2 of the Sherman Act and are liable for breach of their ETSI FRAND commitments, (ii) a judgment that the plaintiffs are entitled to a license with respect to the Company's 3G and 4G SEPs on FRAND terms and conditions, and (iii) injunctions against any demand for allegedly excessive royalties or enforcement of the Company defendants' 3G and 4G U.S. SEPs against the plaintiffs or their customers via patent infringement proceedings. On June 22, 2020, the Company filed a motion to dismiss Lenovo's Sherman Act claims with prejudice, and to dismiss Lenovo's breach of contract claim with leave to re-file as a counterclaim in the Company's legal proceeding against Lenovo in the Delaware District Court discussed above. Oral argument on the Company's motion to dismiss was held on October 27, 2020. On March 24, 2021, the court ruled on the Company’s motion to dismiss. The court dismissed the Sherman Act Section 1 claim without prejudice, denied the motion to dismiss the Sherman Act Section 2 claim, and consolidated the Section 2 and breach of contract claims with Company’s patent proceeding against Lenovo in the Delaware District Court discussed above. China Proceeding On April 10, 2020, Lenovo (Beijing) Ltd. and certain of its affiliates filed a complaint against the Company and certain of its subsidiaries in the Beijing Intellectual Property Court (Beijing IP Court) seeking a determination of the FRAND royalty rates payable for the Company's Chinese 3G, 4G and 5G SEPs. On February 20, 2021, the Company filed an application challenging the jurisdiction of the Beijing IP Court to take up Lenovo’s complaint. The jurisdiction challenge remains pending. Xiaomi China Proceeding On August 5, 2020, the Company was informed in writing by Xiaomi Corporation ("Xiaomi") that, on June 3, 2020, Xiaomi Communication Technology Co., Ltd. and certain of its affiliates filed a complaint against the Company and one of its subsidiaries in the Wuhan Intermediate People's Court (the "Wuhan Court") seeking for the Wuhan Court to determine a global FRAND rate for a license to the Company's 3G and/or 4G/LTE SEPs. The Company was informed on September 25, 2020 that the Wuhan Court held an ex parte hearing on or about September 23, 2020 and issued an order that, among other things, enjoins the Company from seeking a preliminary and permanent injunction against Xiaomi and certain of its subsidiaries for infringement of certain of the Company's patents related to 3G and/or 4G/LTE standards in the Company's case in the Delhi High Court discussed below, or elsewhere. The Wuhan Court ordered a fine of up to one million yuan per day if the Company were to violate the order. The Company contends that it has not yet been properly served with Xiaomi's complaint or the Wuhan Court's anti-suit injunction order. On October 13, 2020, the Company filed an application challenging the jurisdiction of the Wuhan Court to take up Xiaomi’s complaint. On March 12, 2021, the Company’s Chinese counsel was orally informed by the Court that the Company’s application challenging jurisdiction of the Wuhan Court had been rejected. The Company has not yet received the written decision but is challenging the decision at the IP Tribunal of the SPC. On September 30, 2020, the Company filed a preliminary conditional response seeking reconsideration of the Wuhan Court's anti-suit injunction. In a decision dated December 4, 2020, the Wuhan Court dismissed the Company’s reconsideration petition. The Company is challenging that decision at the SPC. India Proceeding On July 29, 2020, the Company and certain of its subsidiaries filed two patent infringement actions in the Delhi High Court in New Delhi, India (the "Delhi High Court") against Xiaomi and certain of its subsidiaries. The first complaint alleges infringement of five of the Company's patents related to 3G and/or 4G/LTE standards: Indian Patent Nos. 262910; 295912; 298719; 313036; and 320182. The second complaint alleges infringement of three of the Company's patents related to H.265/HEVC standards: Indian Patent Nos. 242248; 299448; and 308108. In these proceedings, the Company is seeking compensatory and punitive damages for Xiaomi's infringement of the asserted patents. The Company is further seeking, among other remedies, interim and permanent injunctive relief to prevent further infringement of the litigated patents in India, unless Xiaomi elects to take a license on terms determined to be FRAND by the Delhi High Court. The Company’s application for interim injunctive relief remains pending. On September 29, 2020, the Company filed an anti-anti-suit injunction application against Xiaomi in the Delhi High Court, seeking, among other things, to enjoin Xiaomi from enforcing the Wuhan Court's September 23, 2020 anti-suit injunction order described above. On October 9, 2020, the Delhi High Court granted the Company's motion and issued an ad interim injunction restraining Xiaomi from enforcing the anti-suit injunction order issued by the Wuhan Court, pending further consideration of the Company's application for an anti-anti-suit injunction at a hearing on November 25, 2020. On May 3, 2021, in an oral pronouncement by the Delhi High Court, the interim anti-anti-suit injunction was made permanent throughout the pendency of the Indian cellular case. Furthermore, the Delhi High Court stated that, if any orders or other measures are passed by the Wuhan Court related to the anti-suit injunction that result in the Company incurring a monetary penalty, then Xiaomi must deposit a corresponding, equal amount with the Delhi High Court for the Company's benefit within one week. German Proceeding On October 30, 2020, the Company filed an anti-anti-suit injunction application against Xiaomi in the Munich District Court, seeking to enjoin Xiaomi from continuing to pursue the Wuhan Court's September 23, 2020 anti-suit injunction order described above with respect to Germany. On November 11, 2020, the Munich District Court granted the Company's motion and issued an ex parte injunction restraining Xiaomi from enforcing pursuing the anti-suit injunction. The Company filed penalty requests for non-compliance with