What changed in this filing

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Item 9A. Controls and Procedures

2021-02-26 compared with 2020-02-26 · 534 added, 575 removed, 1127 unchanged (50% of the section changed)

7 unchanged sentences

Our internal control over financial reporting is the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

(i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors;

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

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Based on the results of this assessment, management has concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on the criteria in Internal Control — Integrated Framework (2013) issued by the COSO.

Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company.

We have excluded Northwest Logic, Inc.

and the Secure Silicon IP and Protocols businesses of Verimatrix (the “acquired entities”) from our assessment of internal control over financial reporting as of December 31, 2019 because they were acquired by us in purchase business combinations during 2019.

The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from our assessment of internal control over financial reporting collectively represent approximately 1% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by PricewaterhouseCoopers, LLP, an independent registered public accounting firm, as stated in their report which appears herein.

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We have a Code of Business Conduct and Ethics for all of our directors, officers and employees.

Our Code of Business Conduct and Ethics is available on our website at http://investor.rambus.com/default.aspx?SectionId=7d08773c-336a-43c5-b0ff-5b190f1901eb&LanguageId=1.

Our Code of Business Conduct and Ethics is available on our website at https://investor.rambus.com/corporate-governance/committee-composition/code-of-business-conduct-and-ethics/default.aspx.

To date, there have been no waivers under our Code of Business Conduct and Ethics.

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The information responsive to this item is incorporated herein by reference to our Proxy Statement for our 2021 annual meeting of stockholders to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

Table of Content s

Exhibits and Financial Statement Schedules

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Changes in Accounting Principles

As discussed in Notes 3 and 2 to the consolidated financial statements, respectively, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for revenues from contracts with customers in 2018.

Basis for Opinions

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Report on Internal Control over Financial Reporting, management has excluded Northwest Logic, Inc.

and the Secure Silicon IP and Protocols businesses of Verimatrix (the “acquired entities”) from its assessment of internal control over financial reporting as of December 31, 2019 because they were acquired by the Company in purchase business combinations during 2019.

We have also excluded the acquired entities from our audit of internal control over financial reporting.

The acquired entities are wholly-owned subsidiaries whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting collectively represent approximately 1% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Existing Technology Intangible Assets Acquired from the Northwest Logic, Inc.

and Secure Silicon IP and Protocols acquisitions

As described in Notes 2 and 21 to the consolidated financial statements, during the year ended December 31, 2019, the Company completed the acquisitions of Northwest Logic, Inc.

and Secure Silicon IP and Protocols businesses for total considerations of $21.9 million and $46.8 million, respectively, of which $8.1 million and $21.6 million, respectively, of existing technology intangible assets were recorded.

The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach.

This method reflects the present value of the projected cash flows that are expected to be generated by the existing technologies less charges representing the contribution of other assets to those cash flows.

Significant estimates and assumptions in estimating the fair value of the existing technologies include revenue growth rates, operating expense margins, technology obsolescence rates, and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of the existing technology intangible assets acquired in the acquisitions of Northwest Logic, Inc.

and Secure Silicon IP and Protocols businesses is a critical audit matter are there was significant judgment by management when determining the valuation of the existing technology intangibles assets, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the revenue growth rates, operating expense margins, technology obsolescence rates, and discount rate assumptions used in the valuation of the existing technology intangible assets .

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the existing technologies intangible assets acquired in the acquisitions of Northwest Logic, Inc., and Secure Silicon IP and Protocols businesses.

These procedures also included, among others, reading the purchase agreements and testing management’s process for determining the fair value of the existing technology intangible assets, including evaluating the appropriateness of the valuation method, testing the completeness and accuracy of underlying data used in the estimate, and evaluating the reasonableness of the significant assumptions, including revenue growth rates, operating expense margins, technology obsolescence rates, and discount rates.

Evaluating the reasonableness of the revenue growth rates and the operating expense margins involved considering the past performance of the acquired businesses, actual arrangements subsequent to the acquisitions and industry data.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of valuation method and the reasonableness of the technology obsolescence rates and the discount rates.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - License and Customization Services Revenue

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The key factor reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the project.

The principal considerations for our determination that performing procedures relating to revenue recognition for license and customization revenue is a critical audit matter are there was significant judgment made by management to determine the estimated man-months necessary to contract completion for each contract, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimate of man-months necessary to complete each project.

The principal considerations for our determination that performing procedures relating to revenue recognition for license and customization services revenue is a critical audit matter are the significant judgment by management in determining the estimated man-months necessary to contract completion for each contract, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimate of man-months necessary to complete each project.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the Company’s license and customization services revenue recognition process, including controls over management’s determination of the estimate of total man-months to complete each contract.

The procedures also included, among others, for a sample of contracts, testing management’s process for determining the estimate of total man-months.

These procedures also included, among others, for a sample of contracts, testing management’s process for determining the estimate of total man-months.

Evaluating management’s assumption related to the estimate of man-months involved (i) performing a comparison of the estimated man-months to completed projects of similar size and (ii) evaluating the timely identification of circumstances which may warrant a modification to a previous cost estimate, including an assessment of total man-months.

Relative Fair Value Measurement Related to the Goodwill Allocation of the Payments and Ticketing Businesses and the Retained Business.

As described in Notes 6 and 17 to the consolidated financial statements, the Company entered into a share purchase agreement with Visa International Service Association (the “Purchaser”), pursuant to which the Purchaser agreed to acquire all of the outstanding shares of the Company’s subsidiary, Smart Card Software Limited, which comprises the Company’s Payments and Ticketing businesses, which was part of the Company’s former Rambus Security Division (“RSD”) segment.

The Company measured these businesses at the lower of their carrying value or fair value less any costs to sell, and recognized a cumulative impairment of approximately $7.4 million during the year ended December 31, 2019.

In the second quarter of 2019, in order to determine the impairment loss, the Company performed a relative fair value measurement to allocate goodwill to the business units between the disposed Payments and Ticketing businesses and the retained business, which includes Cryptography Research, Inc (“CRI”), which was part of the former RSD segment.

The goodwill allocated to the disposed Payments and Ticketing businesses was $54.5 million.

The fair value of the retained business was estimated by management using a discounted cash flow model.

The Company’s cash flow projections for the retained business included significant judgments and assumptions relating to revenue growth rates, projected operating income and the discount rate.

The principal considerations for our determination that performing procedures relating to the fair value measurement of the retained business unit is a critical audit matter are there was significant judgment made by management when developing the fair value measurement of the retained business unit, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s cash flow projections, including significant assumptions relating to revenue growth rates, projected operating income, and the discount rate.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s assessment of the relative fair value measurement of the retained business unit.

The procedures also included, among others, testing management’s process for developing the fair value measurement for the retained business unit;

evaluating the appropriateness of the discounted cash flow model;

testing the completeness, accuracy, and relevance of underlying data used in the model;

and evaluating the reasonableness of the significant assumptions used by management, including revenue growth rates, projected operating income and the discount rate.

Evaluating management’s assumptions related to revenue growth rates and projected operating income involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the retained business unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit and the prior year audit.

/s/ PricewaterhouseCoopers LLP

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Unbilled receivables 135,897 184,366

Inventories 14,466 10,086

Prepaids and other current assets 15,907 18,524

1 unchanged sentence

Intangible assets, net 36,487 54,900

Goodwill 183,222 183,465

Property, plant and equipment, net 57,693 44,714

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Unbilled receivables, long-term 232,056 343,703

Other assets 4,535 5,931

Total assets $ 1,243,876 $ 1,338,986

LIABILITIES & STOCKHOLDERS’ EQUITY

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Accounts payable

$ 8,993 $ 9,549

Accrued salaries and benefits

23,326 20,291

Deferred revenue

10,198 11,947

Income taxes payable, short-term

20,064 19,142

Operating lease liabilities

Other current liabilities

18,559 18,893

Total current liabilities

85,864 86,179

Convertible notes, long-term 156,031 148,788

Long-term imputed financing obligation

Long-term operating lease liabilities 34,305 39,889

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Additional paid in capital

1,270,426 1,261,142

Accumulated deficit

( 365,344 ) ( 290,244 )

Accumulated other comprehensive loss

( 81 ) ( 92 )

Total stockholders’ equity

905,113 970,918

Total liabilities and stockholders’ equity $ 1,243,876 $ 1,338,986

See Notes to Consolidated Financial Statements

Refer to Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31,

2020 2019 2018

(In thousands, except per share amounts)

Royalties $ 80,985 $ 90,785 $ 130,452

Product revenue 113,996 72,972 38,690

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Total revenue 242,747 224,027 231,201

Operating costs and expenses:

Cost of revenue:

Cost of product revenue 37,749 27,156 18,299

Cost of contract and other revenue 5,647 9,905 11,718

Amortization of acquired intangible assets 17,352 14,314 23,684

Total cost of revenue 60,748 51,375 53,701

Gross profit 181,999 172,652 177,500

Operating expenses:

Research and development 139,837 156,815 158,339

Sales, general and administrative 85,619 101,373 98,254

Amortization of acquired intangible assets 1,061 2,743 5,657

Restructuring and other charges 4,089 8,821 2,217

Loss on divestiture — 7,439 —

Gain from sale of intellectual property

Total operating costs and expenses

Operating income (loss)

Change in fair value of earn-out liability ( 1,800 ) — —

Total operating expenses 228,806 277,191 264,467

Operating loss ( 46,807 ) ( 104,539 ) ( 86,967 )

Interest income and other income (expense), net 17,516 27,375 32,621

Loss on extinguishment of debt

Interest expense ( 10,340 ) ( 9,852 ) ( 16,282 )

Interest and other income (expense), net 7,176 17,523 16,339

Income (loss) before income taxes

Loss before income taxes ( 39,631 ) ( 87,016 ) ( 70,628 )

Provision for income taxes 3,978 3,403 87,329

Net loss $ ( 43,609 ) $ ( 90,419 ) $ ( 157,957 )

Net loss per share:

Basic $ ( 0.39 ) $ ( 0.81 ) $ ( 1.46 )

Diluted $ ( 0.39 ) $ ( 0.81 ) $ ( 1.46 )

Weighted-average shares used in per share calculations:

______________________________________

* Includes stock-based compensation:

Cost of product revenue

Research and development

Sales, general and administrative

See Notes to Consolidated Financial Statements

Basic 113,254 110,948 108,450

Diluted 113,254 110,948 108,450

Refer to Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years Ended December 31,

2020 2019 2018

(In thousands)

Net loss $ ( 43,609 ) $ ( 90,419 ) $ ( 157,957 )

Other comprehensive income (loss):

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Total comprehensive loss $ ( 43,598 ) $ ( 80,220 ) $ ( 163,151 )

See Notes to Consolidated Financial Statements

Refer to Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Additional Paid-in Capital

Accumulated Deficit

Accumulated Other Comprehensive Gain (Loss)

Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss)

Shares Amount Total

(In thousands)

Balances at December 31, 2017 109,764 $ 110 $ 1,212,798 $ ( 636,227 ) $ ( 5,097 ) $ 571,584

Foreign currency translation adjustment

Unrealized gain on marketable securities, net of tax

Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan

Repurchase and retirement of common stock under repurchase plan

Stock-based compensation

Equity component of 1.375% convertible notes, net

Purchase of convertible note hedges

Issuance of warrants

Repurchase of 1.125% convertible notes

Cumulative effect adjustment from adoption of ASU 2016-09

Balances at December 31, 2017

Net loss — — — ( 157,957 ) — ( 157,957 )

Foreign currency translation adjustment — — — — ( 4,447 ) ( 4,447 )

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Balances at December 31, 2018 109,018 109 1,226,588 ( 204,294 ) ( 10,291 ) 1,012,112

Net loss — — — ( 90,419 ) — ( 90,419 )

Foreign currency translation adjustment — — — — 10,145 10,145

4 unchanged sentences

Balances at December 31, 2019 112,131 112 1,261,142 ( 290,244 ) ( 92 ) 970,918

See Notes to Consolidated Financial Statements

Net loss — — — ( 43,609 ) — ( 43,609 )

Foreign currency translation adjustment — — — — 24 24

Unrealized loss on marketable securities, net of tax — — — — ( 13 ) ( 13 )

Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 2,183 3 2,081 — — 2,084

Repurchase and retirement of common stock under repurchase plan ( 2,616 ) ( 3 ) ( 18,575 ) ( 31,491 ) — ( 50,069 )

Stock-based compensation — — 25,778 — — 25,778

Balances at December 31, 2020 111,698 $ 112 $ 1,270,426 $ ( 365,344 ) $ ( 81 ) $ 905,113

Refer to Notes to Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

2020 2019 2018

(In thousands)

Cash flows from operating activities:

Net loss $ ( 43,609 ) $ ( 90,419 ) $ ( 157,957 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Stock-based compensation 25,778 26,476 21,736

Depreciation 28,951 23,507 10,745

Amortization of intangible assets 18,413 17,058 29,341

Non-cash interest expense and amortization of convertible debt issuance costs 7,243 6,854 9,243

Loss on extinguishment of debt

Deferred tax (benefit) provision

Deferred income taxes 685 ( 1,816 ) 79,954

Non-cash restructuring — — 670

Loss on divestiture — 7,439 —

Gain from sale of assets held for sale

Gain from sale of marketable equity security

Loss on equity investment 747 696 67

Loss from disposal of property, plant and equipment

Gain from sale of marketable equity security — — ( 291 )

Gain from sale of assets held for sale — — ( 1,266 )

(Gain) loss from disposal of property, plant and equipment ( 77 ) 157 395

Change in fair value of earn-out liability ( 1,800 ) — —

Change in operating assets and liabilities, net of effects of acquisitions and divestiture:

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Prepaid expenses and other assets 2,042 4,064 ( 4,084 )

Inventories ( 4,380 ) ( 3,353 ) ( 1,856 )

Accounts payable ( 2,176 ) 2,934 ( 2,268 )

Accrued salaries and benefits and other accrued liabilities

Accrued salaries and benefits and other liabilities 3,353 7,135 ( 3,221 )

