InterDigital Inc (IDCC)

[rmarchma]

my3sons re IDCC's revenue recognition policies

There is a one quarter time lag on per-unit royalty licensees. Therefore IDCC's fourth quarter revenues will reflect IDCC's per-unit licensees' third quarter sales report received in the fourth quarter by IDCC. However, there is no time lag on IDCC's fixed-fee licensees, as their revenue is being calculated on a straight-line basis over the term of the license. I don't think that fixed-fee licensees even have to submit a quarterly sales report to IDCC. Therefore IDCC's fourth quarter revenues on fixed-fee licensees is the prorated fixed amount associated with the fourth quarter.

From the latest 10K:

"We recognize revenues related to Fixed Fee Royalty Payments on a straight-line basis over the effective term of the license. We utilize the straight-line method because we have no future obligations under these licenses and we cannot reliably predict in which periods, within the term of a license, the licensee will benefit from the use of our patented inventions.

Licensees that either owe us Current Royalty Payments or have Prepayment balances provide us with quarterly or semi-annual royalty reports that summarize their sales of covered products and their related royalty obligations to us. We typically receive these royalty reports subsequent to the period in which our licensees’ underlying sales occurred...We recognize the revenue from per-unit royalties in the period when we receive royalty reports from licensees."