said court order. Xiaomi opposed the injunction and requested stay of enforcement, and an oral hearing was held on January 28, 2021. At the hearing, the Munich District Court dismissed the request for stay of enforcement. On February 25, 2021 the Munich District Court confirmed its earlier ex parte anti-anti-suit injunction against Xiaomi. This judgment was appealed by Xiaomi to the Higher Regional Court Munich. On April 27, the Company was informed that the Munich Regional Court commenced service of three patent infringement actions filed in Germany against Xiaomi by a subsidiary of the Company. The complaints involve infringement of the Company's German patents related to 3G and 4G cellular handsets (Patent Nos. EP 2,421,318; EP 2,485,558; and EP 3,355,537). The Company is seeking injunctive relief to prevent further infringement of the asserted patents in Germany. OTHER We are party to certain other disputes and legal actions in the ordinary course of business, including arbitration and legal proceedings with licensees regarding the terms of their agreements and the negotiation thereof. We do not currently believe that these matters, even if adversely adjudicated or settled, would have a material adverse effect on our financial condition, results of operations or cash flows. None of the preceding matters have met the requirements for accrual or disclosure of a potential range as of March 31, 2021.
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS | CASH, CONCENTRATION OF CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS Cash, Cash Equivalents and Restricted Cash Cash, cash equivalents and restricted cash currently consists of money market and demand accounts. The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of March 31, 2021, December 31, 2020 and March 31, 2020 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):
Concentration of Credit Risk and Fair Value of Financial Instruments Financial instruments that potentially subject us to concentration of credit risk consist primarily of cash equivalents, short-term investments, and accounts receivable. We place our cash equivalents and short-term investments only in highly rated financial instruments and in United States government instruments. Our accounts receivable and contract assets are derived principally from patent license and technology solutions agreements. As of March 31, 2021 and December 31, 2020, five licensees comprised 50% and 53%, respectively, of our net accounts receivable balance. We perform ongoing credit evaluations of our licensees, who generally include large, multinational, wireless telecommunications equipment manufacturers. We believe that the book values of our financial instruments approximate their fair values. Fair Value Measurements We use various valuation techniques and assumptions when measuring the fair value of our assets and liabilities. We utilize market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. This guidance established a hierarchy that prioritizes fair value measurements based on the types of input used for the various valuation techniques (market approach, income approach and cost approach). The levels of the hierarchy are described below: Level 1 Inputs — Level 1 includes financial instruments for which quoted market prices for identical instruments are available in active markets. Level 2 Inputs — Level 2 includes financial instruments for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument such as quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets with insufficient volume or infrequent transactions (less active markets) or model-driven valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data, including market interest rate curves, referenced credit spreads and pre-payment rates. Level 3 Inputs — Level 3 includes financial instruments for which fair value is derived from valuation techniques including pricing models and discounted cash flow models in which one or more significant inputs are unobservable, including the Company’s own assumptions. The pricing models incorporate transaction details such as contractual terms, maturity and, in certain instances, timing and amount of future cash flows, as well as assumptions related to liquidity and credit valuation adjustments of marketplace participants. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of financial assets and financial liabilities and their placement within the fair value hierarchy. We use quoted market prices for similar assets to estimate the fair value of our Level 2 investments. Recurring Fair Value Measurements Our financial assets are generally included within short-term investments on our condensed consolidated balance sheets, unless otherwise indicated. Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of March 31, 2021 and December 31, 2020 (in thousands):
______________________________ (a)Primarily included within cash and cash equivalents. (b)As of March 31, 2021 and December 31, 2020, $14.1 million and $80.1 million, respectively, of commercial paper was included within cash and cash equivalents. Non-Recurring Fair Value Measurements Investments in Other Entities During the three months ended March 31, 2020, we recognized a $5.5 million gain resulting from observable price changes of one of our long-term strategic investments, which was included within “Other Income, Net” in the condensed consolidated statement of income. Lease Assets During the three months ended March 31, 2020, we recognized a $1.1 million impairment, comprised of $0.8 million of Property, Plant, and Equipment, and $0.3 million of Right of Use Asset related to the abandonment of one of our leased properties, which was included within “Operating Expense” in the condensed consolidated statement of income. Fair Value of Long-Term Debt 2024 Senior Convertible Notes The principal amount, carrying value and related estimated fair value of the Company's senior convertible debt reported in the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 was as follows (in thousands). The aggregate fair value of the principal amount of the senior convertible long-term debt is a Level 2 fair value measurement.