Income taxes payable ( 17,852 ) ( 15,925 ) ( 14,550 )

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Proceeds from sale of marketable securities 21,588 6,758 —

Proceeds from sale of property and property, plant and equipment

Proceeds from divestiture, net of cash disposed — 76,039 —

Proceeds from sale of assets held for sale — — 3,754

Proceeds from sale of property and property, plant and equipment — 29 10

Settlement of working capital adjustment from disposal of business ( 1,131 ) — —

Proceeds from sale of equity security — — 1,350

Investment in privately-held company

Acquisitions of businesses, net of cash acquired

Investment in privately-held companies — ( 1,000 ) ( 3,000 )

Acquisition of businesses, net of cash acquired — ( 66,780 ) —

Net cash used in investing activities ( 90,394 ) ( 141,474 ) ( 68,036 )

Cash flows from financing activities:

Proceeds from issuance of 1.375% convertible notes

Issuance costs related to issuance of 1.375% convertible notes

Payments for convertible note hedges

Proceeds from issuance of warrants

Repayment of 1.125% convertible notes — — ( 81,207 )

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Payments of taxes on restricted stock units ( 9,403 ) ( 7,023 ) ( 6,766 )

Net cash provided by (used in) financing activities

Net cash used in financing activities ( 61,186 ) ( 298 ) ( 127,684 )

Effect of exchange rate changes on cash and cash equivalents 106 ( 497 ) ( 989 )

2 unchanged sentences

Cash, cash equivalents and restricted cash at end of year $ 136,503 $ 102,518 $ 116,252

The following table provides a reconciliation of the cash, cash equivalents and restricted cash balances as of December 31, 2019, December 31, 2018 and December 31, 2017:

Cash and cash equivalents

Restricted cash

Cash, cash equivalents and restricted cash

Years Ended December 31,

2020 2019 2018

(In thousands)

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest $ 2,372 $ 2,372 $ 3,044

Income taxes, net of refunds $ 21,312 $ 17,835 $ 23,581

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Property, plant and equipment received and accrued in accounts payable and other accrued liabilities $ 20,952 $ 29,844 $ 8,225

See Notes to Consolidated Financial Statements

As of December 31,

2020 2019 2018

(In thousands)

Reconciliation of the cash, cash equivalents and restricted cash balances as shown in the consolidated statement of cash flows:

Cash and cash equivalents $ 136,146 $ 102,176 $ 115,924

Restricted cash 357 342 328

Cash, cash equivalents and restricted cash $ 136,503 $ 102,518 $ 116,252

Refer to Notes to Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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The Company generates revenue by licensing its inventions and solutions, selling its semiconductor products and providing services to market-leading companies.

Rambus is a premier Silicon IP and Chip provider, delivering high-speed interface and embedded security solutions to make data faster and safer.

With 30 years of innovation, the Company continues to develop and license the foundational technology essential to all modern system on chips (SoCs) and computing systems.

The Company delivers a broad range of semiconductor solutions including architecture licenses, high-speed physical and digital controller Interface IP cores, Security IP cores and protocols, and memory interface Chips.

Rambus produces products and innovations that address the fundamental challenges of accelerating data.

The Company makes industry-leading chips and IP that enable critical performance improvements for data center and other growing markets.

The ongoing shift to the cloud, along with the widespread advancement of artificial intelligence (“AI”) across the data center, 5G, automotive and Internet of Things (“IoT”), has led to an exponential growth in data usage and tremendous demands on data infrastructure.

Creating fast and safe connections, both in and across systems, remains one of the most mission-critical design challenges limiting performance in advanced hardware for these markets.

Summary of Significant Accounting Policies

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Revenue Recognition

The Company adopted the New Revenue Standard on January 1, 2018 and all the related amendments using the modified retrospective method.

The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit as of January 1, 2018.

The comparative information for 2017 has not been recast and continues to be reported under the accounting standards in effect for that period.

The Company recognizes revenue upon transfer of control of promised goods and services in an amount that reflects the consideration it expects to receive in exchange for those goods and services.

3 unchanged sentences

all services offerings are priced within tightly controlled bands and all contracts that include support and maintenance state a renewal rate or price that is systematically enforced.

Cost of Revenue

Rambus’ revenue consists of royalty, product and contract and other revenue.

Royalty revenue consists of patent and technology license royalties.

Products primarily consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our direct sales force and distributors.

Contract and other revenue consists of software license fees, engineering fees associated with integration of Rambus’ technology solutions into its customers’ products and support and maintenance fees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

amortization of existing technology, write-down of inventories, amortization of production mask costs, overhead and an allocated portion of occupancy costs.

Royalty Revenue

Rambus’ patent and technology licensing arrangements generally range between one year and ten years in duration and generally grant the licensee the right to use the Company’s entire intellectual property (“IP”) portfolio as it evolves over time.

These arrangements do not typically grant the licensee the right to terminate for convenience and where such rights exist, termination is prospective, with no refund of fees already paid by the licensee.

There is no interdependency or interrelation between the IP included in the portfolio licensed upon contract inception and any IP subsequently made available to the licensee, and the Company would be able to fulfill its promises by transferring the portfolio and the additional IP use rights independently.

However, the numbers of additions to, and removals from the portfolio (for example when a patent expires and renewal is not granted to the Company) in any given period have historically been relatively consistent;

as such, the Company does not allocate the transaction price between the rights granted at contract inception and those subsequently granted over time as a function of these additions.

Patent and technology licensing arrangements result in fixed payments received over time, with guaranteed minimum payments on occasion, variable payments calculated based on the licensee’s sale or use of the IP, or a mix of fixed and variable payments.

• For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), the Company recognizes revenue upon control over the underlying IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted lending rates ranging between 3 % and 5 %, with the related interest income being recognized over time on an effective rate basis.

Where a licensee has the contractual right to terminate a fixed-fee arrangement for convenience without any substantive penalty payable upon such termination, the Company applies the guidance in ASU No.

2014-09, Revenue from Contracts with Customers in Accounting Standards Codification (ASC) Topic 606 (“ASC 606”) to the duration of the contract in which the parties have present enforceable rights and obligations and only recognizes revenue for amounts that are due and payable.

• For variable arrangements, the Company recognizes revenue based on an estimate of the licensee’s sale or usage of the IP during the period of reference, typically quarterly, with a true-up recorded when the Company receives the actual royalty report from the licensee.

Product Revenue

Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, and to distributors, net of accruals for price protection and rights of return on products unsold by the distributors.

To date, none of these accruals have been significant.

The Company transacts with direct customers primarily pursuant to standard purchase orders for delivery of products and generally allows customers to cancel or change purchase orders within limited notice periods prior to the scheduled shipment date.

Contract and Other Revenue

Contract and other revenue consists of software license fees and engineering fees associated with integration of Rambus’ technology solutions into its customers’ related support and maintenance.

An initial software arrangement generally consists of a term-based or perpetual license, significant software customization services and support and maintenance services that include post-implementation customer support and the right to unspecified software updates and enhancements on a when and if available basis.

The Company recognizes license and customization services revenue based on an over time model, measured using the input method.

License and customization services revenue is reported as part of contract and other revenue which was approximately $ 19.8 million for the year ended December 31, 2020.

Due to the nature of the work performed in these arrangements, the estimation of the over time model is complex and involves significant judgment.

The key factor reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the project.

The Company recognizes license renewal revenue at the beginning of the renewal period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Significant Judgments

Historically and with the exception noted below, no significant judgment has generally been required in determining the amount and timing of revenue from the Company’s contracts with customers.

• The Company has adequate tools and controls in place, and substantial experience and expertise in timely and accurately tracking man-months incurred in completing customization and other professional services, and quantifying changes in estimates.

Key estimates used in recognizing revenue predominantly consist of the following:

• For fixed-fee arrangements in which cash is being received over a period exceeding a year, the Company calculates a customer-specific lending rate using a Daily Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the arrangement, and takes into consideration a licensee-specific risk profile determined based on a review of the licensee’s “Full Company View” Dun & Bradstreet report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield Curve Rate considering the overall business risk, financing strength and risk indicators, as listed.

• The Company recognizes revenue on variable fee licensing arrangements on the basis of estimates.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to the Company’s customers.

The Company records contract assets when revenue is recognized prior to invoicing, and a contract liability when revenue is recognized subsequent to invoicing.

The contract assets are transferred to receivables when the billing occurs.

Cost of Revenue

Cost of revenue includes cost of professional services, materials, including cost of wafers processed by third-party foundries, cost associated with packaging and assembly, test and shipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance, warranty cost, amortization of existing technology, write-down of inventories, amortization of production mask costs, overhead and an allocated portion of occupancy costs.

The Company adopted the New Leasing Standard as of January 1, 2019 using the alternative transition method provided by ASU No.

2018-11 and did not recast comparative periods.

The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification.

Additionally, the Company elected the practical expedient related to non-lease components and made the policy election for the short-term leases exemptions.

The Company used its incremental borrowing rate to measure the lease liabilities at the adoption date for its existing operating leases that commenced prior to January 1, 2019, which was based on the remaining lease term and remaining lease payments for such leases.

The Company leases office space, domestically and internationally, under operating leases.

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For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term.

The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments, and uses the implicit rate when readily determinable.

Many of the Company’s leases include rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate.

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Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in each business combination.

Goodwill is not subject to amortization, but is subject to at least an annual assessment for impairment.

Goodwill is not subject to amortization, but is subject to at least an annual assessment

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

for impairment.

The Company performs its impairment analysis of goodwill on an annual basis during the fourth quarter of the year unless conditions arise that warrant a more frequent evaluation.

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Indefinite-lived intangible assets are subject to at least an annual assessment for impairment, applying a fair-value based test.

Under the income

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

approach, the Company measures fair value of the indefinite-lived intangible assets based on a projected cash flow method using a discount rate determined by its management which is commensurate with the risk inherent in its current business model.

Under the income approach, the Company measures fair value of the indefinite-lived intangible assets based on a projected cash flow method using a discount rate determined by its management which is commensurate with the risk inherent in its current business model.

The Company’s discounted cash flow projections are based on its annual financial forecasts developed internally by management for use in managing its business.

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Property, Plant and Equipment

Property, plant and equipment include computer equipment, computer software, machinery, leasehold improvements, furniture and fixtures and buildings.

Computer equipment, computer software, machinery, and furniture and fixtures are stated at cost and generally depreciated on a straight-line basis over an estimated useful life of three years , three years to five years , two years or seven years , and three years , respectively.

The buildings were depreciated on a straight-line basis over an estimated useful life of approximately 39 years .

Refer to Note 11, “Balance Sheet Details,” and Note 13, “Commitments and Contingencies,” for additional details.

Property, plant and equipment include computer equipment, computer software, machinery, leasehold improvements, and furniture and fixtures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

seven years , and three years , respectively.

Refer to Note 11, “Balance Sheet Details,” for additional details.

Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the initial terms of the leases.

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The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation and Equity Incentive Plans

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The Company determines compensation expense associated with restricted stock units based on the fair value of its common stock on the date of grant.

The Company determines compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes Merton valuation model.

The Company determines compensation expense associated with stock options based on the estimated grant-date fair value method using the Black-Scholes Merton (“BSM”) valuation model.

The Company generally recognizes compensation expense using a straight-line amortization method over the respective vesting period for awards that are ultimately expected to vest.

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government sponsored obligations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Marketable Securities

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Diluted earnings (loss) per share is calculated by dividing the earnings (loss) by the weighted-average number of common shares and potentially dilutive securities outstanding during the period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

dilutive common shares consist of incremental common shares issuable upon exercise of stock options, employee stock purchases, restricted stock and restricted stock units, and shares issuable upon the conversion of convertible notes.

Potentially dilutive common shares consist of incremental common shares issuable upon exercise of stock options, employee stock purchases, restricted stock and restricted stock units, and shares issuable upon the conversion of convertible notes.

The dilutive effect of outstanding shares is reflected in diluted earnings per share by application of the treasury stock method.

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The Company’s exposure to market risk for changes in interest rates relates primarily to its investment portfolio.

The Company places its investments with high credit issuers and, by investment policy, attempts to limit the amount of credit exposure to any one issuer.

The Company places its investments with high credit issuers and, by

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

investment policy, attempts to limit the amount of credit exposure to any one issuer.

As stated in the Company’s investment policy, it will ensure the safety and preservation of the Company’s invested funds by limiting default risk and market risk.

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Refer to Note 7, “Segments and Major Customers” for further details.

The Company’s unbilled receivables are collected from customers located in the U.S.

and internationally.

Refer to Note 4, “Revenue Recognition” for further details.

Foreign Currency Translation and Re-Measurement

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Additionally, foreign currency transaction gains and losses are included in interest income and other (income) expense, net, in the consolidated statements of operations and were not material in the periods presented.

Subsequent to the divestiture of the Company’s Payments and Ticketing businesses, the U.S.

Subsequent to the divestiture of the Company’s Payments and Ticketing businesses in 2019, the U.S.

dollar is primarily the functional currency of the Company’s foreign subsidiaries.

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As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date including the Company’s estimates for intangible assets, contractual obligations assumed and pre-acquisition contingencies where applicable.

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If only a range of estimated losses can be determined, Rambus records an amount within the range that, in its judgment, reflects the most likely outcome;

if none of the estimates within that range is a better estimate than any other amount, Rambus records the low end of the range.

if none of the estimates within that range is a better estimate than any other amount, Rambus records the low end of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Any such accrual would be charged to expense in the appropriate period.

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Recent Accounting Pronouncements Adopted

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2016-02, “Leases.” This ASU requires lessees to recognize right-of-use assets and liabilities for operating leases, initially measured at the present value of the lease payments, on the balance sheet.

In addition, it requires lessees to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.

In July 2018, the FASB issued ASU No.

2018-10, “Codification Improvements to Topic 842, Leases,” and ASU No.