Technicolor Patent Acquisition Long-term Debt The carrying value and related estimated fair value of the Technicolor Patent Acquisition long-term debt reported in the condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 was as follows (in thousands). The aggregate fair value of the Technicolor Patent Acquisition long-term debt is a Level 3 fair value measurement.
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OBLIGATIONS | OBLIGATIONS Technicolor Patent Acquisition Long-Term Debt On July 30, 2018, we completed our acquisition of the patent licensing business of Technicolor SA ("Technicolor"), a worldwide technology leader in the media and entertainment sector (the "Technicolor Patent Acquisition"). In conjunction with the Technicolor Patent Acquisition we assumed Technicolor’s rights and obligations under a joint licensing program with Sony Corporation ("Sony") relating to digital televisions and standalone computer display monitors, which commenced in 2015 and is referred to as the "Madison Arrangement." An affiliate of CPPIB Credit Investments Inc. ("CPPIB Credit"), a wholly owned subsidiary of Canada Pension Plan Investment Board, is a third-party investor in the Madison Arrangement. CPPIB Credit has made certain payments to Technicolor and Sony and has agreed to contribute cash to fund certain capital reserve obligations under the arrangement in exchange for a percentage of future revenues, specifically through September 11, 2030 in regard to the Technicolor patents. Upon our assumption of Technicolor’s rights and obligations under the Madison Arrangement, our relationship with CPPIB Credit meets the criteria in ASC 470-10-25 - Sales of Future Revenues or Various Other Measures of Income ("ASC 470"), which relates to cash received from an investor in exchange for a specified percentage or amount of revenue or other measure of income of a particular product line, business segment, trademark, patent, or contractual right for a defined period. Under this guidance, we recognized the fair value of our contingent obligation to CPPIB Credit, as of the acquisition date, as long-term debt in our condensed consolidated balance sheet. This initial fair value measurement was based on the perspective of a market participant and included significant unobservable inputs which are classified as Level 3 inputs within the fair value hierarchy. The fair value of the long-term debt as of March 31, 2021 and December 31, 2020 is disclosed within Note 6, "Cash, Concentration of Credit Risk and Fair Value of Financial Instruments." Our repayment obligations are contingent upon future royalty revenues generated from the Madison Arrangement and there are no minimum or maximum payments under the arrangement. Under ASC 470, amounts recorded as debt are amortized under the interest method. At each reporting period, we will review the discounted expected future cash flows over the life of the obligation. The Company made an accounting policy election to utilize the catch-up method when there is a change in the estimated future cash flows, whereby we will adjust the carrying amount of the debt to the present value of the revised estimated future cash flows, discounted at the original effective interest rate, with a corresponding adjustment recognized as interest expense within “Interest Expense” in the condensed consolidated statements of income. The effective interest rate as of the acquisition date was approximately 14.5%. This rate represents the discount rate that equates the estimated future cash flows with the fair value of the debt as of the acquisition date, and is used to compute the amount of interest to be recognized each period based on the estimated life of the future revenue streams. During the three months ended March 31, 2021 and 2020, we recognized $0.8 million and $0.7 million, respectively, of interest expense related to this debt. This was included within “Interest Expense” in the condensed consolidated statements of income. Any future payments made to CPPIB Credit, or additional proceeds received from CPPIB Credit, will decrease or increase the long-term debt balance accordingly. 2024 Senior Convertible Notes, and Related Note Hedge and Warrant Transactions On June 3, 2019 we issued $400.0 million in aggregate principal amount of 2.00% Senior Convertible Notes due 2024 (the "2024 Notes"). The net proceeds from the issuance of the 2024 Notes, after deducting the initial purchasers' transaction fees and offering expenses, were approximately $391.6 million. The 2024 Notes (i) bear interest at a rate of 2.00% per year, payable in cash on June 1 and December 1 of each year, commencing on December 1, 2019, and (ii) mature on June 1, 2024, unless earlier converted or repurchased. The effective interest rate of the 2024 Notes is 2.02%. The 2024 Notes are convertible into cash, shares of our common stock or a combination thereof, at our election, at an initial conversion rate of 12.3018 shares of our common stock per $1,000 principal amount of 2024 Notes (which is equivalent to an initial conversion price of approximately $81.29 per share), as adjusted pursuant to the terms of the indenture governing the 2024 Notes (the "Indenture"). The conversion rate of the 2024 Notes, and thus the conversion price, may be adjusted in certain circumstances, including in connection with a conversion