2018-11, “Leases (Topic 842),” which allow the application of the new guidance at the beginning of the year of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, in addition to the method of applying the new guidance retrospectively to each prior reporting period presented.

The amendments in ASU No.

2018-10 and ASU No.

2018-11 have the same effective and transition requirements as ASU No.

2016-02 (collectively referred to as the “New Leasing Standard”).

The Company adopted the New Leasing Standard as of January 1, 2019 using the alternative transition method provided by ASU No.

2018-11 and did not recast comparative periods.

Additionally, the Company elected the practical expedient related to non-lease components in which the Company will not separate non-lease components from lease components.

Finally, the Company made the policy election for the short-term leases exemptions, which allows the Company to not recognize lease assets and liabilities for leases having a term of 12 months or less.

Upon adoption, the Company recognized $ 21.4 million and $ 23.9 million of lease assets and liabilities, respectively, on its consolidated balance sheet.

The difference between the lease assets and lease liabilities, net of the deferred tax impact which was not material, was recorded as an adjustment to the opening accumulated deficit.

Additionally, in accordance with the New Leasing Standard, the Company was required to derecognize the Sunnyvale and Ohio facilities as imputed facility obligations (as accounted for under the previous leasing guidance) and recognize these facilities as operating leases on the consolidated balance sheet.

This change resulted in no longer recognizing interest expense associated with these imputed facility lease obligations, but instead, recognizing operating lease costs which will be included in operating costs and expenses on the consolidated statement of operations.

Furthermore, the Company derecognized $ 37.6 million of imputed financing obligation related to these facilities and $ 32.0 million of capitalized building property upon adoption of the New Leasing Standard.

The adoption of the New Leasing Standard resulted in a decrease to the Company’s opening accumulated deficit of $ 4.5 million .

Recent Accounting Pronouncements Not Yet Adopted

In January 2020, the FASB issued ASU No.

2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” The amendments in this ASU clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2020.

Early adoption is permitted.

The amendments in this ASU should be applied on a prospective basis.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In December 2019, the FASB issued ASU No.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.” The amendments in this ASU remove certain exceptions, and clarify and amend existing guidance.

Simplifying the Accounting for Income Taxes.” The amendments in this ASU remove certain exceptions, clarifies and amends existing guidance.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2020.

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2019-12 would need to be applied on a retrospective basis, modified retrospective basis, or prospective basis.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

The Company elected to early adopt this ASU on January 1, 2020.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No.

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This ASU is effective for interim and annual reporting periods beginning after December 15, 2019.

Early adoption is permitted.

Certain disclosures in ASU No.

2018-13 would need to be applied on a retrospective basis and others on a prospective basis.

The Company will adopt this ASU effective January 1, 2020 and while the Company is currently evaluating the impact that this guidance will have on its consolidated financial statements, the Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company adopted this ASU on January 1, 2020.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued ASU No.

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2019-11, “Financial Instruments-Credit Losses (Topic 326),” which provides additional clarifications.

In March 2020, the FASB issued ASU No.

2020-03, “Codification Improvements to Financial Instruments,” which provides additional clarifications and improvements.

These ASUs and the related amendments are effective for interim and annual reporting periods beginning after December 15, 2019.

The Company will adopt this ASU on January 1, 2020 and the Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company adopted this ASU on January 1, 2020.

The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

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).” The amendments in this ASU amend the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity, including reducing the number of accounting models for convertible debt instruments and convertible preferred stock.

This ASU also amends the related earnings (loss) per share guidance for both subtopics, including the diluted earnings (loss) per share calculation for instruments that may be settled in cash or shares and for convertible instruments.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2021.

Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020.

The amendments in this ASU may be applied on a modified retrospective basis or a fully retrospective basis.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

In January 2020, the FASB issued ASU No.

This ASU is effective for interim and annual reporting periods beginning after December 15, 2020.

Early adoption is permitted.

The amendments in this ASU should be applied on a prospective basis.

The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Revenue Recognition

Rambus’ revenue consists of royalty, product and contract and other revenue.

Royalty revenue consists of patent and technology license royalties.

Products consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our direct sales force and distributors.

Royalty Revenue

Rambus’ patent and technology licensing arrangements generally range between 1 year and 7 years in duration and generally grant the licensee the right to use the Company’s entire IP portfolio as it evolves over time.

However, the numbers of additions to, and removals from the portfolio (for example when a patent expires and renewal is not granted to the Company) in

any given period have historically been relatively consistent;

as such, the Company does not allocate the transaction price between the rights granted at contract inception and those subsequently granted over time as a function of these additions.

For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), variable royalty arrangements that the Company has concluded are fixed in substance, and the fixed portion of hybrid fixed/variable arrangements, the Company recognizes revenue upon control over the underlying IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted lending rates ranging between 3 % and 6 % , with the related interest income being recognized over time on an effective rate basis.

2014-09, Revenue from Contracts with Customers in Accounting Standards Codification (ASC) Topic 606 (“ASC 606” or “the New Revenue Standard”) to the duration of the contract in which the parties have present enforceable rights and obligations and only recognizes revenue for amounts that are due and payable.

For variable arrangements, the Company recognizes revenue based on an estimate of the licensee’s sale or usage of the IP during the period of reference, typically quarterly, with a true-up recorded when the Company receives the actual royalty report from the licensee.

Product Revenue

To date, none of these accruals have been significant.

Contract and Other Revenue

Contract and other revenue consists of software license fees and engineering fees associated with integration of Rambus’ technology solutions into its customers’ related support and maintenance.

The Company recognizes license and customization services revenue based on an over time model, measured using the input method.

License and customization services revenue is reported as part of contract and other revenue which was approximately $ 28 million for the year ended December 31, 2019.

Due to the nature of the work performed in these arrangements, the estimation of the over time model is complex and involves significant judgment.

The key factor reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the project.

The Company recognizes license renewal revenue at the beginning of the renewal period.

The Company recognizes revenue from professional services purchased in addition to an initial software arrangement on a cumulative catch-up basis if these services are not distinct from the services provided as part of the initial software arrangement, or as a separate contract if these services are distinct.

Prior to the divestiture of the Company’s Payments and Ticketing businesses in 2019, the Company's Payment Product Group derived a significant portion of its revenue from heavily customized software in the mobile market, whereby the Payment Product Group’s software solution interacts with third-party solutions and other payment platforms to provide the functionality the customer requires.

Historically, these third-party solutions have evolved at a rapid pace, with the Payment Product Group being required to deliver as part of its support and maintenance services the patches and updates needed to maintain the functionality of its own software offering.

As the utility of the solution to the end customer erodes very quickly without these updates, these were viewed as critical and the customized software solution and updates were not separately identifiable.

As such, these arrangements were treated as a single performance obligation;

revenue was deferred until completion of the customization services, and recognized ratably over the committed support and maintenance term.

Prior to the divestiture of the Company’s Payments and Ticketing businesses in 2019, the Company's Ticketing Products Group primarily derived revenue from ticketing services arrangements that systematically consist of a software component,

support and maintenance, managed services and hosting services.

The software could be hosted by third-party hosting service providers or the Company.

All arrangements entered into subsequent to the acquisition (the Company had originally acquired the Payments and Ticketing businesses in 2016) preclude customers from taking possession of the software at any time during the hosting term and the Company had concluded that should a customer that was under contract as of the acquisition date ever request possession of the software, the Ticketing Products Group would have the ability to charge the customer, and enforce a claim to payment of a substantive fee in exchange for such right, and that the costs of setting up the environment needed to run the software would act as a significant disincentive to the customer taking possession of the software.

Based on the above, the Company concluded that these services were a single performance obligation, with customers simultaneously receiving and consuming the benefits provided by the Ticketing Products Group’s performance, and recognized ticketing services revenue ratably over the term, commencing upon completion of setup activities.

The Company recognized setup fees upon completion.

While these activities did not transfer a service to the customer, the Company elected not to defer and amortized these fees over the expected duration of the customer relationship owing to the immateriality of the amounts charged.

Significant Judgments

Historically and with the exception noted below, no significant judgment has generally been required in determining the amount and timing of revenue from the Company’s contracts with customers.

The Company has adequate tools and controls in place, and substantial experience and expertise in timely and accurately tracking man-months incurred in completing customization and other professional services, and quantifying changes in estimates.

Key estimates used in recognizing revenue predominantly consist of the following:

All fixed-fee arrangements result in cash being received after control over the underlying IP use right has transferred to the licensee, and over a period exceeding a year.

As such, all these arrangements include a significant financing component.

The Company calculates a customer-specific lending rate using a Daily Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the arrangement, and takes into consideration a licensee-specific risk profile determined based on a review of the licensee’s “Full Company View” Dun & Bradstreet report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield Curve Rate considering the overall business risk, financing strength and risk indicators, as listed.

The Company recognizes revenue on variable fee licensing arrangements on the basis of estimates.

In connection with the adoption of the New Revenue Standard, the Company has set up specific procedures and controls to ensure timely and accurate quantification of variable royalties, and implemented new systems to enable the preparation of the estimates and reporting of the financial information required by the New Revenue Standard.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to the Company’s customers.

The Company records contract assets when revenue is recognized prior to invoicing, and a contract liability when revenue is recognized subsequent to invoicing.

The contract assets are primarily related to the Company’s fixed fee IP licensing arrangements and rights to consideration for performance obligations delivered but not billed as of December 31, 2020.

The contract assets are transferred to receivables when the billing occurs.

The Company’s contract balances were as follows:

As of December 31,

(In thousands) 2020 2019

December 31, 2019

December 31, 2018

Unbilled receivables $ 367,953 $ 528,069

Deferred revenue 10,461 11,947

During the years ended December 31, 2019 and December 31, 2018 , the Company recognized $ 18.3 million and $ 20.5 million , respectively, of revenue that was included in the contract balances as of December 31, 2018 and January 1, 2018, respectively.

During the years ended December 31, 2020 and December 31, 2019, the Company recognized $ 10.3 million and $ 18.3 million, respectively, of revenue that was included in the contract balances as of December 31, 2019 and December 31, 2018, respectively.

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.

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Earnings (Loss) Per Share

The following table sets forth the computation of basic and diluted income (loss) per share:

The following table sets forth the computation of basic and diluted income (loss) per share (in thousands, except per share amounts):

For the Years Ended December 31,

2020 2019 2018

Net loss per share:

Net loss $ ( 43,609 ) $ ( 90,419 ) $ ( 157,957 )

Weighted-average common shares outstanding - basic

113,254 110,948 108,450

Effect of potential dilutive common shares

Weighted-average common shares outstanding - diluted

113,254 110,948 108,450

Basic net loss per share $ ( 0.39 ) $ ( 0.81 ) $ ( 1.46 )

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Refer to Note 12, “Convertible Notes” for more details.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets and Goodwill

The following tables present goodwill information for the years ended December 31, 2020 and December 31, 2019:

Additions to Goodwill (1)

Divestiture of Goodwill (2)

Effect of Exchange Rates (3)

(In thousands)

(In thousands) December 31,

2019 Adjustment to Goodwill (1)

Total goodwill $ 183,465 $ ( 243 ) $ 183,222

______________________________________

In August 2019, the Company acquired Northwest Logic, Inc.

(“Northwest Logic”), and in December 2019, the Company acquired the Secure Silicon IP and Protocols business from Verimatrix (the “Secure Silicon IP and Protocols business”), which resulted in the Company recognizing additional goodwill.

Refer to Note 21, “Acquisitions,” for additional information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Refer to Note 17, “Divestiture,” for additional information.

Effect of exchange rates relates to foreign currency translation adjustments for the period.

(1) Working capital adjustments related to the acquisition of Northwest Logic, Inc.

(“Northwest Logic”).

As of December 31, 2020

Gross Carrying Amount

Accumulated Impairment Losses

Net Carrying Amount

(In thousands)

(In thousands) Gross Carrying Amount Accumulated Impairment Losses Net Carrying Amount

Total goodwill $ 204,992 $ ( 21,770 ) $ 183,222

(In thousands) December 31,

2018 Additions to Goodwill (1)

Divestiture of Goodwill (2)

Effect of Exchange Rates (3)

(In thousands)

Total goodwill $ 207,178 $ 30,322 $ ( 54,494 ) $ 459 $ 183,465

______________________________________

(1) In August 2019, the Company acquired Northwest Logic, and in December 2019, the Company acquired the Secure Silicon IP and Protocols business from Verimatrix (the “Secure Silicon IP and Protocols business”), which resulted in the Company recognizing additional goodwill.

Refer to Note 21, “Acquisitions,” for additional information.

(2) Refer to Note 17, “Divestiture,” for additional information.

(3) Effect of exchange rates relates to foreign currency translation adjustments for the period.

As of December 31, 2019

Gross Carrying Amount

Accumulated Impairment Losses

Net Carrying Amount

(In thousands)

(In thousands) Gross Carrying Amount Accumulated Impairment Losses Net Carrying Amount

Total goodwill $ 205,235 $ ( 21,770 ) $ 183,465

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets

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As of December 31, 2020

Gross Carrying Amount (1) (2)

(In thousands, except useful life) Useful Life Gross Carrying Amount Accumulated Amortization Net Carrying Amount

Existing technology 3 to 10 years $ 263,789 $ ( 230,950 ) $ 32,839

Customer contracts and contractual relationships 0.5 to 10 years 36,293 ( 34,245 ) 2,048

Non-compete agreements and trademarks 3 years 300 ( 300 ) —

IPR&D Not applicable 1,600 — 1,600

Total intangible assets $ 301,982 $ ( 265,495 ) $ 36,487

As of December 31, 2019

(In thousands, except useful life) Useful Life Gross Carrying Amount (1) (2)

Accumulated Amortization

Net Carrying Amount

(In thousands)

Existing technology

3 to 10 years

Customer contracts and contractual relationships

0.5 to 10 years

Non-compete agreements and trademarks

Not applicable

Existing technology 3 to 10 years $ 262,789 $ ( 213,354 ) $ 49,435

Customer contracts and contractual relationships 0.5 to 10 years 36,293 ( 33,428 ) 2,865

Non-compete agreements and trademarks 3 years 300 ( 300 ) —

IPR&D Not applicable 2,600 — 2,600

Total intangible assets $ 301,982 $ ( 247,082 ) $ 54,900

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Refer to Note 21, “Acquisitions,” for additional information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2018

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

(In thousands)

Existing technology

3 to 10 years

Customer contracts and contractual relationships

1 to 10 years

Non-compete agreements and trademarks

Not applicable

Total intangible assets

During the year ended December 31, 2018, the Company acquired patents related to its memory technology for an immaterial amount.

During the year ended December 31, 2018, the Company did not sell any intangible assets.

Amortization expense for intangible assets for the years ended December 31, 2020, 2019, and 2018 was $ 18.4 million, $ 17.1 million, and $ 29.3 million, respectively.

The estimated future amortization expense of intangible assets as of December 31, 2019 was as follows (amounts in thousands):

The estimated future amortization expense of intangible assets as of December 31, 2020 was as follows (in thousands):

Years Ending December 31:

2021 $ 14,611

Total amortizable purchased intangible assets 34,887

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The Company has determined its CODM to be the Chief Executive Officer (“CEO”).

In line with the Company’s divestiture of its Payments and Ticketing businesses and its refocus on its semiconductor operations, commencing in the third quarter of 2019, the CEO reviews financial information presented on a consolidated basis for purposes of managing the business, allocating resources, making operating decisions and assessing financial performance.

On this basis, the Company is organized and operates as a single segment:

high-speed interface IP and chips, and embedded security within the semiconductor space.

The CEO reviews financial information presented on a consolidated basis for purposes of managing the business, allocating resources, making operating

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

decisions and assessing financial performance.

On this basis, the Company is organized and operates as a single segment within the semiconductor space.

As of December 31, 2020, the Company has a single operating and reportable segment.

Accordingly, no additional disclosure of segment measures of profit or loss or total assets is applicable for all periods presented.

The Company has recast the prior-period segment information to reflect the new segment structure.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts receivable from the Company’s major customers representing 10% or more of total accounts receivable at December 31, 2020 and 2019, respectively, was as follows:

As of December 31,

Customer 1 14 % *

Customer 2 13 % 14 %

Customer 3 11 % *

Customer 4 * 19 %

_________________________________________

* Customer accounted for less than 10% of total accounts receivable in the period

Revenue from the Company’s major customers representing 10% or more of total revenue for the years ended December 31, 2019 , 2018 and 2017 were as follows:

Revenue from the Company’s major customers representing 10% or more of total revenue for the years ended December 31, 2020, 2019 and 2018 was as follows:

Years Ended December 31,

Revenue from customers in the geographic regions based on the location of contracting parties is as follows:

2020 2019 2018

Customer A 15 % 10 % *

Customer B 13 % * *

Customer C * 14 % 15 %

Customer D * * 11 %

Revenue from customers in the geographic regions based on the location of contracting parties was as follows:

Years Ended December 31,

(In thousands) 2020 2019 2018

USA $ 137,614 $ 134,526 $ 129,567

Taiwan 21,803 24,118 21,749

South Korea 3,664 3,583 13,421

Japan 16,862 11,877 23,222

Europe 7,359 10,262 15,668

Canada 1,162 3,554 4,960

Singapore 28,034 21,751 19,140

Asia-Other 26,249 14,356 3,474

Total $ 242,747 $ 224,027 $ 231,201

At December 31, 2020, of the $ 57.7 million of total property, plant and equipment, approximately $ 53.2 million were located in the United States, $ 3.3 million were located in India and $ 1.2 million were located in other foreign locations.

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government-sponsored obligations, commercial paper, corporate notes and bonds, money market funds and municipal notes and bonds that mature within three years .

As of December 31, 2019 and 2018 , all of the Company’s cash equivalents and marketable securities have a remaining maturity of less than one year .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

All cash equivalents and marketable securities are classified as available-for-sale.

Total cash, cash equivalents and marketable securities are summarized as follows:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020

(Dollars in thousands)

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Weighted Rate of Return

(Dollars in thousands) Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Weighted Rate of Return

Money market funds $ 32,815 $ 32,815 $ — $ — 0.01 %

Government bonds and notes 169,880 169,920 3 ( 43 ) 0.12 %

Corporate notes, bonds, commercial paper and other

Corporate notes, bonds and commercial paper 238,491 238,509 61 ( 79 ) 0.21 %

Total cash equivalents and marketable securities

441,186 441,244 64 ( 122 )

Cash 61,463 61,463 — —

Total cash, cash equivalents and marketable securities

$ 502,649 $ 502,707 $ 64 $ ( 122 )

As of December 31, 2019

(Dollars in thousands)

Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Weighted Rate of Return

(Dollars in thousands) Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Weighted Rate of Return

Money market funds $ 10,065 $ 10,065 $ — $ — 1.48 %

Government bonds and notes 39,086 39,087 — ( 1 ) 1.49 %

Corporate notes, bonds, commercial paper and other

Corporate notes, bonds and commercial paper 314,391 314,435 19 ( 63 ) 1.81 %

Total cash equivalents and marketable securities

363,542 363,587 19 ( 64 )

Cash 44,122 44,122 — —

Total cash, cash equivalents and marketable securities

$ 407,664 $ 407,709 $ 19 $ ( 64 )

Available-for-sale securities are reported at fair value on the balance sheets and classified as follows:

(Dollars in thousands)

As of December 31,

(In thousands) 2020 2019

Cash equivalents $ 74,683 $ 58,054

1 unchanged sentence

Total cash equivalents and marketable securities

441,186 363,542

Cash 61,463 44,122

Total cash, cash equivalents and marketable securities

$ 502,649 $ 407,664

The Company continues to invest in highly rated quality, highly liquid debt securities.

As of December 31, 2019 , these securities have a remaining maturity of less than one year.

The Company holds all of its marketable securities as available-for-sale, marks them to market, and regularly reviews its portfolio to ensure adherence to its investment policy and to monitor individual investments for risk analysis, proper valuation, and unrealized losses that may be other than temporary.

The estimated fair value of cash equivalents and marketable securities classified by the length of time that the securities have been in a continuous unrealized loss position at December 31, 2019 and 2018 are as follows:

Gross Unrealized Loss

(In thousands)

Less than one year

The estimated fair value and gross unrealized losses of cash equivalents and marketable securities classified by the length of time that the securities have been in a continuous unrealized loss position at December 31, 2020 and 2019 are as follows:

Fair Value Gross Unrealized Loss

(In thousands) December 31,

2020 December 31,

2019 December 31,

2020 December 31,

Less than 12 months

Government bonds and notes $ 72,896 $ 14,112 $ ( 43 ) $ ( 1 )

Corporate notes, bonds and commercial paper 181,354 250,822 ( 79 ) ( 63 )

Total Corporate notes, bonds, and commercial paper and U.S.

Government bonds and notes

Total cash equivalents and marketable securities in a continuous unrealized loss position $ 254,250 $ 264,934 $ ( 122 ) $ ( 64 )

The gross unrealized loss at December 31, 2020 and 2019 was not material in relation to the Company’s total available-for-sale portfolio.

The gross unrealized loss can be primarily attributed to a combination of market conditions as well as the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

demand for and duration of the U.S.

The gross unrealized loss can be primarily attributed to a combination of market conditions as well as the demand for and duration of the U.S.

government-sponsored obligations and corporate notes and bonds.

The Company has no intent to sell, there is no requirement to sell and the Company believes that it can recover the amortized cost of these investments.

The Company reasonably

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

believes that there is no need to sell these investments and that it can recover the amortized cost of these investments.

The Company has found no evidence of impairment due to credit losses in its portfolio.

1 unchanged sentence

However, the Company cannot provide any assurance that its portfolio of cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require the Company in the future to record an impairment charge for credit losses which could adversely impact its financial results.

The contractual maturities of cash equivalents (excluding money market funds which have no maturity) and marketable securities are summarized as follows:

(In thousands) December 31,

Due less than one year $ 334,332

Due from one year through three years 74,039

Total $ 408,371

Refer to Note 9, “Fair Value of Financial Instruments,” for discussion regarding the fair value of the Company’s cash equivalents and marketable securities.

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The fair value measurement statement requires disclosure that establishes a framework for measuring fair value and expands disclosure about fair value measurements.

The statement requires fair value measurement be classified and disclosed in one of the following three categories:

The statement requires that fair value measurement be classified and disclosed in one of the following three categories:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

7 unchanged sentences

The Company does not have any financial assets in Level 3 as of December 31, 2020 and 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company reviews the pricing inputs by obtaining prices from a different source for the same security on a sample of its portfolio.

1 unchanged sentence

The following table presents the financial instruments that are carried at fair value and summarizes the valuation of its cash equivalents and marketable securities by the above pricing levels as of December 31, 2020 and 2019:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020

Quoted Market Prices in Active Markets

Significant Other Observable Inputs

Significant Unobservable Inputs

(In thousands)

(In thousands) Total Quoted Market Prices in Active Markets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Money market funds $ 32,815 $ 32,815 $ — $ —

Government bonds and notes 169,880 — 169,880 —

Corporate notes, bonds, commercial paper and other

Corporate notes, bonds and commercial paper 238,491 — 238,491 —

Total available-for-sale securities

$ 441,186 $ 32,815 $ 408,371 $ —

As of December 31, 2019

Quoted Market Prices in Active Markets

Significant Other Observable Inputs

Significant Unobservable Inputs

(In thousands)

(In thousands) Total Quoted Market Prices in Active Markets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Money market funds $ 10,065 $ 10,065 $ — $ —

Government bonds and notes 39,086 — 39,086 —

Corporate notes, bonds, commercial paper and other

Corporate notes, bonds commercial paper 314,391 — 314,391 —

Total available-for-sale securities

$ 363,542 $ 10,065 $ 353,477 $ —

The Company monitors its investments for other-than-temporary impairment and records appropriate reductions in carrying value when necessary.

10 unchanged sentences

The following table presents the financial instruments that are not carried at fair value but which require fair value disclosure as of December 31, 2020 and 2019:

As of December 31, 2019

As of December 31, 2018

(in thousands)

Carrying Value

1.375% Convertible Senior Notes due 2023

As of December 31, 2020 As of December 31, 2019

(In thousands) Face

Value Carrying Value Fair

1.375% Convertible Senior Notes due 2023 (the “2023 Notes”) $ 172,500 $ 156,031 $ 194,709 $ 172,500 $ 148,788 $ 174,239

The fair value of the convertible notes at each balance sheet date is determined based on recent quoted market prices for these notes which is a level 2 measurement.

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Information regarding the Company’s goodwill and long-lived assets balances are disclosed in Note 6, “Intangible Assets and Goodwill.”

On July 8, 2019, the Company entered into a definitive triple net space lease agreement with 237 North First Street Holdings, LLC (the “Landlord”), whereby the Company will lease approximately 90,000 square feet of office space located at 4453 North First Street in San Jose, California (the “Lease”).

The office space will serve as the Company’s corporate headquarters and include engineering, marketing and administrative functions.

The Company expects to move to the new premises during the summer of 2020.

The Lease has a term of 128 months from the commencement date in October 2019.

The starting rent of the Lease is approximately $ 3.26 per square foot on a triple net basis.

The annual base rent increases each year to certain fixed amounts over the course of the term as set forth in the Lease and will be $ 4.38 per square foot in the eleventh year.

In addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes, and a management fee.

The Lease also allows for an option to expand, wherein the Company has the right of first refusal to rent additional space in the building.

The Company has a one-time option to extend the Lease for a period of 60 months and may elect to terminate the Lease, via written notice to the Landlord, in the event the office space is damaged or destroyed.

Total future required payments under the Lease are approximately $ 41 million .

Pursuant to the terms of the lease, the landlord agreed to reimburse the Company up to $ 8.9 million , related to a tenant improvement allowance.

The lease of the Company’s current Sunnyvale, California headquarters expires on June 30, 2020.

On July 8, 2019, the Company entered into a definitive triple net space lease agreement with 237 North First Street Holdings, LLC (the “Landlord”), whereby the Company leases office space located at 4453 North First Street in San Jose, California, (the “Lease”).

In April 2020, the lease was amended for certain terms (the “Amended Lease”).

The Amended Lease includes approximately 90,000 square feet of office space, which serves as the Company’s corporate headquarters and includes engineering, sales, marketing and administrative functions.

The Amended Lease has a term of 128 months from the amended commencement date in April 2020.

The starting rent of the Amended Lease is approximately $ 3.26 per square foot on a triple net basis.

The annual base rent increases each year to certain fixed amounts over the course of the term as set forth in the Amended Lease and will be $ 4.38 per square foot in the final year of the Amended Lease term.

In addition to the base rent, the Company will also pay operating expenses, insurance expenses, real estate taxes, and a management fee under the Amended Lease.

The Amended Lease also allows for an option to expand, wherein the Company has the right of first refusal to rent additional space in the building.

The Company has a one-time option to extend the Amended Lease for a period of 60 months and may elect to terminate the Amended Lease, via written notice to the Landlord, in the event the office space is damaged or destroyed.

Total required payments under the Amended Lease are approximately $ 41 million.

Pursuant to the terms of the Amended Lease, the landlord agreed to reimburse the Company up to $ 9.0 million, related to a tenant improvement allowance.

The lease of the Company’s Sunnyvale, California, headquarters expired on June 30, 2020.

Refer to Note 13, “Commitments and Contingencies,” for additional information regarding the Company’s leases.

The Company used its incremental borrowing rate to measure the lease liabilities at the adoption date for its existing operating leases that commenced prior to January 1, 2019 which was based on the remaining lease term and remaining lease payments for such leases.

On an ongoing basis, as most of the Company’s leases do not provide an implicit rate, the Company will use its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The Company will use the implicit rate when readily determinable.

Refer to Note 3, “Recent Accounting Pronouncements” for additional information regarding the adoption of the New Leasing Standard on January 1, 2019.