of the 2024 Notes made following certain fundamental changes and under other circumstances set forth in the Indenture. As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock. The 2024 Notes are senior unsecured obligations of the Company and rank equally in right of payment with any of our current and any future senior unsecured indebtedness. The 2024 Notes are effectively subordinated to all of our future secured indebtedness to the extent of the value of the related collateral, and the 2024 Notes are structurally subordinated to indebtedness and other liabilities, including trade payables, of our subsidiaries. On May 29 and May 31, 2019, in connection with the offering of the 2024 Notes, we entered into convertible note hedge transactions (collectively, the "2024 Note Hedge Transactions") that cover, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock, in the aggregate, at a strike price that initially corresponds to the initial conversion price of the 2024 Notes, subject to adjustment, and are exercisable upon any conversion of the 2024 Notes. On May 29 and May 31, 2019, we also entered into privately negotiated warrant transactions (collectively, the "2024 Warrant Transactions" and, together with the 2024 Note Hedge Transactions, the "2024 Call Spread Transactions"), whereby we sold warrants to acquire, subject to customary anti-dilution adjustments, approximately 4.9 million shares of common stock at an initial strike price of approximately $109.43 per share, subject to adjustment. There have been no material changes regarding the 2024 Notes and 2024 Call Spread Transactions from the disclosures included in Note 10, "Obligations" within the Notes to the Consolidated Financial Statements included in Part II, Item 8 of the 2020 Form 10-K. 2020 Senior Convertible Notes On March 11, 2015, we issued $316.0 million in aggregate principal amount of 1.50% Senior Convertible Notes due 2020 (the "2020 Notes"). The 2020 Notes bore interest at a rate of 1.50% per year and matured on March 1, 2020. On the maturity date, the outstanding balance of $94.9 million under the 2020 Notes was repaid in full. The following table reflects the carrying value of our Long-Term Debt as of March 31, 2021 and December 31, 2020 (in thousands):
______________________________ (a)Due to the adoption of ASU 2020-06 on January 1, 2021, the unamortized interest discount was reclassified back to the carrying value of the 2024 Notes. Refer to Note 1, "Basis of Presentation", for further information regarding this adoption. The following table presents the amount of interest cost recognized, which is included within "Interest Expense" in our condensed consolidated statements of income, for the three months ended March 31, 2021 and March 31, 2020 relating to the contractual interest coupon, accretion of the debt discount, and the amortization of deferred financing costs of the 2024 Notes and 2020 Notes (in thousands):
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
VARIABLE INTEREST ENTITIES | VARIABLE INTEREST ENTITIES As further discussed below, we are the primary beneficiary of three variable interest entities. As of March 31, 2021, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were $56.4 million and $6.1 million, respectively. Assets included $18.9 million of cash and cash equivalents, $2.4 million of accounts receivable and prepaid assets, and $35.1 million of patents, net. As of December 31, 2020, the combined book values of the assets and liabilities associated with these variable interest entities included in our condensed consolidated balance sheet were $62.0 million and $5.8 million, respectively. Assets included $24.5 million of cash and cash equivalents, $2.3 million of accounts receivable and prepaid assets, and $35.2 million of patents, net. Chordant On January 31, 2019, we launched the Company’s Chordant™ business as a standalone company. The spinout of the unit, which now includes an affiliate of Sony as an investor along with the Company, gives Chordant added independence and flexibility in driving into its core operator and smart city markets. Chordant is a variable interest entity and we have determined that we are the primary beneficiary for accounting purposes and consolidate Chordant. For the three months ended March 31, 2021 and 2020, we have allocated approximately $0.1 million and $0.3 million, respectively, of Chordant's net loss to noncontrolling interests held by other parties. Convida Wireless Convida Wireless was launched in 2013 and most recently renewed in 2018 to combine Sony's consumer electronics expertise with our pioneering IoT expertise to drive IoT communications and connectivity. Based on the terms of the agreement, the parties will contribute funding and resources for additional research and platform development, which we will perform. SCP IP Investment LLC, an affiliate of Stephens Inc., is a minority investor in Convida Wireless. Convida Wireless is a variable interest entity. Based on our provision of research and platform development services to Convida Wireless, we have determined that we remain the primary beneficiary for accounting purposes and will continue to consolidate Convida Wireless. For each of the three months ended March 31, 2021 and 2020, we have allocated approximately $1.5 million of Convida Wireless's net loss to noncontrolling interests held by other parties. Signal Trust for Wireless Innovation During 2013, we announced the establishment of the Signal Trust for Wireless Innovation (the “Trust”), the goal of which was to monetize a patent portfolio primarily related to 3G cellular infrastructure. In response to a request from Signal Trust, in first quarter 2021 we provided our consent, as major beneficiary, to dissolve Signal Trust. The Trust has been accounted for as a variable interest entity. Based on the terms of the trust agreement, we determined that we are the primary beneficiary for accounting purposes and have included the Trust in our consolidated financial statements. Pending the dissolution of the Trust, we will continue to consolidate the Trust in our consolidated financial statements.