The table below reconciles the undiscounted cash flows for the first five years and total of the remaining years to the operating lease liabilities recorded on the consolidated balance sheet as of December 31, 2020 (in thousands):

Years ending December 31,

Years ending December 31, Amount

Thereafter 21,325

Total minimum lease payments 49,861

4 unchanged sentences

As of December 31, 2020, the weighted-average remaining lease term for the Company’s operating leases was 8.1 years, and the weighted-average discount rate used to determine the present value of the Company’s operating leases was 4.2 %.

Operating lease costs included in research and development and selling, general and administrative costs on the statement of operations were $ 9.6 million for the year ended December 31, 2019 .

Rent expense, recorded under accounting guidance in

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

effect prior to January 1, 2019 when the New Leasing Standard became effective for the Company, was approximately $ 5.2 million and $ 4.4 million for the years ended December 31, 2018 and 2017 , respectively.

Operating lease costs included in research and development and selling, general and administrative costs on the statement of operations were $ 9.5 million and $ 9.6 million for the years ended December 31, 2020 and 2019, respectively.

Rent expense, recorded under accounting guidance in effect prior to January 1, 2019 when the New Leasing Standard became effective for the Company, was approximately $ 5.2 million for the year ended December 31, 2018.

Cash paid for amounts included in the measurement of operating lease liabilities was $ 7.2 million for the year ended December 31, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Balance Sheet Details

Inventories consist of the following:

Inventories consisted of the following:

As of December 31,

3 unchanged sentences

Finished goods 5,871 4,634

$ 14,466 $ 10,086

Property, Plant and Equipment, net

6 unchanged sentences

Leasehold improvements 9,658 10,316

Machinery 10,378 10,446

Construction in progress 27,250 1,691

Property, plant and equipment, gross

140,370 125,803

Less accumulated depreciation and amortization ( 82,677 ) ( 81,089 )

1 unchanged sentence

$ 57,693 $ 44,714

Refer to Note 3, “Recent Accounting Pronouncements” and Note 13, “Commitments and Contingencies,” for a discussion related to the Company’s facility leases due to the adoption of the New Leasing Standard on January 1, 2019.

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $ 21.2 million, $ 15.2 million and $ 10.7 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accumulated Other Comprehensive Gain (Loss)

4 unchanged sentences

Unrealized loss on available-for-sale securities, net of tax ( 210 ) ( 197 )

$ ( 81 ) $ ( 92 )

Convertible Notes

The Company’s convertible notes are shown in the following table:

(Dollars in thousands)

As of December 31,

As of December 31, 2018

1.375% Convertible Senior Notes due 2023

(In thousands) 2020 2019

2023 Notes $ 172,500 $ 172,500

Unamortized discount - 2023 Notes ( 15,420 ) ( 22,163 )

3 unchanged sentences

Total long-term convertible notes $ 156,031 $ 148,788

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.375% Convertible Senior Notes due 2023.

16 unchanged sentences

(1) during any calendar quarter commencing after March 31, 2018, and only during such calendar quarter, if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

any five consecutive trading day period in which, for each trading day of that period, the trading price per $ 1,000 principal amount of 2023 Notes for such trading day was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

(2) during the five business day period after any five consecutive trading day period in which, for each trading day of that period, the trading price per $ 1,000 principal amount of 2023 Notes for such trading day was less than 98 % of the product of the last reported sale price of the common stock and the conversion rate on each such trading day;

(3) upon the occurrence of specified distributions to holders of our common stock;

9 unchanged sentences

The following events are considered “events of default” with respect to the 2023 Notes, which may result in the acceleration of the maturity of the 2023 Notes:

(1) the Company defaults in the payment when due of any principal of any of the 2023 Notes at maturity or upon exercise of a repurchase right or otherwise;

(2) the Company defaults in the payment of any interest, including additional interest, if any, on any of the 2023 Notes, when the interest becomes due and payable, and continuance of such default for a period of 30 days;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(1) the Company defaults on the payment when due of any principal of any of the 2023 Notes at maturity or upon exercise of a repurchase right or otherwise;

(2) the Company defaults on the payment of any interest, including additional interest, if any, on any of the 2023 Notes, when the interest becomes due and payable, and continuance of such default for a period of 30 days;

(3) failure by the Company to comply with its obligation to convert the 2023 Notes in accordance with the 2023 Indenture upon exercise of a holder’s conversion right;

6 unchanged sentences

Note Hedges and Warrants.

On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company entered into privately negotiated convertible note hedge transactions (the “Convertible Note Hedge Transactions”) with respect to the Company’s common stock, par value $0.001 per share (the “Common Stock”), with certain bank

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

counterparties (the “Counterparties”).

The Company paid an aggregate amount of approximately $ 33.5 million to the Counterparties for the Convertible Note Hedge Transactions.

11 unchanged sentences

The amounts paid for the Convertible Note Hedge Transactions are tax deductible expenses, while the proceeds received from the Warrants are not taxable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Impact to Earnings per Share.

19 unchanged sentences

The transaction costs allocated to the equity component of $ 0.8 million were recorded as additional paid-in capital.

The 2018 Notes were the Company’s general unsecured obligations, ranking equally in right of payment to all of Rambus’ existing and future

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

senior unsecured indebtedness, including the 2023 Notes, and senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the 2018 Notes.

The 2018 Notes were the Company’s general unsecured obligations, ranking equally in right of payment to all of Rambus’ existing and future senior unsecured indebtedness, including the 2023 Notes, and senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated to the 2018 Notes.

The 2018 Notes were convertible into shares of the Company’s common stock at an initial conversion rate of 82.8329 shares of common stock per $ 1,000 principal amount of 2018 Notes, subject to adjustment in certain events.

2 unchanged sentences

( 1) during any calendar quarter commencing after the calendar quarter ending on December 31, 2013 (and only during such calendar quarter), if the closing sale price of the common stock for 20 or more trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is more than 130 % of the conversion price per share of common stock on the last trading day of the preceding calendar quarter;

(2) during the five business day period after any five consecutive trading day period (the ‘‘measurement period’’) in which the trading price (as defined below) per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the closing sale price of the Company’s common stock and the conversion rate on each such trading day;

(2) during the five business day period after any five consecutive trading day period (the ‘‘measurement period’’) in which the trading price per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the closing sale price of the Company’s common stock and the conversion rate on each such trading day;

(3) upon the occurrence of specified distributions to holders of the Company’s common stock;

2 unchanged sentences

If a holder elected to convert its 2018 Notes in connection with certain fundamental changes, as that term is defined in the 2018 Indenture, that occurred prior to the Maturity Date, the Company would have, in certain circumstances, increased the conversion rate for 2018 Notes converted in connection with such fundamental changes by a specified number of shares of common stock.

Upon conversion of the 2018 Notes, the Company will have paid cash up to the aggregate principal amount of the notes to have been converted and paid or delivered, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the notes converted, as specified in the Indenture.

The Company may not have redeemed the 2018 Notes at its option prior to the Maturity Date, and no sinking fund was provided for the 2018 Notes.

Upon the occurrence of a fundamental change, holders may have required the Company to repurchase for cash all or any portion of their notes at a repurchase price equal to 100 % of the principal amount of the notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The following events are considered events of default under the Indenture which may have resulted in the acceleration of the maturity of the 2018 Notes:

(1) default in the payment when due of any principal of any of the notes at maturity, upon redemption or upon exercise of a repurchase right or otherwise;

(2) default in the payment of any interest, including additional interest, if any, on any of the notes, when the interest became due and payable, and continuance of such default for a period of 30 days;

(3) the Company’s failure to deliver cash or cash and shares of the Company’s common stock (including any additional shares deliverable as a result of a conversion in connection with a make-whole fundamental change, as defined in the Indenture) when required by the Indenture;

(4) default in the Company’s obligation to provide notice of the occurrence of a fundamental change, make-whole fundamental change or distribution to holders of the Company’s common stock when required by the Indenture;

(5) the Company’s failure to comply with any of the Company’s other agreements in the notes or the 2018 Indenture (other than those referred to in clauses (1) through (4) above) for 60 days after the Company’s receipt of written notice to the Company of such default from the trustee or to the Company and the trustee of such default from holders of not less than 25 % in aggregate principal amount of the 2018 Notes then outstanding;

(6) the Company’s failure to pay when due the principal of, or acceleration of, any indebtedness for money borrowed by the Company or any of the Company’s material subsidiaries in excess of $ 40 million principal amount, if such indebtedness is not discharged, or such acceleration is not annulled, for a period of 30 days after written notice thereof is delivered to the Company by the trustee or to the Company and the trustee by the holders of 25 % or more in aggregate principal amount of the notes then

Upon conversion of the 2018 Notes, the Company would have paid cash up to the aggregate principal amount of the notes to have been converted and paid or delivered, as the case may be, cash, shares of the Company’s common stock or a combination

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

outstanding without such failure to pay having been cured or waived, such acceleration having been rescinded or annulled (if applicable) and such indebtedness not having been paid or discharged;

(7) certain events of bankruptcy, insolvency or reorganization relating to the Company or any of the Company’s material subsidiaries (as defined in the Indenture).

If an event of default, other than an event of default described in clause (7) above with respect to the Company, occurred and was continuing, either the trustee or the holders of at least 25 % in aggregate principal amount of the notes then outstanding may have declared the principal amount of, and accrued and unpaid interest, including additional interest, if any, on the notes then outstanding to be immediately due and payable.

If an event of default described in clause (7) above occurred with respect to the Company, the principal amount of and accrued and unpaid interest, including additional interest, if any, on the notes will have automatically become immediately due and payable.

of cash and shares of the Company’s common stock, at the Company’s election, in respect of the remainder, if any, of the Company’s conversion obligation in excess of the aggregate principal amount of the notes converted, as specified in the Indenture.

During the third quarter of 2018, the Company paid upon maturity the remaining $ 81.2 million in aggregate principal amount of the 2018 Notes.

1 unchanged sentence

The value of the shares delivered was approximately $ 5.0 million.

During the fourth quarter of 2017, the Company repurchased $ 56.8 million aggregate principal amount of the 2018 Notes for a price of $72.3 million which resulted in a loss on extinguishment of debt of $1.1 million and $16.6 million being recorded in stockholders’ equity.

To determine the impact of the repurchase on stockholders’ equity, the Company first determined the fair value of the liability component of the repurchased 2018 Notes immediately prior to the repurchase.

The Company then reduced the amount paid for the repurchased 2018 Notes by the fair value of the liability component and allocated the remaining amount paid to the equity component, which resulted in a reduction to stockholders’ equity.

Additional paid-in capital at December 31, 2019 and December 31, 2018 includes $ 111.3 million and $ 111.3 million , respectively, for each year related to the equity component of the notes.

As of December 31, 2020, none of the conversion conditions were met related to the 2023 Notes.

8 unchanged sentences

Total interest expense on convertible notes

$ 9,615 $ 9,226 $ 11,991

Commitments and Contingencies

On December 15, 2009, the Company entered into a lease agreement for approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale, California commencing on July 1, 2010 and expiring on June 30, 2020.

The office space is used for the Company’s corporate headquarters, as well as engineering, sales, marketing and administrative operations and activities.

The annual base rent for these leases includes certain rent abatement and increases annually over the lease term.

The Company has two options to extend the lease for a period of 60 months each and a one-time option to terminate the lease after 84 months in exchange for an early termination fee.

Pursuant to the terms of the lease, the landlord agreed to reimburse the Company approximately $ 9.1 million , which was received by the year ended December 31, 2011.

On November 4, 2011, to better plan for future expansion, the Company entered into an amended lease for its Sunnyvale facility for approximately an additional 31,000 square-foot space commencing on March 1, 2012 and expiring on June 30, 2020.

Additionally, a tenant improvement allowance to be provided by the landlord was approximately $ 1.7 million .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

September 29, 2012, the Company entered into a second amended Sunnyvale lease to reduce the tenant improvement allowance to approximately $ 1.5 million .

On January 31, 2013, the Company entered into a third amendment to the Sunnyvale lease to surrender the 31,000 square-foot space from the first amendment back to the landlord and recorded a total charge of $ 2.0 million related to the surrender of the amended lease.

On December 15, 2009, the Company entered into a lease agreement for approximately 125,000 square feet of office space located at 1050 Enterprise Way in Sunnyvale, California, which commenced on July 1, 2010 and expired on June 30, 2020.

The office space was used for the Company’s corporate headquarters, as well as engineering, sales, marketing and administrative operations and activities.

Refer to Note 10, “Leases,” for information regarding the Company’s lease agreement for a new corporate headquarters in San Jose, California.

On March 8, 2010, the Company entered into a lease agreement for approximately 25,000 square feet of office and manufacturing areas, located in Brecksville, Ohio.

The office area was used for the lighting division’s engineering activities while the manufacturing area was used for the manufacture of prototypes.

This lease was amended on September 29, 2011 to expand the facility to approximately 51,000 total square feet and the amended lease expired on July 31, 2019.

The Company had an option to extend the lease for a period of 60 months .

During 2018, the Company closed its lighting division and manufacturing operations in Brecksville, Ohio, and sold the related equipment.

Refer to Note 18, “Restructuring and Other Charges,” for additional details.

The Company undertook a series of structural improvements to ready the Sunnyvale and Brecksville facilities for its use.

Since these improvements were considered structural in nature and the Company was responsible for any cost overruns, for accounting purposes, the Company was treated in substance as the owner of each construction project during the construction period.

At the completion of each construction, the Company concluded that it retained sufficient continuing involvement to preclude de-recognition of the building under the FASB authoritative guidance applicable to the sale leasebacks of real estate.

As such, prior to January 1, 2019 when the New Leasing Standard became effective for the Company, the Company accounted for the buildings as owned real estate and recorded an imputed financing obligation for its obligations to the legal owners.

Upon adoption of the New Leasing Standard, these leases were treated as operating leases.