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Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
OTHER INCOME, NET | OTHER INCOME, NET The amounts included in "Other income, net" in the condensed consolidated statements of income for the three months ended March 31, 2021 and 2020 were as follows (in thousands):
The decrease in Other income, net between periods was primarily driven by a net $4.4 million gain in the three months ended March 31, 2020, primarily resulting from observable price changes of one of our long-term strategic investments, partially offset by a $1.9 million gain in the three months ended March 31, 2021 on a contract termination. Additionally, Interest and investment income decreased $2.3 million in the three months ended March 31, 2021 due to lower rates of return on our short-term investments.
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Prepaid and Other Current Assets |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID AND OTHER CURRENT ASSETS | PREPAID AND OTHER CURRENT ASSETS The amounts included in "Prepaid and other current assets" in the consolidated balance sheet as of March 31, 2021 and December 31, 2020 were as follows (in thousands):
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Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | The accompanying unaudited, condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, accordingly, do not include all of the detailed schedules, information and notes necessary to state fairly the financial condition, results of operations and cash flows in conformity with United States generally accepted accounting principles (“GAAP”). The year-end condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP for year-end financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (our “2020 Form 10-K”) as filed with the Securities and Exchange Commission (“SEC”) on February 18, 2021. Definitions of capitalized terms not defined herein appear within our 2020 Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. We have one reportable segment. |
Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. |
Reclassifications | Certain reclassifications have been made to prior year amounts to conform to the current year presentation. |
New Accounting Guidance | Accounting Standards Update: Simplifying the Accounting for Income Taxes In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). The amendments in this ASU are intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020 with early adoption allowed. We adopted this guidance as of January 1, 2021 and the adoption did not have a material impact on our consolidated financial statements. Accounting Standards Update: Simplifying the Accounting for Convertible Instruments In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). The amendments in this ASU are intended to simplify accounting for convertible debt instruments and convertible preferred stock by removing certain accounting models which separate the embedded conversion features from the host contract. ASU 2020-06 also amends certain guidance in ASC 260 on the computation of earnings per share for convertible instruments and contracts on an entity’s own equity. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption is permitted for fiscal years beginning after December 15, 2020. This update permits the use of either the modified retrospective or fully retrospective methods of transition. We elected to early adopt this standard on a modified retrospective approach as of January 1, 2021. This adoption increased Long-term debt by $50.2 million at January 1, 2021, which was comprised of $51.6 million of unamortized interest discount and was partially offset by a net increase of $1.4 million equity component of deferred financing costs. This was due to the standard no longer requiring bifurcation of the embedded conversion feature from the host contract on the 2024 Notes, as defined in Note 7, "Obligations." This adoption also reduced non-cash interest expense starting in 2021 due to the removal of the accretion of the debt discount on the 2024 Notes. Lastly, the adoption requires the use of the if-converted method of calculating diluted earnings per share rather than the treasury stock method for convertible instruments and requires the inclusion of the potential effect of shares settled in cash or shares in the diluted earnings per share calculation. Due to the reduction in non-cash interest expense, this adoption increased both basic and diluted earnings per share by $0.09 for the three months ended March 31, 2021.
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Basis of Presentation (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of supplemental cash flow information | The following table presents additional supplemental cash flow information for the three months ended March 31, 2021 and 2020 (in thousands):
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Revenue (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disaggregation of revenue | The following table presents the disaggregation of our revenue for the three months ended March 31, 2021 and 2020 (in thousands):
a. Recurring revenues are comprised of current patent royalties, inclusive of Dynamic Fixed-Fee Agreement royalties, and current technology solutions revenue. b. Non-recurring revenues are comprised of non-current patent royalties, which primarily include past patent royalties and royalties from static agreements, as well as patent sales.
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Schedule of contracted revenue | Based on contracts signed and committed as of March 31, 2021, we expect to recognize the following revenue from Dynamic Fixed-Fee Agreement payments over the term of such contracts (in thousands):
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Net Income (Loss) Per Share (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of numerator and the denominator of the basic and diluted | The following tables reconcile the numerator and the denominator of the basic and diluted net income per share computation (in thousands, except for per share data):
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Schedule of excluded from our computation of EPS | Set forth below are the securities and the weighted average number of shares of common stock underlying such securities that were excluded from our computation of EPS for the periods presented (in thousands):
______________________________ (a)As of December 31, 2020, we made the irrevocable election to settle all conversions of the 2024 Notes through combination settlements of cash and shares of our common stock, with a specified dollar amount of $1,000 per $1,000 principal amount of 2024 Notes and any remaining amounts in shares of our common stock.
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Cash, Concentration of Credit Risk and Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of cash and cash equivalents | The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of March 31, 2021, December 31, 2020 and March 31, 2020 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):
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Schedule of restricted cash and cash equivalents | The following table provides a reconciliation of total cash, cash equivalents and restricted cash as of March 31, 2021, December 31, 2020 and March 31, 2020 to the captions within the condensed consolidated balance sheets and condensed consolidated statements of cash flows (in thousands):
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Schedule of fair value on a recurring basis | Our financial assets and liabilities that are accounted for at fair value on a recurring basis are presented in the tables below as of March 31, 2021 and December 31, 2020 (in thousands):
______________________________ (a)Primarily included within cash and cash equivalents. (b)As of March 31, 2021 and December 31, 2020, $14.1 million and $80.1 million, respectively, of commercial paper was included within cash and cash equivalents.
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Schedule of aggregate fair value | The aggregate fair value of the principal amount of the senior convertible long-term debt is a Level 2 fair value measurement.
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Obligations (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of carrying value of the 2024 Notes and 2020 Notes | The following table reflects the carrying value of our Long-Term Debt as of March 31, 2021 and December 31, 2020 (in thousands):
______________________________ (a)Due to the adoption of ASU 2020-06 on January 1, 2021, the unamortized interest discount was reclassified back to the carrying value of the 2024 Notes. Refer to Note 1, "Basis of Presentation", for further information regarding this adoption.
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Schedule of accretion of the debt discount, and the amortization of financing costs | The following table presents the amount of interest cost recognized, which is included within "Interest Expense" in our condensed consolidated statements of income, for the three months ended March 31, 2021 and March 31, 2020 relating to the contractual interest coupon, accretion of the debt discount, and the amortization of deferred financing costs of the 2024 Notes and 2020 Notes (in thousands):
______________________________ (a)Due to the adoption of ASU 2020-06, there is no longer accretion of the debt discount starting January 1, 2021. Refer to Note 1, "Basis of Presentation", for further information regarding this adoption.