Prior to the adoption of the New Leasing Standard, monthly lease payments on these facilities were allocated between the land element of the lease (which was accounted for as an operating lease) and the imputed financing obligation.

The imputed financing obligation was amortized using the effective interest method and the interest rate was determined in accordance with the requirements of sale leaseback accounting.

For the years ended December 31, 2018 and 2017, the Company recognized in its Consolidated Statements of Operations $ 4.3 million and $ 4.4 million , respectively, of interest expense in connection with the imputed financing obligation on these facilities.

As of December 31, 2018, the imputed financing obligation balance in connection with these facilities was $ 37.6 million , which was primarily classified under long-term imputed financing obligation.

As of December 31, 2018, the Company had capitalized $ 40.3 million in property, plant and equipment based on the estimated fair value of the portion of the pre-construction shell, construction costs related to the build-out of the facilities and capitalized interest during construction period.

On November 17, 2017, the Company entered into an Indenture with U.S.

Bank National Association, as trustee, relating to the issuance by the Company of $172.5 million aggregate principal amount of the 2023 Notes.

The aggregate principal amount of the 2023 Notes as of December 31, 2019 was $172.5 million , offset by unamortized debt discount and unamortized debt issuance costs of $22.2 million and $1.5 million , respectively, on the accompanying consolidated balance sheets.

The unamortized discount related to the 2023 Notes is being amortized to interest expense using the effective method over the remaining 3.1 years until maturity of the 2023 Notes on February 1, 2023.

Refer to Note 12, “Convertible Notes,” for additional details.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020, the Company’s material contractual obligations were as follows (in thousands):

Total 2021 2022 2023 2024 2025

Contractual obligations (1) (2) (3)

Other contractual obligations

Software licenses (4)

$ 18,970 $ 12,541 $ 6,429 $ — $ — $ —

Acquisition retention bonuses (5)

6,370 3,370 3,000 — — —

Convertible notes 172,500 — — 172,500 — —

1 unchanged sentence

5,936 2,372 2,372 1,192 — —

$ 203,776 $ 18,283 $ 11,801 $ 173,692 $ — $ —

______________________________________

(1) The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately $ 25.5 million including $23.6 million recorded as a reduction of long-term deferred tax assets and $1.9 million in long-term income taxes payable, as of December 31, 2020.

1 unchanged sentence

(2) For the Company’s lease commitments as of December 31, 2020, refer to Note 10, “Leases.”

(3) The Company’s other contractual obligations as of December 31, 2020 were not material.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(4) The Company has commitments with various software vendors for agreements generally having terms longer than one year .

(5) In connection with the acquisitions of Northwest Logic in August 2019 and the Secure Silicon IP and Protocols business in December 2019, the Company is obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions including the condition of employment.

Refer to Note 3, “Recent Accounting Pronouncements” and Note 10, “Leases,” for a discussion related to the Company’s facility leases due to the adoption of the New Leasing Standard on January 1, 2019.

Additionally, the Company’s lease-related obligations as of December 31, 2018, as determined under the prior accounting standard, were as follows (in thousands):

Lease-related obligations

Imputed financing obligation (1)

_________________________________________

With respect to the imputed financing obligation, the main components of the difference between the amount reflected in the table above and the amount reflected on the consolidated balance sheet are the interest on the imputed financing obligation and the estimated common area expenses over the future periods.

The amount includes the amended Ohio lease and the amended Sunnyvale lease.

Indemnifications

From time to time, the Company indemnifies certain customers as a necessary means of doing business.

Indemnification covers customers for losses suffered or incurred by them as a result of any patent, copyright, or other intellectual property infringement or any other claim by any third party arising as result of the applicable agreement with the Company.

Indemnification covers customers for losses suffered or incurred by them as a result of any patent, copyright, or other IP infringement or any other claim by any third party arising as result of the applicable agreement with the Company.

The Company generally attempts to limit the maximum amount of indemnification that the Company could be required to make under these agreements to the amount of fees received by the Company, however, this is not always possible.

The fair value of the liability as of December 31, 2020 and 2019 was not material.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Equity Incentive Plans and Stock-Based Compensation

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However, awards under the 2019 Inducement Plan may only be granted to individuals who previously have not been employees or non-employee directors of the Company (or who will become employed following a bona fide period of non-employment or service with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules, in connection with a merger or acquisition.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A summary of shares available for grant under the Company’s plans is as follows:

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Total shares available for grant as of December 31, 2017 5,051,147

Increase in shares approved for issuance

Stock options granted

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(1) For purposes of determining the number of shares available for grant under the 2015 Plan against the maximum number of shares authorized, each restricted stock granted reduces the number of shares available for grant by 1.5 shares and each restricted stock forfeited increases shares available for grant by 1.5 shares.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(2) Amount includes 0.5 million shares that had been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.

(3) Shares were reserved under the 2019 Inducement Plan adopted in the third quarter of 2019.

(4) Amount includes 1.0 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.

(5) On April 30, 2020, the Company’s stockholders approved an additional 7,800,000 shares for issuance under the 2015 Plan.

(6) Amount includes 0.5 million shares that have been reserved for potential future issuance related to certain performance unit awards discussed under the section titled “Nonvested Equity Stock and Stock Units” below.

Shares were reserved under the 2019 Inducement Plan adopted in the third quarter of 2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

General Stock Option Information

The following table summarizes stock option activity under the Company’s equity incentive plans for the years ended December 31, 2020, 2019 and 2018 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2020:

Options Outstanding

Weighted Average Remaining Contractual Term

Number of Shares

Weighted Average Exercise Price per Share

Aggregate Intrinsic Value

(Dollars in thousands, except per share amounts)

Options Outstanding Weighted-Average Remaining Contractual Term

(In thousands, except per share amounts and years) Number of Shares Weighted-Average Exercise Price per Share Aggregate Intrinsic Value

Outstanding as of December 31, 2017 4,310,361 $ 9.78

Options granted

711,479 $ 12.84

Options exercised

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Options granted

80,000 $ 13.25

Options exercised

( 1,249,785 ) $ 7.79

Options forfeited

( 426,960 ) $ 13.71

Outstanding as of December 31, 2019 1,639,146 $ 11.37

Options granted

40,000 $ 15.59

Options exercised

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Options forfeited

( 101,816 ) $ 19.41

Outstanding as of December 31, 2020 964,211 $ 11.08 5.04 $ 6,151

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Options exercisable at December 31, 2020 781,102 $ 10.51 4.31 $ 5,432

Employee Stock Purchase Plans

Employee Stock Purchase Plan

During the years ended December 31, 2020, 2019, and 2018, the Company had one employee stock purchase plan, the 2015 Employee Stock Purchase Plan (“2015 ESPP”).

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The Company issued 541,395 shares at a weighted-average price of $ 9.99 per share during the year ended December 31, 2018.

As of December 31, 2019 , 1,665,440 shares under the ESPP remain available for issuance.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On April 30, 2020, the Company's stockholders approved an additional 2,000,000 shares to be reserved for issuance under the 2015 ESPP.

As of December 31, 2020, 3,198,375 shares under the ESPP remained available for issuance.

Stock-Based Compensation

Stock Options

During the years ended December 31, 2019 , 2018 and 2017 , Rambus granted 80,000 , 711,479 and 558,426 stock options, respectively, with an estimated total grant-date fair value of $ 0.3 million , $ 3.0 million and $ 2.3 million , respectively.

During the years ended December 31, 2020 and 2019, the number of stock options granted were not material.

During the year ended December 31, 2018, Rambus granted 711,479 stock options with an estimated total grant-date fair value of $ 3.0 million.

During the years ended December 31, 2020, 2019 and 2018, Rambus recorded stock-based compensation related to stock options of $ 0.6 million, $ 1.0 million and $ 1.7 million, respectively.

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The total fair value of options vested for the years ended December 31, 2020, 2019 and 2018 was $ 3.3 million, $ 6.7 million and $ 12.9 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Stock Purchase Plans

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That cost is expected to be recognized over four months .

There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the years ended December 31, 2019 and December 31, 2018 .

Tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the year ended December 31, 2017, calculated in accordance with accounting for share-based payments were $ 1.3 million .

Valuation Assumptions

Rambus estimates the fair value of stock options using the Black-Scholes-Merton model (“BSM”).

Rambus estimates the fair value of stock awards using the BSM model.

The BSM model determines the fair value of stock-based compensation and is affected by Rambus’ stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables.

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If actual results differ significantly from these estimates, stock-based compensation expense and Rambus’ results of operations could be materially impacted.

The fair value of stock awards is estimated as of the grant date using the BSM option-pricing model assuming a dividend yield of 0 % and the additional weighted-average assumptions as listed in the following tables:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of stock awards is estimated as of the grant date using the BSM option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the table below.

The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in the periods presented:

Stock Option Plan for Years Ended December 31,

2020 2019 2018

Stock Option Plan

Expected stock price volatility

38 % 33%-36% 24%-32%

Risk free interest rate

0.2 % 1.4%-1.6% 2.6%-2.8%

Expected term (in years)

5.5 5.1-5.2 5.8

Weighted-average fair value of stock options granted $ 5.46 $ 4.36 $ 4.23

Employee Stock Purchase Plan for Years Ended December 31,

2020 2019 2018

Employee Stock Purchase Plan

Expected stock price volatility

37%-46% 32 % 27%-34%

Risk free interest rate

0.1 % 1.6%-2.4% 2.05%-2.5%

Expected term (in years)

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The expected term of ESPP grants is based upon the length of each respective purchase period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Nonvested Equity Stock and Stock Units

The Company grants nonvested equity stock units to officers, directors and employees.

For the years ended December 31, 2019 , 2018 and 2017 , the Company granted nonvested equity stock units totaling 4,233,701 , 2,978,558 and 3,075,396 shares, respectively.

For the years ended December 31, 2020, 2019 and 2018, the Company granted nonvested equity stock units totaling 2.0 million, 4.2 million and 3.0 million shares, respectively.

These awards have a service condition, generally a service period of four years , except in the case of grants to directors, for which the service period is one year .

For the years ended December 31, 2020, 2019 and 2018, the fair value of nonvested equity stock units at the date of grant was approximately $ 31.0 million, $ 43.0 million and $ 38.1 million, respectively.

During the years ended December 31, 2019 , 2018 and 2017 , the Company granted performance unit awards to certain Company executive officers with vesting subject to the achievement of certain performance conditions.

During the years ended December 31, 2020, 2019 and 2018, the Company granted performance unit awards to certain Company executive officers with vesting subject to the achievement of certain performance and/or market conditions.

The ultimate number of performance units that can be earned can range from 0 % to 200 % of target depending on performance relative to target over the applicable period.

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This cost is expected to be recognized over a weighted-average period of 2.1 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table reflects the activity related to nonvested equity stock and stock units for the three years ended December 31, 2020:

Nonvested Equity Stock and Stock Units

Weighted-Average

Nonvested Equity Stock and Stock Units Shares Weighted-Average

Grant-Date Fair Value

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2,978,558 $ 12.77

( 1,713,930 ) $ 12.39

( 2,266,842 ) $ 12.97

Nonvested at December 31, 2018 4,859,135 $ 12.71

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( 1,896,283 ) $ 12.40

( 1,907,070 ) $ 11.33

Nonvested at December 31, 2019 5,289,483 $ 11.27

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( 1,693,659 ) $ 11.70

( 730,676 ) $ 11.83

Nonvested at December 31, 2020 4,851,265 $ 12.82

Stockholders’ Equity

Share Repurchase Program

During the year ended December 31, 2019 , the Company did not repurchase any shares of its common stock under its share repurchase program.

On January 21, 2015, the Company’s Board approved a new share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares.

Share repurchases under the plan may be made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations.

There is no expiration date applicable to the plan.

This new stock repurchase program replaced the previous program approved by the Board in February 2010 and canceled the remaining shares outstanding as part of the previous authorization.

On March 5, 2018, the Company initiated an accelerated share repurchase program with Citibank N.A.

The accelerated share repurchase program was part of the broader share repurchase program previously authorized by the Company’s Board on January 21, 2015.

Under the accelerated share repurchase program, the Company pre-paid to Citibank N.A.

the $ 50.0 million purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 3.1 million shares of its common stock from Citibank N.A., in the first quarter of 2018, which were retired and recorded as a $ 40.0 million reduction to stockholders’ equity.

The remaining $ 10.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company’s stock.

During the second quarter of 2018, the accelerated share repurchase program was completed and the Company received an additional 0.7 million shares of its common stock as the final settlement of the accelerated share repurchase program.

There were no other repurchases of the Company’s common stock during 2018.

On May 1, 2017, the Company initiated an accelerated share repurchase program with Barclays Bank PLC.

The accelerated share repurchase program was part of the broader share repurchase program previously authorized by the Company’s Board on January 21, 2015.

Under the accelerated share repurchase program, the Company pre-paid to Barclays Bank PLC the $ 50.0 million purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 3.2 million shares of its common stock from Barclays Bank PLC, in the second quarter of 2017, which were retired and recorded as a $ 40.0 million reduction to stockholders’ equity.

The remaining $ 10.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company’s stock.

The number of shares to be ultimately purchased by the Company was determined based on the volume weighted average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties.

During the fourth quarter of 2017, the

On January 21, 2015, the Company’s Board approved a share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2015 Repurchase Program”).

Share repurchases under the 2015 Repurchase Program were made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations.

During the years ended December 31, 2020 and 2019, the Company did not repurchase any shares of its common stock under the 2015 Repurchase Program.

On October 29, 2020, the Company’s Board approved a new share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2020 Repurchase Program”).

Share repurchases under the 2020 Repurchase Program may be made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules, and regulations.

There is no expiration date applicable to the 2020 Repurchase Program.

The 2020 Repurchase Program replaced the previous program approved by the Board in January 2015 and canceled the remaining shares outstanding as part of the previous authorization.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

accelerated share repurchase program was completed and the Company received an additional 0.8 million shares of its common stock as the final settlement of the accelerated share repurchase program.

On November 11, 2020, the Company entered into an accelerated share repurchase program with Deutsche Bank AG, London Branch as counterparty, through its agent Deutsche Bank Securities Inc.

(“Deutsche Bank”) (the “2020 ASR Program”).

The 2020 ASR Program was part of the broader share repurchase program previously authorized by the Company’s Board on October 29, 2020.

Under the 2020 ASR Program, the Company pre-paid to Deutsche Bank the $ 50.0 million purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 2.6 million shares of its common stock from Deutsche Bank in the fourth quarter of 2020, which were retired and recorded as a $ 40.0 million reduction to stockholders’ equity.

The remaining $ 10.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company’s stock.

The number of shares to be ultimately purchased by the Company will be determined based on the volume-weighted-average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties.

The 2020 ASR Program is expected to be completed within six months from the beginning of the program.

There were no other repurchases of the Company’s common stock during 2020.

As of December 31, 2020, there remained an outstanding authorization to repurchase approximately 17.4 million shares of the Company’s outstanding common stock under the current share repurchase program.

The Company records stock repurchases as a reduction to stockholders’ equity.

The Company records share repurchases as a reduction to stockholders’ equity.

The Company records a portion of the purchase price of the repurchased shares as an increase to accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock.

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Benefit Plans

Rambus has a 401(k) Profit Sharing Plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code of 1986.

Rambus has a 401(k) Plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code of 1986.

Each eligible employee may elect to contribute up to 60 % of the employee’s annual compensation to the 401(k) Plan, up to the Internal Revenue Service limit.

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The final gross proceeds from the sale amounted to $ 82.5 million, which included the selling price of $ 75.0 million and approximately $ 7.5 million in net working capital adjustments finalized in October 2019.

The $7.5 million in net working capital adjustments is net of a final working capital adjustment due to the buyer of approximately $ 1.1 million , which the Company will pay in cash to the buyer during the first quarter of 2020.

The $7.5 million in net working capital adjustments is net of a final working capital adjustment due to the buyer of approximately $ 1.1 million, which the Company paid in cash to the buyer during the first quarter of 2020.

The final gross proceeds were offset by approximately $ 3.8 million in transaction costs for the year ended December 31, 2019.

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Restructuring and Other Charges

The 2019 Plan

In June 2019, the Company initiated a restructuring program to reduce overall expenses which is expected to improve future profitability by reducing spending on research and development efforts and sales, general and administrative programs (the “2019 Plan”).

2020 Restructuring Plan

In November 2020, the Company initiated a restructuring program to reduce overall expenses which is expected to improve future profitability by reducing spending on research and development efforts and sales, general and administrative programs (the “2020 Restructuring Plan”).

In connection with this restructuring program, the Company initiated a plan of termination resulting in a reduction of approximately 70 employees.

During the year ended December 31, 2019 , the Company recorded restructuring and other severance-related charges of approximately $ 8.8 million related primarily to the reduction in workforce.

During the year ended December 31, 2020, the Company recorded charges of approximately $ 3.3 million related primarily to the reduction in workforce.

During the year ended December 31, 2020, the Company paid approximately $ 0.9 million of the total charges.

As of December 31, 2020, the Company’s accrued restructuring balance was approximately $ 2.4 million.

The 2019 Plan is expected to be substantially completed in early 2020.

The 2018 Plan

On January 30, 2018, the Company announced its plans to close its lighting division and manufacturing operations in Brecksville, Ohio, (“the 2018 Plan”).

The 2020 Restructuring Plan is expected to be substantially completed in the first half of 2021.

2019 Restructuring Plan

In connection with this restructuring program, the Company initiated a plan of termination resulting in a reduction of approximately 80 employees.

During the years ended December 31, 2020 and 2019, the Company recorded charges of approximately $ 0.8 million and $ 8.8 million, respectively, related to the reduction in workforce.

The 2019 Restructuring Plan was substantially completed in the second quarter of 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2018 Restructuring Plan

On January 30, 2018, the Company announced its plans to close its lighting division and manufacturing operations in Brecksville, Ohio, (“the 2018 Restructuring Plan”).

The Company believed that such business was not core to its strategy and growth objectives.

In connection therewith, the Company terminated approximately fifty employees, and began the process to exit the facilities in Ohio and sell the related equipment.

In connection therewith, the Company terminated approximately 50 employees, and began the process to exit the facilities in Ohio and sell the related equipment.

The Company expected to record restructuring charges of approximately $ 2.0 million to $ 5.0 million related to employee terminations and severance costs and facility related costs.

During the year ended December 31, 2018, the Company recorded a net charge of $ 2.2 million, primarily related to the reduction in workforce, of which $ 2.0 million was related to the lighting division and $ 0.2 million was related to corporate support functions.

The 2018 Plan was completed as of December 31, 2019.

The 2018 Restructuring Plan was completed as of December 31, 2019.

The Company concluded that the closure of its lighting division did not meet the criteria for reporting as discontinued operations.

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As of December 31, 2018, the Company sold all property, plant and equipment from its lighting division reclassified as held for sale on the consolidated balance sheets of approximately $ 3.5 million and recognized a gain on the disposal of the held for sale assets of approximately $ 1.2 million included in restructuring charges on the consolidated statements of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2017, the Company did not initiate any restructuring programs.

Income (loss) before taxes consisted of the following:

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(In thousands) 2020 2019 2018

The provision for (benefit from) income taxes is comprised of:

Domestic $ ( 43,029 ) $ ( 81,316 ) $ ( 63,829 )

Foreign 3,398 ( 5,700 ) ( 6,799 )

$ ( 39,631 ) $ ( 87,016 ) $ ( 70,628 )

The provision for (benefit from) income taxes was comprised of:

Years Ended December 31,

(In thousands) 2020 2019 2018

$ ( 456 ) $ 2,932 $ 5,451

2,018 2,016 82,726

( 1,528 ) ( 1,198 ) 522

3,097 1,708 1,592

195 ( 2,712 ) ( 3,295 )

$ 3,978 $ 3,403 $ 87,329

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The differences between Rambus’ effective tax rate and the U.S.

federal statutory regular tax rate are as follows:

federal statutory regular tax rate were as follows:

Years Ended December 31,

Expense at U.S.

2020 2019 2018

federal statutory rate 21.0 % 21.0 % 21.0 %

Expense (benefit) at state statutory rate

State income tax (expense)/benefit ( 2.5 ) 0.9 ( 1.2 )

Withholding tax ( 3.7 ) ( 3.5 ) ( 7.7 )

Foreign rate differential ( 4.4 ) ( 1.6 ) ( 0.2 )

Research and development (“R&D”) credit

Research and development credit ( 4.4 ) 1.2 2.2

Executive compensation ( 1.7 ) ( 1.2 ) ( 0.1 )

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Foreign derived intangible income deduction 12.3 4.6 14.8

Impact of corporate rate change on deferred taxes

Divestiture ( 18.8 ) 4.8 —

Other 0.7 0.3 0.7

Valuation allowance 76.6 ( 31.5 ) ( 158.0 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The components of the net deferred tax assets (liabilities) are as follows:

( 10.0 ) % ( 3.9 ) % ( 123.6 ) %

The components of the net deferred tax assets (liabilities) were as follows:

As of December 31,

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Net operating loss carryovers 15,756 20,900

Tax credits 169,063 233,407

Total gross deferred tax assets 216,712 293,014

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Non-current deferred tax assets

$ 4,353 $ 4,574

Non-current deferred tax liabilities

(14,336) (13,846)

Net deferred tax liabilities

$ ( 9,983 ) $ ( 9,272 )

The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative.

During the third quarter of 2018, the Company assessed the changes in its underlying facts and circumstances and evaluated the realizability of its existing deferred tax assets based on all available evidence, both positive and negative, and the weight accorded to each, and concluded a full valuation allowance associated with U.S.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

negative, and the weight accorded to each, and concluded a full valuation allowance associated with U.S.

federal and California deferred tax assets was appropriate.

As such, the Company has set up and continues to maintain a full valuation allowance against its U.S.

federal deferred tax assets.

During 2020, as a result of the enactment of California A.B.

85 and the temporary suspension of California net operating loss utilization for tax years 2020 through 2022, the Company released $ 0.6 million of the valuation allowance on its deferred tax asset for California research and development tax credits.

The Company continues to maintain a full valuation allowance on the remainder of its California and U.S.

federal deferred tax assets as it does not expect to be able to fully utilize them.

The following table presents the tax valuation allowance information for the years ended December 31, 2020, 2019 and 2018:

Balance at Beginning of Period

Charged (Credited) to Operations

Charged to Other Account*

Valuation Allowance Release

Valuation Allowance Set up

Balance at End of Period

(In thousands) Balance at Beginning of Period Charged (Credited) to Operations Charged to Other Account* Valuation Allowance Release Valuation Allowance Set up Balance at End of Period

Tax Valuation Allowance

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* Amounts not charged to operations are charged to other comprehensive income or retained earnings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

As of December 31, 2020, Rambus had California and other state net operating loss carryforwards of $ 202.2 million and $ 35.8 million, respectively.

As of December 31, 2019 , Rambus had federal and state capital loss carryforwards of $ 26.4 million .

As of December 31, 2019 , Rambus had federal research and development tax credit carryforwards of $ 40.6 million , alternative minimum tax credit carryforwards of $ 1.9 million and foreign tax credits of $ 186.1 million .

As of December 31, 2019 , Rambus had California research and development tax credit carryforwards of $ 31.5 million .

The federal foreign tax credits and research and development credits begin to expire in 2020 and 2019, respectively.

As of December 31, 2020, Rambus had federal research and development tax credit carryforwards of $ 38.8 million and foreign tax credits of $ 123.5 million.

As of December 31, 2020, Rambus had California research and development tax credit carryforwards of $ 30.3 million and California alternative minimum tax credit carryforwards of $ 0.2 million.

The federal foreign tax credits and research and development credits begin to expire in 2021.

Approximately $ 9.9 million of federal foreign tax credits will expire in 2021.

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As a result of recent court rulings in Korea, the Company has determined that they may be entitled to refund claims for foreign taxes previously withheld from licensees in Korea.

The Company recognizes that there are numerous risks and uncertainties associated with the ultimate collection of this refund, and, has therefore established an offsetting reserve for the entire amount of refundable withholding taxes previously withheld in Korea (which had an insignificant impact to the Company’s income tax provision).

If recognized, $ 1.8 million would be recorded as an income tax benefit in the consolidated statement of operations.

As of December 31, 2018 , the Company had $ 23.5 million of unrecognized tax benefits including $ 21.4 million recorded as a reduction of long-term deferred tax assets and $ 2.1 million recorded in long term income taxes payable.

The Company recognizes that there are numerous risks and uncertainties associated with the ultimate collection of this refund, and has therefore established an offsetting reserve for the entire amount of potentially refundable withholding taxes previously withheld in Korea.

If recognized, $ 110.9 million would be recorded as an income tax benefit in the consolidated statement of operations.

It is reasonably possible that a reduction of up to $ 0.1 million of existing unrecognized tax benefits could occur in the next 12 months .

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2019 , 2018 and 2017 is as follows (amounts in thousands):

As of December 31, 2019, the Company had $115.7 million of unrecognized tax benefits including $ 22.8 million recorded as a reduction of long-term deferred tax assets, $ 91 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea (Korea), and $ 1.8 million recorded in long term income taxes payable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2020, 2019 and 2018 was as follows:

Years Ended December 31,

(In thousands) 2020 2019 2018

Balance at January 1

$ 115,653 $ 23,482 $ 22,652

Tax positions related to current year:

18,600 16,485 1,032

Tax positions related to prior years:

( 209 ) ( 472 ) ( 317 )

Balance at December 31

$ 134,044 $ 115,653 $ 23,482

Rambus recognizes interest and penalties related to uncertain tax positions as a component of the income tax provision (benefit).

At December 31, 2020 and 2019, an immaterial amount of interest and penalties are included in long-term income taxes payable.

Rambus files income tax returns for the U.S., California, India, the U.K., the Netherlands and various other state and foreign jurisdictions.

Rambus files income tax returns for the U.S., California, India, and various other state and foreign jurisdictions.

federal returns are subject to examination from 2016 and forward.

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Management regularly assesses the likelihood of outcomes resulting from income tax examinations to determine the adequacy of their provision for income taxes and believes their provision for unrecognized tax benefits is adequate.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Additionally, the Company’s future effective tax rates could be adversely affected by earnings being higher than anticipated in countries where the Company has higher statutory rates or lower than anticipated in countries where it has lower statutory rates, by changes in valuation of its deferred tax assets and liabilities or by changes in tax laws or interpretations of those laws.

The estimated potential reduction in the Company’s unrecognized tax benefits in the next 12 months would not be material.

At December 31, 2020, no other income taxes (state or foreign) have been provided on undistributed earnings of approximately $ 16.4 million from the Company’s international subsidiaries since these earnings have been, and under current plans will continue to be, indefinitely reinvested outside the United States.

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Under the terms of the Merger Agreement, the Company paid approximately $ 21.9 million in cash, including certain bonus payments and adjustments for working capital.

Of the purchase price, $ 3.0 million of the consideration was deposited into an escrow account to fund indemnification obligations and other contractual provisions, to be released 24 months after the Closing Date.

Of the purchase price, $ 3.0 million of the consideration was deposited into an escrow account to fund indemnification

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

obligations and other contractual provisions, to be released 24 months after the Closing Date.

This acquisition allows the Company to further scale, bringing together high-speed design expertise with the physical and digital IP families from renowned market leaders to offer comprehensive memory and SerDes IP solutions for chip designers.

The Company integrated Northwest Logic’s offerings and design team into its IP cores technology solutions.

As part of the acquisition, the Company agreed to pay $ 9.0 million to certain Northwest Logic employees in cash over three years following August 23, 2019 (the “Retention Bonus”).

The Retention Bonus will be paid in three installments of $ 3.0 million on each of the dates that are 12 months, 24 months and 36 months following the Closing Date.