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Other Income, Net (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Income and Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of other income expense, net | The amounts included in "Other income, net" in the condensed consolidated statements of income for the three months ended March 31, 2021 and 2020 were as follows (in thousands):
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Prepaid and Other Current Assets (Tables) |
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Mar. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid and Other Current Assets | The amounts included in "Prepaid and other current assets" in the consolidated balance sheet as of March 31, 2021 and December 31, 2020 were as follows (in thousands):
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Basis of Presentation - Narrative (Details) $ / shares in Units, $ in Thousands |
3 Months Ended | |||
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Mar. 31, 2021
USD ($)
segment
$ / shares
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Mar. 31, 2020
USD ($)
$ / shares
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Jan. 01, 2021
USD ($)
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Dec. 31, 2020
USD ($)
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Number of reportable segments | segment | 1 | |||
Debt Instrument [Line Items] | ||||
Net catch up amortization | $ 1,819 | $ 4,637 | ||
Net income per common share: basic (in USD per share) | $ / shares | $ 0.18 | $ 0 | ||
Net income per common share, Diluted (in USD per share) | $ / shares | 0.18 | $ 0 | ||
Accounting Standards Update 2020-06 | ||||
Debt Instrument [Line Items] | ||||
Net income per common share: basic (in USD per share) | $ / shares | $ 0.09 | |||
Senior Convertible Long-Term Debt | ||||
Debt Instrument [Line Items] | ||||
Unamortized discount | $ 0 | $ 51,567 | ||
Senior Convertible Long-Term Debt | Accounting Standards Update 2020-06 | ||||
Debt Instrument [Line Items] | ||||
Long-term debt | $ (50,200) | |||
Unamortized discount | 51,600 | |||
Debt issuance costs equity component | $ 1,400 |
Basis of Presentation - Schedule of Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
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Mar. 31, 2021 |
Mar. 31, 2020 |
Dec. 31, 2020 |
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SUPPLEMENTAL CASH FLOW INFORMATION: | |||
Interest paid | $ 0 | $ 712 | |
Income taxes paid, including foreign withholding taxes | 4,328 | 2,228 | |
Non-cash investing and financing activities: | |||
Dividend payable | 10,766 | 10,762 | $ 10,786 |
Accrued capitalized patent costs and property and equipment | 2,096 | (1,288) | |
Unsettled repurchase of common stock | $ 1,994 | $ 0 |
Revenue - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
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Mar. 31, 2021 |
Dec. 31, 2020 |
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Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items] | ||
Revenue recognized that had been included in deferred revenue as of the beginning of the period | $ 62.7 | |
Contract assets, current | 9.4 | $ 9.7 |
Contract assets, non-current | $ 8.9 | $ 8.9 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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Income Tax Contingency [Line Items] | ||
Effective tax rate | 30.80% | 1144.70% |
Effective tax rate before valuation allowance is included (as percent) | 12.00% | 65.50% |
Discrete tax expense (benefit) | $ 300 | |
Income taxes paid, including foreign withholding taxes | 4,328 | $ 2,228 |
Foreign Country | ||
Income Tax Contingency [Line Items] | ||
Income taxes paid, including foreign withholding taxes | $ 3,600 | $ 2,000 |
Net Income (Loss) Per Share - Numerator and Denominator of Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Earnings Per Share [Abstract] | ||
Net income applicable to InterDigital, Inc. | $ 5,571 | $ 116 |
Weighted-average shares outstanding: | ||
Weighted-average shares outstanding: basic (in shares) | 30,836 | 30,722 |
Dilutive effect of stock options, RSUs, convertible securities and warrants (in shares) | 359 | 198 |
Weighted-average shares outstanding: diluted (in shares) | 31,195 | 30,920 |
Earnings per share: | ||
Net income per common share: basic (in USD per share) | $ 0.18 | $ 0 |
Dilutive effect of stock options, RSUs, convertible securities and warrants (in USD per share) | 0 | 0 |
Net income per common share: diluted (in USD per share) | $ 0.18 | $ 0 |
Net Income (Loss) Per Share - Antidilutive Securities Excluded from Earnings Per Share (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 5,041 | 12,796 |
Restricted stock units and stock options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 120 | 260 |
Convertible securities | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 0 | 6,268 |
Warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share, amount (in shares) | 4,921 | 6,268 |
Cash, Concentration of Credit Risk and Fair Value of Financial Instruments - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|---|---|
Fair Value Disclosures [Abstract] | ||||
Cash and cash equivalents | $ 396,156 | $ 473,474 | $ 515,793 | |
Restricted cash included within prepaid and other current assets | 3,688 | 3,108 | 12,851 | |
Restricted cash included within other non-current assets | 1,081 | 1,081 | 1,081 | |
Total cash, cash equivalents and restricted cash | $ 400,925 | $ 477,663 | $ 529,725 | $ 757,098 |
Cash, Concentration of Credit Risk and Fair Value of Financial Instruments - Narrative (Details) $ in Millions |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020
USD ($)
property
|
Dec. 31, 2020 |
|
Concentration Risk [Line Items] | |||
Unrealized gain | $ 5.5 | ||
Lease asset impairment | 1.1 | ||
Lease property, plant and equipment impairment | 0.8 | ||
Lease right of use asset impairment | $ 0.3 | ||
Number of abandoned leased properties | property | 1 | ||
Accounts Receivable | Licensee Concentration Risk | Five Largest Licensees | |||
Concentration Risk [Line Items] | |||
Accounts receivable percentage | 50.00% | 53.00% |
Cash, Concentration of Credit Risk and Fair Value of Financial Instruments - Fair Value of Long-Term Debt (Details) - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Technicolor Patent Acquisition Long-Term Debt | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Carrying Value | $ 24,992,000 | $ 24,171,000 |
Fair Value | 26,762,000 | 27,016,000 |
Senior Convertible Long-Term Debt | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Principal | 400,000,000 | 400,000,000 |
Carrying Value | 394,404,000 | 343,821,000 |
Fair Value | $ 422,000,000 | $ 418,760,000 |
Obligations - Technicolor Patent Acquisition Long-Term Debt (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Business Acquisition [Line Items] | ||
Interest debt expense | $ 6,486 | |
Technicolor | ||
Business Acquisition [Line Items] | ||
Effective interest rate acquisition percentage | 14.50% | |
Interest debt expense | $ 800 | $ 700 |
Obligations - Carrying Value of 2024 Notes and 2020 Notes (Details) - Convertible Debt - USD ($) |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Principal | $ 400,000,000 | $ 400,000,000 |
Less: | ||
Unamortized interest discount(a) | 0 | (51,567,000) |
Deferred financing costs(a) | (5,596,000) | (4,612,000) |
Net carrying amount of the 2024 Notes | $ 394,404,000 | $ 343,821,000 |
Obligations - Accretion of Debt Discount and Amortization of Financing Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Debt Instrument [Line Items] | ||
Contractual coupon interest | $ 2,237 | |
Accretion of debt discount(a) | 3,891 | |
Amortization of deferred financing costs | 358 | |
Total | 6,486 | |
Convertible Debt | Convertible Notes 2024 | ||
Debt Instrument [Line Items] | ||
Contractual coupon interest | $ 2,000 | 2,000 |
Accretion of debt discount(a) | 0 | 3,222 |
Amortization of deferred financing costs | 398 | 288 |
Total | $ 2,398 | 5,510 |
Convertible Debt | Convertible Notes 2020 | ||
Debt Instrument [Line Items] | ||
Contractual coupon interest | 237 | |
Accretion of debt discount(a) | 669 | |
Amortization of deferred financing costs | 70 | |
Total | $ 976 |
Obligations - Additional Information (Details) |
May 31, 2019 |
---|---|
Technicolor | |
Business Acquisition [Line Items] | |
Receive future cash receipts percentage | 42.50% |
Variable Interest Entities (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2021
USD ($)
variable_interest_entity
|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
|
|
Variable Interest Entity [Line Items] | |||
Assets | $ 1,561,874 | $ 1,616,275 | |
Liabilities | 829,301 | 819,709 | |
Cash and cash equivalents | 396,156 | $ 515,793 | 473,474 |
Patents, net | 407,732 | 418,343 | |
Accounts receivable | 12,502 | 16,008 | |
Noncontrolling interests | (1,613) | (1,777) | |
Chordant | |||
Variable Interest Entity [Line Items] | |||
Noncontrolling interests | (100) | 300 | |
Convida | |||
Variable Interest Entity [Line Items] | |||
Noncontrolling interests | $ (1,500) | $ (1,500) | |
Primary Beneficiary | |||
Variable Interest Entity [Line Items] | |||
Number of variable interest entities | variable_interest_entity | 3 | ||
Assets | $ 56,400 | 62,000 | |
Liabilities | 6,100 | 5,800 | |
Cash and cash equivalents | 18,900 | 24,500 | |
Accounts receivable and prepaid assets | 2,400 | ||
Patents, net | $ 35,100 | 35,200 | |
Accounts receivable | $ 2,300 |
Other Income, Net - Other Income, Net (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Other Income and Expenses [Abstract] | ||
Interest and investment income | $ 553 | $ 2,877 |
Other | 171 | 3,146 |
Other income, net | $ 724 | $ 6,023 |
Other Income, Net - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
Other Income and Expenses [Abstract] | ||
Gain from observable price changes in orderly transactions of a long-term strategic investment | $ 1.9 | $ 4.4 |
Reduction in interest and investment income | $ (2.3) |
Prepaid and Other Current Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Tax receivables | $ 70,334 | $ 69,592 |
Prepaid assets | 12,045 | 10,899 |
Unsettled repurchase of common stock | 1,994 | 0 |
Operating lease receivable | 0 | 817 |
Other current assets | 3,290 | 2,916 |
Total Prepaid and other current assets | $ 87,663 | $ 84,224 |
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