As part of the acquisition, the Company agreed to pay $ 9.0 million to certain Northwest Logic employees in cash over three years following August 23, 2019 (the “Retention Bonus”), to be paid in three installments of $ 3.0 million on each of the dates that are 12 months, 24 months and 36 months following the Closing Date.

The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed as incurred.

As of December 31, 2019, the Company had incurred approximately $ 0.7 million in external acquisition costs in connection with the transaction, which were expensed as incurred.

The purchase price allocation and related accounting for this acquisition is preliminary.

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company’s estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period.

In accordance with ASC No.

805, during the measurement period an acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of the acquisition date.

Accordingly, the Company has recognized a measurement period adjustment made during the fourth quarter of 2019 to the fair value of certain assets acquired and liabilities assumed as a result of further refinements in the Company’s estimates.

This adjustment was retrospectively applied to the August 23, 2019 acquisition date balance sheet.

The effect of this adjustment on the preliminary purchase price allocation was an increase in goodwill of $ 2.1 million and an increase in deferred tax liability, net, of $ 2.1 million .

This adjustment did not have a material impact on the Company’s previously reported results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach.

1 unchanged sentence

The Company performed a valuation of the net assets acquired as of the Closing Date.

The total consideration from the business combination was allocated as of the Closing Date, including the retrospective adjustment made in the fourth quarter of 2019, as follows:

(in thousands)

The total consideration from the business combination was allocated as of the Closing Date, and reflects adjustments made through the measurement period to finalize the purchase price accounting, as follows:

(In thousands) Total

Cash and cash equivalents $ 159

2 unchanged sentences

Identified intangible assets 8,800

Goodwill 13,477

Operating lease right-of-use asset 178

Other asset 9

Accounts payable ( 9 )

2 unchanged sentences

Deferred tax liability, net ( 2,133 )

Total $ 21,939

The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of Northwest Logic.

This goodwill is not expected to be deductible for tax purposes.

This goodwill is not deductible for tax purposes.

The identified intangible assets assumed in the acquisition of Northwest Logic were recognized as follows based upon their estimated fair values as of the acquisition date:

Estimated Weighted Average Useful Life

(in thousands)

Total Estimated Weighted-Average Useful Life

(in thousands) (in years)

Existing technology $ 8,100 5

1 unchanged sentence

Customer backlog 300 0.5

Total $ 8,800

Secure Silicon IP and Protocols Business from Verimatrix

1 unchanged sentence

On December 8, 2019 (the “Closing Date”), the Company completed its acquisition of the Secure Silicon IP and Protocols business.

Under the terms of the Asset Purchase Agreement, as amended, the Company paid approximately $ 45.0 million in cash at the Closing Date, and will pay up to an additional $ 20.0 million , currently valued at $ 1.8 million , subject to certain revenue targets of the transferred business for the calendar year 2020.

The addition of the embedded security teams, products and expertise from the Secure Silicon IP and Protocols business augments the Company’s portfolio of mission-critical embedded security products and expands its offerings for data center, AI, networking and automotive.

Under the terms of the Asset

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Purchase Agreement, as amended, the Company paid approximately $ 45.0 million in cash at the Closing Date, and may have been required to pay up to an additional $ 20.0 million, at that time valued at $ 1.8 million (the “fair value of the earn-out liability”), subject to certain revenue targets of the transferred business for the calendar year 2020.

Since the specified targets were not met for calendar year 2020, the Company recorded a full reduction in the fair value of the earn-out liability, which resulted in a gain in the consolidated statements of operations.

The total adjusted purchase consideration for the acquisition of the Secure Silicon IP and Protocols business was $ 46.8 million, which consisted of the following:

(in thousands)

(In thousands) Total

Cash consideration transferred at the Closing Date $ 45,000

1 unchanged sentence

Total adjusted purchase price $ 46,800

As part of the acquisition, the Company agreed to pay $ 1.0 million to certain employees in cash over two years effective January 1, 2020 (the “Retention Bonus”).

The Retention Bonus will be paid in arrears in two annual installments of $ 0.5 million in December 2020 and December 2021, respectively.

As part of the acquisition, the Company agreed to pay $ 1.0 million to certain employees in cash over two years effective January 1, 2020 (the “Retention Bonus”), to be paid in arrears in the fourth quarter of 2020 and 2021, respectively.

The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed as incurred.

As of December 31, 2019, the Company had incurred approximately $ 3.1 million in external acquisition costs in connection with the transaction, which were expensed as incurred.

The purchase price allocation and related accounting for this acquisition is preliminary.

The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach.

3 unchanged sentences

The total consideration from the acquisition was allocated as follows:

(in thousands)

(In thousands) Total

Prepaid expenses and other current assets $ 267

2 unchanged sentences

Identified intangible assets 23,500

Goodwill 16,845

Deferred revenue ( 310 )

1 unchanged sentence

Other current liabilities ( 267 )

Total $ 46,800

Approximately $ 15.0 million of the goodwill is expected to be deductible for tax purposes.

Approximately $ 15.0 million of the goodwill is deductible for tax purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The identified intangible assets assumed in the acquisition of the Secure Silicon IP and Protocols business were recognized as follows based upon their estimated fair values as of the acquisition date:

Estimated Weighted Average Useful Life

(in thousands)

Existing technology

Customer contracts and contractual relationships

Not applicable

IPR&D consists of one project, primarily relating to the development of Media Access Control Security frame engines, which is part of the Silicon IP solutions.

The project is expected to be completed over the next twelve months.

The acquired IPR&D will not be amortized until completion of the related product which is determined by when the underlying project reaches technological feasibility and commences commercial production.

Upon completion, the IPR&D project will be amortized over its useful life, which is expected to range between three years and five years .

Total Estimated Weighted-Average Useful Life

(in thousands) (in years)

Existing technology $ 21,600 3 to 5 years

Customer contracts and contractual relationships 900 5 years

IPR&D 1,000 Not applicable

Total $ 23,500

IPR&D consisted of one project, primarily relating to the development of Media Access Control Security frame engines, which was part of the Silicon IP solutions.

During the year ended December 31, 2020, the project was completed and the asset is being amortized over its useful life of five years .

During the year ended December 31, 2020, the amortization for the completed project was not material.

Unaudited Pro Forma Combined Consolidated Financial Information

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Years Ended December 31,

Revenue $ 231,492 $ 241,049

Net loss $ ( 90,688 ) $ ( 160,742 )

Net loss per share - diluted $ ( 0.82 ) $ ( 1.48 )

2 unchanged sentences

Pro forma financial information on the combined results of operations for the Company and the Secure Silicon IP and Protocols business as if the acquisition had occurred on January 1, 2018 has not been presented as it was impracticable to prepare full financial statements for the Secure Silicon IP and Protocols business, given that the Secure Silicon IP and Protocols business had not been managed as a stand-alone business and thus stand-alone financial statements were not readily available.

Additionally, the revenue recognized from the Northwest Logic and Secure Silicon IP and Protocols business acquisitions is not material to the Company’s consolidated financial statements during the year ended December 31, 2019, either individually or in the aggregate.

Additionally, the revenue recognized from the Northwest Logic and Secure Silicon IP and Protocols business acquisitions was not material to the Company’s consolidated financial statements during the year ended December 31, 2019, either individually or in the aggregate.

Furthermore, the Company does not track operating results from these businesses separately.

2 unchanged sentences

Quarterly Statements of Operations

June 30, 2019

March 31, 2019

June 30, 2018

March 31, 2018

(In thousands, except for per share amounts)

(In thousands, except for per share amounts) Dec.

31, 2020 Sept.

30, 2020 June 30, 2020 March 31, 2020 Dec.

31, 2019 Sept.

30, 2019 June 30, 2019 March 31, 2019

Total revenue $ 61,913 $ 56,915 $ 59,930 $ 63,989 $ 59,947 $ 57,399 $ 58,297 $ 48,384

Total operating costs and expenses

Total cost of revenue $ 13,451 $ 15,264 $ 16,148 $ 15,885 $ 14,576 $ 12,574 $ 13,027 $ 11,198

Gross profit $ 48,462 $ 41,651 $ 43,782 $ 48,104 $ 45,371 $ 44,825 $ 45,270 $ 37,186

Total operating expenses $ 59,466 $ 54,151 $ 56,246 $ 58,943 $ 58,582 $ 67,698 $ 82,316 $ 68,595

Operating loss $ ( 11,004 ) $ ( 12,500 ) $ ( 12,464 ) $ ( 10,839 ) $ ( 13,211 ) $ ( 22,873 ) $ ( 37,046 ) $ ( 31,409 )

Net loss $ ( 12,066 ) $ ( 12,779 ) $ ( 10,781 ) $ ( 7,983 ) $ ( 9,532 ) $ ( 17,331 ) $ ( 36,980 ) $ ( 26,576 )

Net loss per share — basic $ ( 0.11 ) $ ( 0.11 ) $ ( 0.09 ) $ ( 0.07 ) $ ( 0.09 ) $ ( 0.16 ) ( 0.33 ) $ ( 0.24 )

2 unchanged sentences

Shares used in per share calculations — diluted 112,706 113,828 113,572 112,907 111,883 111,315 110,875 109,692

______________________________________

The net loss for the quarter ended September 30, 2018 included a $91.3 million impact of an increase in our deferred tax asset valuation allowance.

Refer to Note 19, “Income Taxes,” of Notes to Consolidated Financial Statements of this Form 10-K.

The quarterly financial information includes the impact of the accelerated share repurchase program as follows:

0.7 million shares in the quarter ended June 30, 2018 and 3.1 million shares repurchased in the quarter ended March 31, 2018.

Refer to Note 15, “Stockholders’ Equity,” of Notes to Consolidated Financial Statements of this Form 10-K.

INDEX TO EXHIBITS

Exhibit Number

Description of Document

Exhibit Number Description of Document

3.1(1) Amended and Restated Certificate of Incorporation of Registrant filed May 29, 1997.

44 unchanged sentences

10.31(20) Form of Performance Based Restricted Stock Unit Agreement (2019 Inducement Equity Incentive Plan).

Exhibit Number Description of Document

10.32(21) First Amendment to Net Lease Agreement dated April 22, 2020 relating to the New San Jose Headquarters Location between Rambus Inc.

and 237 North First Street Holdings, LLC.

10.33(22)+ Amendment No.

1 to Semiconductor Patent License Agreement, dated September 2, 2020, between Rambus, Inc.

and Micron Technology, Inc.

10.34(23) Master Confirmation between Deutsche Bank AG, London Branch as counterparty, through its agent Deutsche Bank Securities Inc.

(“Deutsche Bank”) and Rambus Inc., dated November 11, 2020.

10.35+ Amendment No.

2 dated December 15, 2020, to the Semiconductor Patent License Agreement between Rambus Inc.

and Micron Technology, Inc.

21.1 Subsidiaries of Registrant.

7 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

101.INS XBRL 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 XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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Omitted portions have been filed separately with the Securities and Exchange Commission.

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

+ Portions of this exhibit have been redacted in compliance with Regulation S-K Item 601(b)(10).

† The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

(1) Incorporated by reference to the Form 10-K filed on December 15, 1997.

8 unchanged sentences

(8) Incorporated by reference to the Form 8-K filed on April 30, 2014.

Incorporated by reference to the Form 8-K filed on April 27, 2018.

(9) Incorporated by reference to the Form 8-K filed on May 6, 2020.

(10) Incorporated by reference to the Form 10-Q filed on July 23, 2015.

(11) Incorporated by reference to the Form 10-K filed on February 26, 2010.

Incorporated by reference to the Form 10-Q filed on May 3, 2010.

(12) Incorporated by reference to the Form 10-K filed on February 26, 2020.

(13) Incorporated by reference to the Form 10-K filed on February 24, 2012.

(14) Incorporated by reference to the Form 8-K filed on October 29, 2018.

Incorporated by reference to the Form 10-Q/A filed on January 13, 2014.

Incorporated by reference to the Form 10-Q filed on July 29, 2013.

(15) Incorporated by reference to the Form 10-K filed on February 21, 2014.

4 unchanged sentences

(20) Incorporated by reference to the Form 8-K filed on August 28, 2019.

(21) Incorporated by reference to the Form 10-Q filed on August 7, 2020.

(22) Incorporated by reference to the Form 10-Q filed on November 6, 2020.

(23) Incorporated by reference to the Form 8-K dated November 12, 2020.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

5 unchanged sentences

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ LUC SERAPHIN

Chief Executive Officer, President and Director (Principal Executive Officer)

February 26, 2020

/s/ RAHUL MATHUR

Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer)

February 26, 2020

/s/ KEITH JONES

Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer)

February 26, 2020

/s/ CHARLES KISSNER

Chairman of the Board of Directors

February 26, 2020

Signature Title Date

/s/ LUC SERAPHIN Chief Executive Officer, President and Director (Principal Executive Officer) February 26, 2021

/s/ RAHUL MATHUR Senior Vice President, Finance and Chief Financial Officer (Principal Financial Officer) February 26, 2021

/s/ KEITH JONES Vice President, Chief Accounting Officer and Corporate Controller (Principal Accounting Officer) February 26, 2021

/s/ CHARLES KISSNER Chairman of the Board of Directors February 26, 2021

Charles Kissner

/s/ ELLIS THOMAS FISHER

February 26, 2020

Ellis Thomas Fisher

/s/ EMIKO HIGASHI

February 26, 2020

/s/ EMIKO HIGASHI Director February 26, 2021

Emiko Higashi

/s/ MEERA RAO

February 26, 2020

/s/ SANJAY SARAF

February 26, 2020

/s/ NECIP SAYINER

February 26, 2020

/s/ GREGORY LANG Director February 26, 2021

/s/ MEERA RAO Director February 26, 2021

/s/ SANJAY SARAF Director February 26, 2021

/s/ NECIP SAYINER Director February 26, 2021

Necip Sayiner

/s/ ERIC STANG

February 26, 2020

/s/ ERIC STANG Director February 26, 2021

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures