RAMBUS INC 10-K/A

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures (As Restated) We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Securities and Exchange Act of 1934 as amended (“Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act as of the end of the period covered by this report. At the time our Annual Report on Form 10-K for the year ended December 31, 2020 was filed on February 26, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were effective. Subsequent to that evaluation, as a result of the material weakness described below, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective. The Chief Executive Officer of the Company (in such individual’s capacity as the Principal Executive Officer of Rambus Inc.) and the Chief Financial Officer of the Company (in such individual’s capacity as the Principal Financial Officer of Rambus Inc.) previously concluded that the Company’s disclosure controls and procedures were effective for the interim periods ended March 31, 2020, June 30, 2020 and September 30, 2020. However, the Chief Executive Officer and Chief Financial Officer have subsequently concluded that the Company’s disclosure controls and procedures were not effective for the interim periods ended March 31, 2020, June 30, 2020 and September 30, 2020, due to the material weakness in the 48 Table of Contents Company’s internal control over financial reporting as described in “Management’s Report on Internal Control over Financial Reporting (As Restated)” below. Management’s Report on Internal Control over Financial Reporting (As Restated) Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is a 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: (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; and (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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In Management’s Report on Internal Control over Financial Reporting included in our Original Form 10-K for the year ended December 31, 2020, our management previously concluded that we maintained effective internal control over financial reporting as of December 31, 2020. Management subsequently concluded that the material weakness existed as of December 31, 2020. During the quarter ending March 31, 2021, we determined that a portion of revenue under a single customer agreement that had not yet been recognized, should have been recognized beginning in the third quarter of 2019. As a result, we determined that a material misstatement of the consolidated financial statements had occurred which required a restatement of the 2020 and 2019 consolidated financial statements included in our Form 10-K for the year ended December 31, 2020 and our Form 10-Qs for the quarterly periods ended September 30, 2019 through September 30, 2020. This was due to the inadequate design and maintenance of controls to evaluate and monitor the accounting for patent and technology licensing arrangements with unusual contract terms. Additionally, this control deficiency could result in a misstatement of the royalties revenue, unbilled receivables and interest income account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness, and as a result, management has concluded that, as of December 31, 2020, our internal control over financial reporting was not effective based on the criteria in Internal Control — Integrated Framework (2013) issued by the COSO. Accordingly, management has restated its report on internal control over financial reporting. 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. Remediation Plan for Material Weakness Management is actively engaged in the planning for, and implementation of, remediation efforts to address the material weakness. The remediation plan includes enhancement of our existing contract review control for patent and technology licensing arrangements with unusual terms to require review of the facts as summarized in the contract review analysis by legal and the licensing group to confirm appropriate understanding of the terms by the revenue recognition team as well as 49 implementation of a new control designed to evaluate and monitor, at inception and on a quarterly basis, the accounting assessment of patent and technology licensing arrangements with unusual terms. Changes in Internal Control Over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our fiscal quarter ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. 50 Table of Contents PART III Item 10. Directors, Executive Officers and Corporate Governance 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/A. The information under the heading “Our Executive Officers” in Part I, Item 1 of this Annual Report on Form 10-K/A is also incorporated herein by reference. 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 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. We will post any amendments or waivers, if and when granted, of our Code of Business Conduct and Ethics on our website. Item 11. Executive Compensation 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/A. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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/A. Item 13. Certain Relationships and Related Transactions, and Director Independence 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/A. Item 14. Principal Accountant Fees and Services 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/A. 51 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) (1) Financial Statements The following consolidated financial statements of the Registrant and Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, are included herewith: Page Report of Independent Registered Public Accounting Firm 53 Consolidated Balance Sheets as of December 31, 2020 (As Restated) and 201 9 ( A s Res tated) 56 Consolidated Statements of Operations for the years ended December 31, 2020 (As Restated), 201 9 (As Restated) and 2018 57 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2020 (As Restated), 2019 (As Restated) and 2018 58 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 (As Restated), 2019 (As Restated) and 2018 59 Consolidated Statements of Cash Flows for the years ended December 31, 2020 (As Restated), 2019 (As Restated) and 2018 60 Notes to Consolidated Financial Statements 62 Consolidated Supplementary Financial Data (unaudited) 118 (a) (2) Financial Statement Schedule All schedules are omitted because they are not applicable or the required information is shown in the Consolidated Financial Statements or the notes thereto. 52 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Rambus Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Rambus Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date related to the inadequate design and maintenance of controls to evaluate and monitor the accounting for patent and technology licensing arrangements with unusual contract terms. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness referred to above is described in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements. Restatement of Previously Issued Financial Statements and Management’s Conclusion Regarding Internal Control over Financial Reporting As discussed in Note 1 to the consolidated financial statements, the Company has restated its 2020 and 2019 financial statements to correct errors. Management and we previously concluded that the Company maintained effective internal control over financial reporting as of December 31, 2020. However, management has subsequently determined that a material weakness in internal control over financial reporting existed as of that date related to the Company’s inadequate design and maintenance of controls to evaluate and monitor the accounting for patent and technology licensing arrangements with unusual contract terms. Accordingly, management’s report has been restated and our present opinion on internal control over financial reporting, as presented herein, is different from that expressed in our previous report. Changes in Accounting Principles 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 The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 53 Table of Contents We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. 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; (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; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s 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. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters 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 As described in Note 2 to the consolidated financial statements, 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 $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 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. 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- 54 Table of Contents 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. /s/ PricewaterhouseCoopers LLP San Jose, California February 26, 2021, except for the effects of the restatement and revision discussed in Note 1 to the consolidated financial statements and the matter discussed in the penultimate paragraph of Management’s Report on Internal Control over Financial Reporting, as to which the date is March 29, 2021 We have served as the Company’s auditor since 1991. 55 Table of Contents RAMBUS INC. CONSOLIDATED BALANCE SHEETS December 31, 2020 (As Restated) 2019 (As Restated) (In thousands, except shares and per share amounts) ASSETS Current assets: Cash and cash equivalents $ 136,146 $ 102,176 Marketable securities 366,503 305,488 Accounts receivable 27,903 44,039 Unbilled receivables 138,813 184,366 Inventories 14,466 10,086 Prepaids and other current assets 15,881 18,512 Total current assets 699,712 664,667 Intangible assets, net 36,487 54,900 Goodwill 183,222 183,465 Property, plant and equipment, net 57,693 45,536 Operating lease right-of-use assets 28,708 37,020 Deferred tax assets 4,353 4,574 Unbilled receivables, long-term 236,699 347,348 Other assets 4,535 5,931 Total assets $ 1,251,409 $ 1,343,441 LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities: 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 4,724 6,357 Other current liabilities 18,559 18,893 Total current liabilities 85,864 86,179 Convertible notes, long-term 156,031 148,788 Long-term operating lease liabilities 34,305 39,889 Long-term income taxes payable 41,333 60,094 Deferred tax liabilities 14,276 13,846 Other long-term liabilities 6,894 19,272 Total liabilities 338,703 368,068 Commitments and contingencies (Notes 10, 13 and 20) Stockholders’ equity: Convertible preferred stock, $.001 par value: Authorized: 5,000,000 shares; Issued and outstanding: no shares at December 31, 2020 and December 31, 2019 — — Common Stock, $.001 par value: Authorized: 500,000,000 shares; Issued and outstanding: 111,697,994 shares at December 31, 2020 and 112,131,352 shares at December 31, 2019 112 112 Additional paid in capital 1,270,426 1,261,142 Accumulated deficit ( 357,751 ) ( 285,789 ) Accumulated other comprehensive loss ( 81 ) ( 92 ) Total stockholders’ equity 912,706 975,373 Total liabilities and stockholders’ equity $ 1,251,409 $ 1,343,441 Refer to Notes to Consolidated Financial Statements 56 Table of Contents RAMBUS INC. CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2020 (As Restated) 2019 (As Restated) 2018 (In thousands, except per share amounts) Revenue: Royalties $ 84,560 $ 94,361 $ 130,452 Product revenue 113,996 72,972 38,690 Contract and other revenue 47,766 60,270 62,059 Total revenue 246,322 227,603 231,201 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 185,574 176,228 177,500 Operating expenses: Research and development 139,837 156,815 158,339 Sales, general and administrative 86,441 100,551 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 — Change in fair value of earn-out liability ( 1,800 ) — — Total operating expenses 229,628 276,369 264,467 Operating loss ( 44,054 ) ( 100,141 ) ( 86,967 ) Interest income and other income (expense), net 17,855 27,445 32,621 Interest expense ( 10,340 ) ( 9,852 ) ( 16,282 ) Interest and other income (expense), net 7,515 17,593 16,339 Loss before income taxes ( 36,539 ) ( 82,548 ) ( 70,628 ) Provision for income taxes 3,932 3,416 87,329 Net loss $ ( 40,471 ) $ ( 85,964 ) $ ( 157,957 ) Net loss per share: Basic $ ( 0.36 ) $ ( 0.77 ) $ ( 1.46 ) Diluted $ ( 0.36 ) $ ( 0.77 ) $ ( 1.46 ) Weighted-average shares used in per share calculations: Basic 113,254 110,948 108,450 Diluted 113,254 110,948 108,450 Refer to Notes to Consolidated Financial Statements 57 Table of Contents RAMBUS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years Ended December 31, 2020 (As Restated) 2019 (As Restated) 2018 (In thousands) Net loss $ ( 40,471 ) $ ( 85,964 ) $ ( 157,957 ) Other comprehensive income (loss): Foreign currency translation adjustment 24 10,145 ( 4,447 ) Unrealized gain (loss) on marketable securities, net of tax ( 13 ) 54 ( 747 ) Total comprehensive loss $ ( 40,460 ) $ ( 75,765 ) $ ( 163,151 ) Refer to Notes to Consolidated Financial Statements 58 Table of Contents RAMBUS INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total (In thousands) Balances at December 31, 2017 109,764 $ 110 $ 1,212,798 $ ( 636,227 ) $ ( 5,097 ) $ 571,584 Net loss — — — ( 157,957 ) — ( 157,957 ) Foreign currency translation adjustment — — — — ( 4,447 ) ( 4,447 ) Unrealized loss on marketable securities, net of tax — — — — ( 747 ) ( 747 ) Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 2,616 3 4,627 — — 4,630 Repurchase and retirement of common stock under repurchase plan ( 3,786 ) ( 4 ) ( 12,573 ) ( 37,456 ) — ( 50,033 ) Stock-based compensation — — 21,736 — — 21,736 Issuance of common stock in connection with the maturity of the 2018 Notes related to the settlement of the in-the-money conversion feature of the 2018 Notes 424 — — — — — Cumulative effect adjustment from adoption of ASU 2016-01 — — — 1,058 — 1,058 Cumulative effect adjustment from the adoption of ASC 606 — — — 626,288 — 626,288 Balances at December 31, 2018 109,018 109 1,226,588 ( 204,294 ) ( 10,291 ) 1,012,112 Net loss (As Restated) — — — ( 85,964 ) — ( 85,964 ) Foreign currency translation adjustment — — — — 10,145 10,145 Unrealized gain on marketable securities, net of tax — — — — 54 54 Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 3,113 3 8,078 — — 8,081 Stock-based compensation — — 26,476 — — 26,476 Cumulative effect adjustment from the adoption of ASC 842 — — — 4,469 — 4,469 Balances at December 31, 2019 (As Restated) 112,131 112 1,261,142 ( 285,789 ) ( 92 ) 975,373 Net loss (As Restated) — — — ( 40,471 ) — ( 40,471 ) 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 (As Restated) 111,698 $ 112 $ 1,270,426 $ ( 357,751 ) $ ( 81 ) $ 912,706 Refer to Notes to Consolidated Financial Statements 59 Table of Contents RAMBUS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2020 (As Restated) 2019 (As Restated) 2018 (In thousands) Cash flows from operating activities: Net loss $ ( 40,471 ) $ ( 85,964 ) $ ( 157,957 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation 25,778 26,476 21,736 Depreciation 29,773 23,644 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 Deferred income taxes 624 ( 1,816 ) 79,954 Non-cash restructuring — — 670 Loss on divestiture — 7,439 — Loss on equity investment 747 696 67 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: Accounts receivable 16,136 4,994 ( 24,933 ) Unbilled receivables 156,202 147,868 145,164 Prepaid expenses and other assets 2,057 4,076 ( 4,978 ) Inventories ( 4,380 ) ( 3,353 ) ( 1,856 ) Accounts payable ( 2,176 ) 2,934 ( 2,268 ) Accrued salaries and benefits and other liabilities 3,353 6,176 ( 3,221 ) Income taxes payable ( 17,852 ) ( 15,925 ) ( 14,550 ) Deferred revenue ( 1,486 ) ( 3,497 ) 228 Operating lease liabilities ( 6,625 ) ( 9,282 ) — Net cash provided by operating activities 185,459 128,535 86,223 Cash flows from investing activities: Purchases of property, plant and equipment ( 29,728 ) ( 6,472 ) ( 10,762 ) Acquisition of intangible assets — — ( 350 ) Purchases of marketable securities ( 898,957 ) ( 657,433 ) ( 282,117 ) Maturities of marketable securities 817,834 507,385 223,079 Proceeds from sale of marketable securities 21,588 6,758 — Proceeds from divestiture, net of cash disposed — 76,039 — Proceeds from sale of assets held for sale — — 4,648 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 companies — ( 1,000 ) ( 3,000 ) Acquisition of businesses, net of cash acquired — ( 66,780 ) — Net cash used in investing activities ( 90,394 ) ( 141,474 ) ( 67,142 ) Cash flows from financing activities: Repayment of 1.125% convertible notes — — ( 81,207 ) Proceeds received from issuance of common stock under employee stock plans 11,487 15,104 11,402 Payments under installment payment arrangement ( 13,201 ) ( 8,379 ) — Principal payments against financing lease obligation — — ( 1,080 ) Repurchase and retirement of common stock, including prepayment under accelerated share repurchase program ( 50,069 ) — ( 50,033 ) Payments of taxes on restricted stock units ( 9,403 ) ( 7,023 ) ( 6,766 ) Net cash used in financing activities ( 61,186 ) ( 298 ) ( 127,684 ) Effect of exchange rate changes on cash and cash equivalents 106 ( 497 ) ( 989 ) Net increase (decrease) in cash, cash equivalents and restricted cash 33,985 ( 13,734 ) ( 109,592 ) Cash, cash equivalents and restricted cash at beginning of year 102,518 116,252 225,844 Cash, cash equivalents and restricted cash at end of year $ 136,503 $ 102,518 $ 116,252 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 Non-cash investing and financing activities: Property, plant and equipment received and accrued in accounts payable and other accrued liabilities $ 20,952 $ 29,844 $ 8,225 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 60 Table of Contents RAMBUS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Restatement and Revision of Consolidated Financial Statements Rambus Inc. (the “Company” or “Rambus”) has restated its previously issued consolidated financial statements and related disclosures as of and for the fiscal years ended December 31, 2020 and 2019 included in its Original Form 10-K (as defined below) filed with the Securities and Exchange Commission (the “SEC”) in order to correct errors resulting from the incorrect application of generally accepted accounting principles relating to revenue recognition as it pertains to a single customer agreement (the “Impacted Agreement”). Additionally, to correct errors that the Company has determined to be immaterial, both individually and in aggregate, the Company has also restated the consolidated financial statements for the fiscal years ended December 31, 2020 and 2019, and revised the consolidated financial statements for the fiscal year ended December 31, 2018. The applicable Notes were also updated to reflect the restatement and revision. Impact of Restatement and Revision The following errors in the Company’s consolidated financial statements were identified and corrected: a) Correction of revenue related to the Impacted Agreement: During the quarter ending March 31, 2021, the Company determined that a portion of revenue under a single customer agreement that had not yet been recognized, should have been recognized during the quarters ended September 30, 2019, December 31, 2019, March 31, 2020, and June 30, 2020. The Impacted Agreement contained a single performance obligation for a license to the Company’s patents and technology in exchange for consideration, a portion of which was fixed at the inception of the contract and a portion that was dependent on the customer’s applicable sales (as stipulated in the agreement) for the four consecutive quarters commencing on July 1, 2019 and ending on June 30, 2020. The Company accounted for the agreement as a right-to-use IP license agreement with the fixed portion of the consideration appropriately recognized at the inception of the agreement when control of the license was transferred to the customer. However, the Company did not recognize as revenue the portion of the consideration that depended on the customer’s sales beginning in the quarter ended September 30, 2019. During the quarter ending March 31, 2021, the Company reassessed its accounting for this uncertain portion of the consideration and determined that revenue associated with that uncertain portion of the consideration should have been recognized over the four quarters commencing on July 1, 2019 and ending June 30, 2020, which are the periods when the uncertainty surrounding the amount of the contingent consideration was resolved (that is when the customer’s sales occurred for which the contingent payments were based). This error resulted in royalty revenue being corrected by approximately $ 3.6 million in each of the years ended December 31, 2020 and 2019, resulting in an increase in royalty revenue for each of the respective periods. Unbilled receivables (both current and non-current, as applicable) on the Consolidated Balance Sheets are also increased by the correction, given this additional revenue recognized is payable by the customer in ten equal quarterly installments with the first installment payable in the quarter ending March 31, 2021. Additionally, due to the significant financing component of the Impacted Agreement, immaterial amounts are corrected to increase interest and other income (expense), net, on the Consolidated Statements of Operations. b) Correction of immaterial asset retirement obligation (“ARO”) related to the Company’s previous Sunnyvale, California headquarters of approximately $ 1.0 million in fiscal year 2019 related to facility restoration costs. The Company originally recorded a liability for the ARO but expensed (included in sales, general and administrative expenses on the Consolidated Statements of Operations) the entire amount in the year ended December 31, 2019. The Company has corrected the consolidated financial statements to record the ARO asset within property, plant and equipment, net, within the Consolidated Balance Sheets and reflect the amortization of the ARO asset over the remaining life of the lease of seven months beginning in December of 2019 through June 2020. c) Correction of immaterial proceeds from the sale of certain items designated as assets held for sale of $ 0.9 million in fiscal year 2018 related to the closure of the Company’s lighting division. The Company has reclassified the proceeds from the sale of assets held for sale from the “prepaid expenses and other assets” line item within cash flows from operating activities to the “proceeds from sale of assets held for sale” line item within cash flows from investing activities on the Consolidated Statement of Cash Flows for the fiscal year ended December 31, 2018. d) Recording of provision for income taxes impacts due to adjustments a) and b) above. 61 Table of Contents A summary of the accounting impact of these adjustments to the Company’s condensed consolidated financial statements as of and for the related interim periods is provided in Note 22, “Restatement and Revision of Quarterly Condensed Consolidated Financial Statements (Unaudited)”. The following tables reflect the impact of the restatement adjustments and revision to the specific line items presented in the Company’s previously reported consolidated financial statements for the annual periods. The amounts originally reported were derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (the “Original Form 10-K”), filed with the SEC on February 26, 2021 (in thousands, except per share amounts): December 31, 2020 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Unbilled receivables $ 135,897 $ 2,916 $ 138,813 Prepaids and other current assets 15,907 ( 26 ) 15,881 Total current assets 696,822 2,890 699,712 Unbilled receivables, long-term 232,056 4,643 236,699 Total assets 1,243,876 7,533 1,251,409 LIABILITIES & STOCKHOLDERS’ EQUITY Deferred tax liabilities 14,336 ( 60 ) 14,276 Total liabilities 338,763 ( 60 ) 338,703 Stockholders’ equity: Accumulated deficit ( 365,344 ) 7,593 ( 357,751 ) Total stockholders’ equity 905,113 7,593 912,706 Total liabilities and stockholders’ equity 1,243,876 7,533 1,251,409 December 31, 2019 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Prepaids and other current assets $ 18,524 $ ( 12 ) $ 18,512 Total current assets 664,679 ( 12 ) 664,667 Property, plant and equipment, net 44,714 822 45,536 Unbilled receivables, long-term 343,703 3,645 347,348 Total assets 1,338,986 4,455 1,343,441 LIABILITIES & STOCKHOLDERS’ EQUITY Stockholders’ equity: Accumulated deficit ( 290,244 ) 4,455 ( 285,789 ) Total stockholders’ equity 970,918 4,455 975,373 Total liabilities and stockholders’ equity 1,338,986 4,455 1,343,441 62 Table of Contents Year Ended December 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 80,985 $ 3,575 $ 84,560 Total revenue 242,747 3,575 246,322 Gross profit 181,999 3,575 185,574 Operating expenses: Sales, general and administrative 85,619 822 86,441 Total operating expenses 228,806 822 229,628 Operating income (loss) ( 46,807 ) 2,753 ( 44,054 ) Interest income and other income (expense), net 17,516 339 17,855 Interest and other income (expense), net 7,176 339 7,515 Income (loss) before income taxes ( 39,631 ) 3,092 ( 36,539 ) Provision for income taxes 3,978 ( 46 ) 3,932 Net income (loss) ( 43,609 ) 3,138 ( 40,471 ) Net income (loss) per share: Basic $ ( 0.39 ) $ 0.03 $ ( 0.36 ) Diluted $ ( 0.39 ) $ 0.03 $ ( 0.36 ) Year Ended December 31, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 90,785 $ 3,576 $ 94,361 Total revenue 224,027 3,576 227,603 Gross profit 172,652 3,576 176,228 Operating expenses: Sales, general and administrative 101,373 ( 822 ) 100,551 Total operating expenses 277,191 ( 822 ) 276,369 Operating income (loss) ( 104,539 ) 4,398 ( 100,141 ) Interest income and other income (expense), net 27,375 70 27,445 Interest and other income (expense), net 17,523 70 17,593 Income (loss) before income taxes ( 87,016 ) 4,468 ( 82,548 ) Provision for income taxes 3,403 13 3,416 Net income (loss) ( 90,419 ) 4,455 ( 85,964 ) Net income (loss) per share: Basic $ ( 0.81 ) $ 0.04 $ ( 0.77 ) Diluted $ ( 0.81 ) $ 0.04 $ ( 0.77 ) 63 Table of Contents Year Ended December 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 43,609 ) $ 3,138 $ ( 40,471 ) Total comprehensive income (loss) ( 43,598 ) 3,138 ( 40,460 ) Year Ended December 31, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 90,419 ) $ 4,455 $ ( 85,964 ) Total comprehensive income (loss) ( 80,220 ) 4,455 ( 75,765 ) Year Ended December 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Stockholders’ Equity Net loss attributable to: Accumulated deficit $ ( 365,344 ) $ 7,593 $ ( 357,751 ) Total stockholders’ equity 905,113 7,593 912,706 Year Ended December 31, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Stockholders’ Equity Net loss attributable to: Accumulated deficit $ ( 290,244 ) $ 4,455 $ ( 285,789 ) Total stockholders’ equity 970,918 4,455 975,373 Year Ended December 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 43,609 ) $ 3,138 $ ( 40,471 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 28,951 822 29,773 Deferred income taxes 685 ( 61 ) 624 Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 160,116 ( 3,914 ) 156,202 Prepaid expenses and other assets 2,042 15 2,057 Net cash provided by operating activities 185,459 — 185,459 64 Table of Contents Year Ended December 31, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 90,419 ) $ 4,455 $ ( 85,964 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 23,507 137 23,644 Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 151,513 ( 3,645 ) 147,868 Prepaid expenses and other assets 4,064 12 4,076 Accrued salaries and benefits and other liabilities 7,135 ( 959 ) 6,176 Net cash provided by operating activities 128,535 — 128,535 Year Ended December 31, 2018 As Originally Reported Revisions As Revised Consolidated Statement of Cash Flows Cash flows from operating activities: Adjustments to reconcile net loss to net cash provided by operating activities: Change in operating assets and liabilities, net of effects of acquisitions: Prepaid expenses and other assets $ ( 4,084 ) $ ( 894 ) $ ( 4,978 ) Net cash provided by operating activities 87,117 ( 894 ) 86,223 Cash flows from investing activities: Proceeds from sale of assets held for sale 3,754 894 4,648 Net cash used in investing activities ( 68,036 ) 894 ( 67,142 ) 1A. Formation and Business of the Company Rambus was incorporated in California in March 1990 and reincorporated in Delaware in March 1997. In addition to licensing, the Company is creating new business opportunities through offering products and services where its goal is to perpetuate strong company operating performance and long-term stockholder value. The Company generates revenue by licensing its inventions and solutions, selling its semiconductor products and providing services to market-leading companies. 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. 2. Summary of Significant Accounting Policies Financial Statement Presentation The accompanying consolidated financial statements include the accounts of Rambus and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in the accompanying consolidated financial statements. Investments in entities with more than 20% ownership by Rambus and in which Rambus has the ability to significantly influence the operations of the investee (but not control) are accounted for using the equity method and are included in other assets. 65 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain prior year balances were reclassified to conform to the current year’s presentation. None of these reclassifications had an impact on reported net income or cash flows for any of the periods presented. 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 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. Substantially all of the goods and services are distinct and are accounted for as separate performance obligations. Where an arrangement includes multiple performance obligations, the transaction price is allocated to these on a relative standalone selling price basis. The Company has established standalone selling prices for all of its offerings - specifically, the same pricing methodology is consistently applied to all licensing arrangements; 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. 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. 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. 66 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) • 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. 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. 67 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Leases 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. The Company’s leases have remaining lease terms between one year and ten years . Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and long-term operating lease liabilities in the Company’s consolidated balance sheets. The Company does not have any finance leases. The Company determines if an arrangement is a lease, or contains a lease, at inception. The Company assesses all relevant facts and circumstances in making the determination of the existence of a lease. 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. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the Company does not separate non-lease components from lease components. Operating lease costs are included in research and development and selling, general and administrative costs on the statement of operations. Goodwill 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. 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. When goodwill is assessed for impairment, the Company has the option to perform an assessment of qualitative factors of impairment (optional assessment) prior to necessitating a quantitative impairment test. Should the optional assessment be used for any given year, qualitative factors to consider for a reporting unit include: cost factors; financial performance; legal, regulatory, contractual, political, business, or other factors; entity specific factors; industry and market considerations; macroeconomic conditions; and other relevant events and factors affecting the reporting unit. If the Company determines in the qualitative assessment that it is more likely than not that the fair value of the reporting unit is less than its carrying value, a quantitative test is then performed. Otherwise, no further testing is required. For a reporting unit tested using a quantitative approach, the Company compares the fair value of the reporting unit with the carrying amount of the reporting unit, including goodwill. The fair value of the reporting unit is estimated using an income approach. Under the income approach, the Company measures fair value of the reporting unit 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. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value, then the amount of goodwill impairment will be the amount by which the reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company performed its annual goodwill impairment analysis as of December 31, 2020 and determined that there was no impairment of its goodwill. For the years ended December 31, 2019 and 2018, the Company did not recognize any goodwill impairment charges. Intangible Assets Intangible assets are comprised of existing technology, customer contracts and contractual relationships, and other definite-lived and indefinite-lived intangible assets. Identifiable intangible assets resulting from the acquisitions of entities accounted for using the purchase method of accounting are estimated by management based on the fair value of assets received. Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from six months to ten years. 68 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Acquired indefinite-lived intangible assets related to the Company’s in-process research and development (“IPR&D”) are capitalized and subject to impairment testing until completion or abandonment of the projects. Upon successful completion of each project, the Company makes a separate determination of the useful life of the acquired indefinite-lived intangible assets and the related amortization is recorded as an expense over the estimated useful life of the specific projects. Indefinite-lived intangible assets are subject to at least an annual assessment for impairment, applying a fair-value based test. 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. If the fair value of the indefinite-lived intangible assets exceeds its carrying value, the indefinite-lived intangible assets are not impaired and no further testing is required. If the implied fair value of the indefinite-lived intangible assets is less than the carrying value, the difference is recorded as an impairment loss. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is computed using standard cost, which approximates actual cost, on a first-in, first-out basis. Inventories are reduced for write-downs based on periodic reviews for evidence of slow-moving or obsolete parts. The write-down is based on comparison between inventory on hand and estimated future sales for each specific product. Once written down, inventory write-downs are not reversed until the inventory is sold or scrapped. Inventory write-downs are also established when conditions indicate that the net realizable value is less than cost due to physical deterioration, obsolescence, changes in price level or other causes. Property, Plant and Equipment Property, plant and equipment include computer equipment, computer software, machinery, leasehold improvements, and furniture and fixtures. 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. 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. Upon disposal, assets and related accumulated depreciation are removed from the accounts and the related gain or loss is included in the results from operations. Definite-Lived and Indefinite-Lived Asset Impairment The Company evaluates definite-lived and indefinite-lived assets (including property, plant and equipment and intangible assets) for impairment whenever events or changes in circumstances indicate the carrying value of an asset group may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted cash flows resulting from the use of the asset group and its eventual disposition. The Company’s estimates of future cash flows attributable to its asset groups require significant judgment based on its historical and anticipated results and are subject to many factors. Factors that the Company considers important which could trigger an impairment review include significant negative industry or economic trends, significant loss of clients, and significant changes in the manner of its use of the acquired assets or the strategy for its overall business. When the Company determines that the carrying value of the asset groups may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company measures the potential impairment based on a projected discounted cash flow method using a discount rate determined by the Company to be commensurate with the risk inherent in the Company’s current business model. An impairment loss is recognized only if the carrying amount of the asset group is not recoverable and exceeds its fair value. The impairment charge is recorded to reduce the pre-impairment carrying amount of the assets based on the relative carrying amount of those assets, though not to reduce the carrying amount of an asset below its fair value. Different assumptions and judgments could materially affect the calculation of the fair value of the assets. During 2020, 2019 and 2018, the Company did not recognize any impairment of its definite-lived and indefinite-lived assets. Income Taxes Income taxes are accounted for using an asset and liability approach, which requires the recognition of deferred tax assets and liabilities for expected future tax events that have been recognized differently in Rambus’ consolidated financial statements and tax returns. The measurement of current and deferred tax assets and liabilities is based on provisions of the enacted tax law and the effects of future changes in tax laws or rates are not anticipated. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized based on available evidence. 69 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. As a result, the Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. 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. Stock-Based Compensation and Equity Incentive Plans The Company maintained stock plans covering a broad range of equity grants including stock options, nonvested equity stock and equity stock units and performance-based instruments. In addition, the Company sponsors an Employee Stock Purchase Plan (“ESPP”), whereby eligible employees are entitled to purchase Common Stock semi-annually, by means of limited payroll deductions, at a 15 % discount from the fair market value of the Common Stock as of specific dates. 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 (“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. Stock-based compensation expense for 2020, 2019 and 2018 has been reduced for estimated forfeitures. When estimating forfeitures, the Company considers voluntary termination behaviors as well as trends of actual option forfeitures. Cash and Cash Equivalents Cash equivalents are highly liquid investments with original maturity of three months or less at the date of purchase. The Company maintains its cash balances with high quality financial institutions. Cash equivalents are invested in highly-rated and highly-liquid money market securities and certain U.S. government sponsored obligations. Marketable Securities Available-for-sale securities are carried at fair value, based on quoted market prices, with the unrealized gains or losses reported, net of tax, in stockholders’ equity as part of accumulated other comprehensive income (loss). The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity, both of which are included in interest and other income, net. Realized gains and losses are recorded on the specific identification method and are included in interest and other income, net. The Company reviews its investments in marketable securities for possible other than temporary impairments on a regular basis. If any loss on investment is believed to be a credit loss, a charge will be recognized in operations. In evaluating whether a credit loss on a debt security has occurred, the Company considers the following factors: 1) the Company’s intent to sell the security, 2) if the Company intends to hold the security, whether or not it is more likely than not that the Company will be required to sell the security before recovery of the security’s amortized cost basis and 3) even if the Company intends to hold the security, whether or not the Company expects the security to recover the entire amortized cost basis. Due to the high credit quality and short-term nature of the Company’s investments, there have been no material credit losses recorded to date. The classification of funds between short-term and long-term is based on whether the securities are available for use in operations or other purposes. Fair Value of Financial Instruments The carrying value of cash equivalents, accounts receivable and accounts payable approximate their fair values due to their relatively short maturities as of December 31, 2020 and 2019. Marketable securities are comprised of available-for-sale securities that are reported at fair value with the related unrealized gains and losses included in accumulated other comprehensive income (loss), a component of stockholders’ equity, net of tax. Fair value of the marketable securities is determined based on quoted market prices. The fair value of the Company’s convertible notes fluctuates with interest rates and with the market price of the common stock, but does not affect the carrying value of the debt on the balance sheet. Research and Development Costs incurred in research and development, which include engineering expenses, such as salaries and related benefits, stock-based compensation, depreciation, professional services and overhead expenses related to the general development of Rambus’ products, are expensed as incurred. Software development costs are capitalized beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. Rambus has not capitalized any software development costs since the period between establishing technological feasibility and general customer release is relatively short and as such, these costs have not been material. 70 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Computation of Earnings (Loss) Per Share Basic earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. 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. 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. This method includes consideration of the amounts to be paid by the employees, the amount of excess tax benefits that would be recognized in equity if the instrument was exercised and the amount of unrecognized stock-based compensation related to future services. No potential dilutive common shares are included in the computation of any diluted per share amount when a net loss is reported. Comprehensive Income (Loss) Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities. Other comprehensive income (loss), net of tax, is presented in the Consolidated Statements of Comprehensive Income (Loss). Credit Concentration As of December 31, 2020 and 2019, the Company’s cash, cash equivalents and marketable securities were invested with various financial institutions in the form of corporate notes, bonds and commercial paper, money market funds, U.S. Treasuries, U.S. Government Agencies, and municipal bonds and notes. 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. 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. The Company has no investments denominated in foreign country currencies and therefore is not subject to foreign exchange risk from these assets. The Company mitigates default risk by investing in high credit quality securities and by positioning its portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. The portfolio includes only marketable securities with active secondary or resale markets to enable portfolio liquidity. The Company’s note hedge transactions, entered into in connection with the 1.375% convertible senior notes due 2023 (the “2023 Notes”), expose the Company to credit risk to the extent that its counterparties may be unable to meet the terms of the transactions. The Company mitigates this risk by limiting its counterparties to major financial institutions. Refer to Note 12, Convertible Notes,” for further details. The Company’s accounts receivable are derived from revenue earned from customers located in the U.S. and internationally. 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 The Company translates the assets and liabilities of its non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in Accumulated Other Comprehensive Gain (Loss) in the consolidated statements of stockholders’ equity. The Company’s subsidiaries that use the U.S. dollar as their functional currency re-measure monetary assets and liabilities at exchange rates in effect at the end of each period, and inventories, property and non-monetary assets and liabilities at historical rates. 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 in 2019, the U.S. dollar is primarily the functional currency of the Company’s foreign subsidiaries. 71 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Business Combinations The Company accounts for acquisitions of businesses using the purchase method of accounting, which requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement. 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. 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. Although, the Company believes the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Significant estimates and assumptions made by management in estimating the fair value of the existing technologies included revenue growth rates, operating expense margins, technology obsolescence rates and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Litigation Rambus may be involved in certain legal proceedings. Based upon consultation with outside counsel handling its defense in these matters and an analysis of potential results, if Rambus believes that a loss arising from such matters is probable and can be reasonably estimated, Rambus records the estimated liability in its consolidated financial statements. 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. Any such accrual would be charged to expense in the appropriate period. Rambus recognizes litigation expenses in the period in which the litigation services were provided. 3. Recent Accounting Pronouncements Recent Accounting Pronouncements Adopted 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, clarifies and amends existing guidance. This ASU is effective for interim and annual reporting periods beginning after December 15, 2020. Early adoption is permitted. Certain disclosures in ASU No. 2019-12 would need to be applied on a retrospective basis, modified retrospective basis, or prospective basis. 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. 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this ASU remove certain disclosures, modify certain disclosures and add additional disclosures. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Certain disclosures in ASU No. 2018-13 would need to be applied on a retrospective basis and others on a prospective basis. 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. 2016-13. The purpose of this ASU is to require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. Credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. In April 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (ASU 2019-04),” which provided certain improvements to various ASUs, including ASU 2016-13. In May 2019, the FASB issued ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326),” which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In November 2019, the FASB issued ASU No. 2019-10, “Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)” which amends certain effective dates. In November 2019, the FASB issued ASU No. 2019-11, “Financial Instruments-Credit Losses (Topic 326),” which provides additional clarifications. In March 2020, 72 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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. 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. 4. Revenue Recognition Contract Balances 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 Company’s contract balances were as follows: As of December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) Unbilled receivables $ 375,512 $ 531,714 Deferred revenue 10,461 11,947 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. Contracted but unsatisfied performance obligations were approximately $ 17.4 million as of December 31, 2020, which the Company primarily expects to recognize over the next 2 years. 73 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Earnings (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 (As Restated) 2019 (As Restated) 2018 Net loss per share: Numerator: Net loss $ ( 40,471 ) $ ( 85,964 ) $ ( 157,957 ) Denominator: 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 $ ( 0.36 ) $ ( 0.77 ) $ ( 1.46 ) Diluted net loss per share $ ( 0.36 ) $ ( 0.77 ) $ ( 1.46 ) For the years ended December 31, 2020, 2019 and 2018, options to purchase approximately 0.3 million, 1.0 million and 1.6 million shares, respectively, were excluded from the calculation because they were anti-dilutive after considering proceeds from exercise, taxes and related unrecognized stock-based compensation expense. For the years ended December 31, 2020, 2019 and 2018, an additional 2.3 million, 2.4 million and 2.4 million shares, respectively, have been excluded from the weighted-average dilutive shares because there was a net loss for the periods. These shares do not include the Company’s 2023 Notes and the 1.125% convertible senior notes due 2018 (the “2018 Notes”). The par amount of convertible notes is payable in cash equal to the principal amount of the notes plus any accrued and unpaid interest and then the “in-the-money” conversion benefit feature at the conversion price above $18.93 and $12.07, respectively, per share is payable in cash, shares of the Company’s common stock or a combination of both. The Company has the option to pay cash, issue shares of common stock or any combination thereof for the aggregate amount due upon conversion of the notes. The Company’s intent is to settle the principal amount of the notes in cash upon conversion. As a result, upon conversion of the notes, only the amounts payable in excess of the principal amounts of the notes are considered in diluted earnings per share under the treasury stock method. Refer to Note 12, Convertible Notes,” for more details. 6. Intangible Assets and Goodwill Goodwill The following tables present goodwill information for the years ended December 31, 2020 and December 31, 2019: (In thousands) December 31, 2019 Adjustment to Goodwill (1) December 31, 2020 Total goodwill $ 183,465 $ ( 243 ) $ 183,222 ______________________________________ (1) Working capital adjustments related to the acquisition of Northwest Logic, Inc. (“Northwest Logic”). 74 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2020 (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) December 31, 2019 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 (In thousands) Gross Carrying Amount Accumulated Impairment Losses Net Carrying Amount Total goodwill $ 205,235 $ ( 21,770 ) $ 183,465 Intangible Assets The components of the Company’s intangible assets as of December 31, 2020 and December 31, 2019 were as follows: As of December 31, 2020 (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 (1) (2) Net Carrying Amount 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 _________________________________________ (1) In October 2019, the Company disposed of approximately $ 20.7 million of net intangible assets in connection with the sale of the legal entities comprising the Company’s Payments and Ticketing businesses. Refer to Note 17, Divestiture,” for additional information. (2) In August 2019, the Company acquired Northwest Logic, and in December 2019, the Company acquired the Secure Silicon IP and Protocols business, which resulted in the Company recognizing additional intangible assets. Refer to Note 21, Acquisitions,” for additional information. 75 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, 2020 was as follows (in thousands): Years Ending December 31: Amount 2021 $ 14,611 2022 7,644 2023 6,940 2024 5,492 2025 200 Thereafter — Total amortizable purchased intangible assets 34,887 IPR&D 1,600 Total intangible assets $ 36,487 7. Segments and Major Customers Operating segments are based upon Rambus’ internal organization structure, the manner in which its operations are managed, the criteria used by its Chief Operating Decision Maker (“CODM”) to evaluate segment performance and availability of separate financial information regularly reviewed for resource allocation and performance assessment. The Company has determined its CODM to be the Chief Executive Officer (“CEO”). 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 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. 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, 2020 2019 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, 2020, 2019 and 2018 was as follows: Years Ended December 31, 2020 (As Restated) 2019 2018 Customer A 15 % 10 % * Customer B 12 % * * Customer C * 14 % 15 % Customer D * * 11 % 76 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Revenue from customers in the geographic regions based on the location of contracting parties was as follows: Years Ended December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) 2018 USA $ 137,614 $ 134,526 $ 129,567 Taiwan 21,803 24,118 21,749 South Korea 3,664 3,583 13,421 Japan 20,437 15,453 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 $ 246,322 $ 227,603 $ 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. At December 31, 2019, of the $ 45.5 million of total property, plant and equipment, approximately $ 41.1 million were located in the United States, $ 3.4 million were located in India and $ 1.0 million were located in other foreign locations. 8. Marketable Securities Rambus invests its excess cash and cash equivalents primarily in U.S. government-sponsored obligations, commercial paper, corporate notes and bonds, money market funds and municipal notes and bonds that mature within three years . All cash equivalents and marketable securities are classified as available-for-sale. Total cash, cash equivalents and marketable securities are summarized as follows: As of December 31, 2020 (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 % U.S. Government bonds and notes 169,880 169,920 3 ( 43 ) 0.12 % 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) Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Weighted Rate of Return Money market funds $ 10,065 $ 10,065 $ — $ — 1.48 % U.S. Government bonds and notes 39,086 39,087 — ( 1 ) 1.49 % 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 ) 77 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Available-for-sale securities are reported at fair value on the balance sheets and classified as follows: As of December 31, (In thousands) 2020 2019 Cash equivalents $ 74,683 $ 58,054 Short-term marketable securities 366,503 305,488 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. 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 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, 2019 Less than 12 months U.S. Government bonds and notes $ 72,896 $ 14,112 $ ( 43 ) $ ( 1 ) Corporate notes, bonds and commercial paper 181,354 250,822 ( 79 ) ( 63 ) 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 demand for and duration of the U.S. government-sponsored obligations and corporate notes and bonds. The Company reasonably 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. Therefore, these unrealized losses were recorded in other comprehensive income (loss). 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, 2020 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. 9. Fair Value of Financial Instruments The fair value measurement statement defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would transact, and the Company considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of non-performance. 78 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company’s financial instruments are measured and recorded at fair value, except for equity method investments and convertible notes. The Company’s non-financial assets, such as goodwill, intangible assets, and property, plant and equipment, are measured at fair value when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized. The Company’s equity method investments are initially recognized at cost, and the carrying amount is increased or decreased to recognize the Company’s share of the profit or loss of the investee after the date of acquisition. The Company’s share of the investee’s profit or loss is recognized in the Company’s consolidated statements of operations. Distributions received from an investee reduce the carrying amount of the investment. Fair Value Hierarchy 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 that fair value measurement be classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company uses unadjusted quotes to determine fair value. The financial assets in Level 1 include money market funds. Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. The Company uses observable pricing inputs including benchmark yields, reported trades, and broker/dealer quotes. The financial assets in Level 2 include U.S. government bonds and notes, corporate notes, commercial paper and municipal bonds and notes. Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The Company does not have any financial assets in Level 3 as of December 31, 2020 and 2019. The Company reviews the pricing inputs by obtaining prices from a different source for the same security on a sample of its portfolio. The Company has not adjusted the pricing inputs it has obtained. 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: As of December 31, 2020 (In thousands) Total Quoted Market Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Money market funds $ 32,815 $ 32,815 $ — $ — U.S. Government bonds and notes 169,880 — 169,880 — 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 (In thousands) Total Quoted Market Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Money market funds $ 10,065 $ 10,065 $ — $ — U.S. Government bonds and notes 39,086 — 39,086 — 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. The Company monitors its investments for other-than-temporary losses by considering current factors, including the economic environment, market conditions, operational performance and other specific factors relating to the 79 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) business underlying the investment, reductions in carrying values when necessary and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in the market. Any other-than-temporary loss is reported under “Interest and other income (expense), net” in the consolidated statement of operations. During the years ended December 31, 2020 and 2019, the Company recorded no other-than-temporary impairment charges on its investments. During the second half of 2018, the Company made an investment in a non-marketable equity security of a private company. This equity investment is accounted for under the equity method of accounting, and the Company accounts for its equity method share of the income (loss) on a quarterly basis. As of December 31, 2020, the Company’s 25.0 % ownership percentage amounted to a $ 2.8 million equity interest in this equity investment. As of December 31, 2019, the Company’s 25.0 % ownership percentage amounted to a $ 3.6 million equity interest in this equity investment. The Company’s equity interest was included in other assets on the accompanying consolidated balance sheets. The Company recorded immaterial amounts in its consolidated statements of operations representing its share of the investee’s loss for the years ended December 31, 2020 and 2019. During the years ended December 31, 2020 and 2019, there were no transfers of financial instruments between different categories of fair value. 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, 2020 As of December 31, 2019 (In thousands) Face Value Carrying Value Fair Value Face Value Carrying Value Fair Value 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. As discussed in Note 12, Convertible Notes,” as of December 31, 2020, the convertible notes are carried at their face value of $172.5 million, less any unamortized debt discount and unamortized debt issuance costs. The carrying value of other financial instruments, including accounts receivable, accounts payable and other liabilities, approximates fair value due to their short maturities. Information regarding the Company’s goodwill and long-lived assets balances are disclosed in Note 6, . Intangible Assets and Goodwill.” 10. Leases 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. 80 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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, Amount 2021 $ 8,616 2022 7,382 2023 4,570 2024 3,925 2025 4,043 Thereafter 21,325 Total minimum lease payments 49,861 Less: amount of lease payments representing interest ( 10,832 ) Present value of future minimum lease payments 39,029 Less: current obligations under leases (4,724) Long-term lease obligations $ 34,305 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 $ 9.5 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. 11. Balance Sheet Details Inventories Inventories consisted of the following: As of December 31, (In thousands) 2020 2019 Raw materials $ 7,945 $ 3,997 Work in process 650 1,455 Finished goods 5,871 4,634 Total $ 14,466 $ 10,086 81 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property, Plant and Equipment, net Property, plant and equipment, net is comprised of the following: As of December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) Computer software $ 49,862 $ 50,453 Computer equipment 32,122 36,761 Furniture and fixtures 11,100 16,136 Leasehold improvements 9,658 11,275 Machinery 10,378 10,446 Construction in progress 27,250 1,691 Property, plant and equipment, gross 140,370 126,762 Less accumulated depreciation and amortization ( 82,677 ) ( 81,226 ) Property, plant and equipment, net $ 57,693 $ 45,536 Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was $ 22.1 million, $ 15.3 million and $ 10.7 million, respectively. Accumulated Other Comprehensive Gain (Loss) Accumulated other comprehensive gain (loss) is comprised of the following: As of December 31, (In thousands) 2020 2019 Foreign currency translation adjustments $ 129 $ 105 Unrealized loss on available-for-sale securities, net of tax ( 210 ) ( 197 ) Total $ ( 81 ) $ ( 92 ) 12. Convertible Notes The Company’s convertible notes are shown in the following table: As of December 31, (In thousands) 2020 2019 2023 Notes $ 172,500 $ 172,500 Unamortized discount - 2023 Notes ( 15,420 ) ( 22,163 ) Unamortized debt issuance costs - 2023 Notes ( 1,049 ) ( 1,549 ) Total convertible notes 156,031 148,788 Less current portion — — Total long-term convertible notes $ 156,031 $ 148,788 1.375% Convertible Senior Notes due 2023. On November 17, 2017, the Company issued $ 172.5 million aggregate principal amount of 1.375% convertible senior notes pursuant to an indenture (the “2023 Indenture”), by and between the Company and U.S. Bank National Association, as trustee (the “Trustee”). In accounting for the 2023 Notes at issuance, the Company separated the 2023 Notes into liability and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. As of the date of issuance, the Company determined that the liability component of the 2023 Notes was $ 137.3 million and the equity component of the 2023 Notes was $ 35.2 million. The fair value of the liability component was estimated using an interest rate for a similar instrument without a conversion feature. The unamortized discount related to the 2023 Notes is being amortized to interest expense using the effective interest method over approximately five years . 82 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The 2023 Notes bear interest at a rate of 1.375 % per year, payable semi-annually on February 1 and August 1 of each year, beginning on August 1, 2018. The 2023 Notes will mature on February 1, 2023, unless earlier repurchased by the Company or converted pursuant to their terms. The Company incurred transaction costs of approximately $ 3.3 million related to the issuance of 2023 Notes. In accounting for these costs, the Company allocated the costs to the liability and equity components in proportion to the allocation of proceeds from the issuance of the 2023 Notes to such components. Transaction costs allocated to the liability component of $ 2.6 million are netted against the carrying amount of the liability in the consolidated balance sheet and are amortized to interest expense using the effective interest method over the term of the 2023 Notes. The transaction costs allocated to the equity component of $ 0.7 million were recorded as additional paid-in capital. The initial conversion rate of the 2023 Notes is 52.8318 shares of the Company’s common stock per $ 1,000 principal amount of 2023 Notes (which is equivalent to an initial conversion price of approximately $ 18.93 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change (as defined in the 2023 Indenture), the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its 2023 Notes in connection with such make-whole fundamental change. Prior to the close of business on the business day immediately preceding November 1, 2022, the 2023 Notes will be convertible only under the following circumstances: (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 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; or (4) upon the occurrence of specified corporate transactions. On or after November 1, 2022, until the close of business on the second scheduled trading day immediately preceding the maturity date, holders of the 2023 Notes may convert all or a portion of their 2023 Notes regardless of the foregoing conditions. Upon conversion, the Company will pay cash up to the aggregate principal amount of the 2023 Notes to be converted and pay or deliver, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock, at the Company’s election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the 2023 Notes being converted. The Company may not redeem the 2023 Notes prior to the maturity date and no sinking fund is provided for the 2023 Notes. Upon the occurrence of a fundamental change (as defined in the 2023 Indenture) prior to the maturity date, holders may require the Company to repurchase all or a portion of the 2023 Notes for cash at a price equal to 100 % of the principal amount of the 2023 Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date. The 2023 Notes are the Company’s senior unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the notes; equal in right of payment with the Company’s existing and future liabilities that are not so subordinated, including its “2018 Notes”; effectively junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness; and structurally junior to any existing and future indebtedness and other liabilities (including trade payables, but excluding intercompany obligations and liabilities) and any preferred stock of subsidiaries of the Company. 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 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; (4) failure by the Company to give a fundamental change notice or notice of a specified corporate transaction when due with respect to the Notes; 83 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (5) failure by the Company to comply with any of its other agreements contained in the 2023 Notes or the 2023 Indenture for a period of 60 days after written notice from the Trustee or the holders of at least 25 % in aggregate principal amount of the Notes then outstanding has been received; (6) failure by the Company to pay when due the principal of, or acceleration of, any indebtedness for money borrowed by the Company or any of its Material Subsidiaries (as defined in the 2023 Indenture) in excess of $ 40.0 million principal amount, if such indebtedness is not discharged, or such acceleration is not annulled, for a period of 30 days after written notice to the Company by the Trustee or to the Company and the Trustee by holders of 25 % or more in aggregate principal amount of the 2023 Notes then outstanding in accordance with the 2023 Indenture; and (7) certain events of bankruptcy, insolvency or reorganization of the Company or any of its Material Subsidiaries (as defined in the Indenture). If such an event of default, other than an event of default described in clause (7) above with respect to the Company, occurs and is continuing, the Trustee by written notice to the Company, or the holders of at least 25 % in aggregate principal amount of the outstanding Notes by notice to the Company and the Trustee, may, and the Trustee at the request of such holders shall, declare 100 % of the principal of and accrued and unpaid interest, if any, on all the Notes then outstanding to be due and payable. If an event of default described in clause (7) above occurs, 100% of the principal of and accrued and unpaid interest on the Notes then outstanding will automatically become due and payable. 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 counterparties (the “Counterparties”). The Company paid an aggregate amount of approximately $ 33.5 million to the Counterparties for the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2023 Notes, approximately 9.1 million shares of Common Stock, the same number of shares underlying the 2023 Notes, at a strike price that corresponds to the initial conversion price of the 2023 Notes, and are exercisable upon conversion of the 2023 Notes. The Convertible Note Hedge Transactions will expire upon the maturity of the 2023 Notes. The Convertible Note Hedge Transactions are intended to reduce the potential economic dilution upon conversion of the 2023 Notes. The Convertible Note Hedge Transactions are separate transactions and are not part of the terms of the 2023 Notes. Holders of the 2023 Notes will not have any rights with respect to the Convertible Note Hedge Transactions. In addition, concurrently with entering into the Convertible Note Hedge Transactions, the Company separately entered into privately negotiated warrant transactions, whereby the Company sold to the Counterparties warrants (the “Warrants”) to acquire, collectively, subject to anti-dilution adjustments, approximately 9.1 million shares of the Common Stock at an initial strike price of approximately $ 23.30 per share, which represents a premium of 60 % over the last reported sale price of the Common Stock of $ 14.56 on November 14, 2017. The Company received aggregate proceeds of approximately $ 23.2 million from the sale of the Warrants to the Counterparties. The Warrants are separate transactions and are not part of the 2023 Notes or Convertible Note Hedge Transactions. Holders of the 2023 Notes and Convertible Note Hedge Transactions will not have any rights with respect to the Warrants. The amounts paid and received for the Convertible Note Hedge Transactions and Warrants have been recorded in additional paid-in capital in the consolidated balance sheets. The fair value of the Convertible Note Hedge Transactions and Warrants are not re-measured through earnings each reporting period. The amounts paid for the Convertible Note Hedge Transactions are tax deductible expenses, while the proceeds received from the Warrants are not taxable. Impact to Earnings per Share. The 2023 Notes will have no impact to diluted earnings per share until the average price of our Common Stock exceeds the conversion price of $18.93 per share because the principal amount of the 2023 Notes is required to be settled in cash upon conversion. Under the treasury stock method, in periods the Company reports net income, the Company is required to include the effect of additional shares that may be issued under the 2023 Notes when the price of the Company’s Common Stock exceeds the conversion price. Under this method, the cumulative dilutive effect of the 2023 Notes would be approximately 9.1 million shares if the average price of the Company’s Common Stock is $18.93. However, upon conversion, there will be no economic dilution from the 2023 Notes, as exercise of the Convertible Note Hedge Transactions eliminates any dilution from the 2023 Notes that would have otherwise occurred when the price of the Company’s Common Stock exceeds the conversion price. The Convertible Note Hedge Transactions are required to be excluded from the calculation of diluted earnings per share, as they would be anti-dilutive under the treasury stock method. 84 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The warrants will have a dilutive effect when the average share price exceeds the warrant’s strike price of $23.30 per share. However, upon conversion, the Convertible Note Hedge Transactions would neutralize the dilution from the 2023 Notes so that there would only be dilution from the warrants. 1.125% Convertible Senior Notes due 2018. On August 16, 2013, the Company issued $ 138.0 million aggregate principal amount of 1.125% convertible senior notes pursuant to an indenture (the “2018 Indenture”) by and between the Company and U.S. Bank National Association, as the trustee. The 2018 Notes matured on August 15, 2018 (the “Maturity Date”), subject to earlier repurchase or conversion. In accounting for the 2018 Notes at issuance, the Company separated the 2018 Notes into liability and equity components pursuant to the accounting standards for convertible debt instruments that may be fully or partially settled in cash upon conversion. As of the date of issuance, the Company determined that the liability component of the 2018 Notes was $ 107.7 million and the equity component of the 2018 Notes was $ 30.3 million. The fair value of the liability component was estimated using an interest rate for a similar instrument without a conversion feature. The unamortized discount related to the 2018 Notes was amortized to interest expense using the effective interest method over five years through August 2018. The Company paid cash interest at an annual rate of 1.125 % of the principal amount at issuance, semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2014. The Company incurred transaction costs of approximately $ 3.6 million related to the issuance of 2018 Notes. In accounting for these costs, the Company allocated the costs to the liability and equity components in proportion to the allocation of proceeds from the issuance of the 2018 Notes to such components. Transaction costs allocated to the liability component of $ 2.8 million were recorded as deferred offering costs and were amortized to interest expense using the effective interest method over five years (the expected term of the debt). 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 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. This is equivalent to an initial conversion price of approximately $ 12.07 per share of common stock. Holders may have surrendered their 2018 Notes for conversion prior to the close of business day immediately preceding May 15, 2018 only under the following circumstances: ( 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 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; or (4) upon the occurrence of specified corporate events. On or after May 15, 2018 until the close of business on the second scheduled trading day immediately preceding the Maturity Date, holders may have converted their notes at any time, regardless of the foregoing circumstances. 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 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 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. Additionally, the Company delivered 423,873 shares of the Company’s common stock as settlement related to the in-the-money conversion feature of the 2018 Notes at maturity. The value of the shares delivered was approximately $ 5.0 million. As of December 31, 2020, none of the conversion conditions were met related to the 2023 Notes. Therefore, the classification of the entire equity component for the 2023 Notes in permanent equity is appropriate as of December 31, 2020. 85 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Interest expense related to the notes for the years ended December 31, 2020, 2019 and 2018 was as follows: Years Ended December 31, (In thousands) 2020 2019 2018 2023 Notes coupon interest at a rate of 1.375% $ 2,372 $ 2,372 $ 2,372 2023 Notes amortization of discount and debt issuance cost at an additional effective interest rate of 4.9% 7,243 6,854 6,486 2018 Notes coupon interest at a rate of 1.125% — — 377 2018 Notes amortization of discount and debt issuance cost at an additional effective interest rate of 5.5% — — 2,756 Total interest expense on convertible notes $ 9,615 $ 9,226 $ 11,991 13. 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, 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 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. Refer to Note 12, Convertible Notes,” for additional details. 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) 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 — — Interest payments related to convertible notes 5,936 2,372 2,372 1,192 — — Total $ 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. As noted below in Note 19, Income Taxes,” although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, the Company cannot reasonably estimate the outcome at this time. (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. (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. 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 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 86 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. 14. Equity Incentive Plans and Stock-Based Compensation Equity Incentive Plans The Company has three equity incentive plans under which grants are currently outstanding: the 2006 Equity Incentive Plan (the “2006 Plan”), the 2015 Equity Incentive Plan (the “2015 Plan”) and the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”). On April 23, 2015, the Company’s stockholders approved the 2015 Plan, which replaced the 2006 Plan. Additionally, in the third quarter of 2019, the Company adopted the 2019 Inducement Plan and, subject to the adjustment provisions of the 2019 Inducement Plan, reserved 400,000 shares of the Company’s common stock for issuance pursuant to equity awards granted under the 2019 Inducement Plan. The 2015 Plan and 2019 Inducement Plan were the Company’s only plans for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants as of December 31, 2020. Grants under all plans typically have a requisite service period of 60 months or 48 months, have straight-line vesting schedules and expire not more than 10 years from date of grant. No further awards will be made under the 2006 Plan, but the 2006 Plan will continue to govern awards previously granted under it. In addition, any shares subject to stock options or other awards granted under the 2006 Plan that on or after the effective date of the 2015 Plan are forfeited, cancelled, exchanged or surrendered or terminate under the 2006 Plan will become available for grant under the 2015 Plan. The Board will periodically review actual share consumption under the 2015 Plan and may make a request for additional shares as needed. The 2019 Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance units, and its terms are substantially similar to the Company’s 2015 Plan. 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. 87 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A summary of shares available for grant under the Company’s plans is as follows: Shares Available for Grant Total shares available for grant as of December 31, 2017 5,051,147 Increase in shares approved for issuance 5,500,000 Stock options granted ( 711,479 ) Stock options forfeited 877,803 Nonvested equity stock and stock units granted (1) (2) ( 4,993,802 ) Nonvested equity stock and stock units forfeited (1) 4,350,377 Total shares available for grant as of December 31, 2018 10,074,046 Increase in shares approved for issuance (3) 400,000 Stock options granted ( 80,000 ) Stock options forfeited 426,960 Nonvested equity stock and stock units granted (1) (4) ( 7,261,845 ) Nonvested equity stock and stock units forfeited (1) 3,267,702 Total shares available for grant as of December 31, 2019 6,826,863 Increase in shares approved for issuance (5) 7,800,000 Stock options granted ( 40,000 ) Stock options forfeited 101,816 Nonvested equity stock and stock units granted (1) (6) ( 3,528,401 ) Nonvested equity stock and stock units forfeited (1) 1,252,042 Total shares available for grant as of December 31, 2020 12,412,320 ______________________________________ (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. (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. 88 Table of Contents 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 (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 ( 908,146 ) $ 6.70 Options forfeited ( 877,803 ) $ 13.73 Outstanding as of December 31, 2018 3,235,891 $ 10.25 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 ( 613,119 ) $ 10.74 Options forfeited ( 101,816 ) $ 19.41 Outstanding as of December 31, 2020 964,211 $ 11.08 5.04 $ 6,151 Vested or expected to vest at December 31, 2020 961,925 $ 11.08 5.03 $ 6,143 Options exercisable at December 31, 2020 781,102 $ 10.51 4.31 $ 5,432 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”). Employees generally will be eligible to participate in the plan if they are employed by Rambus for more than 20 hours per week and more than five months in a fiscal year. The 2015 ESPP provides for six-month offering periods, with a new offering period commencing on the first trading day on or after May 1 and November 1 of each year. Under the plans, employees may purchase stock at the lower of 85% of the beginning of the offering period (the enrollment date), or the end of each offering period (the purchase date). Employees generally may not purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the purchase date. The Company issued 467,065 shares at a weighted-average price of $ 10.51 per share during the year ended December 31, 2020. The Company issued 629,438 shares at a weighted-average price of $ 8.53 per share during the year ended December 31, 2019. The Company issued 541,395 shares at a weighted-average price of $ 9.99 per share during the year ended December 31, 2018. 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, 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. As of December 31, 2020, there was $ 1.1 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock-based compensation arrangements granted under the stock option plans. This cost is expected to be recognized over a weighted-average period of 2.2 years. 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. 89 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Employee Stock Purchase Plans During the years ended December 31, 2020, 2019 and 2018, Rambus recorded stock-based compensation related to the ESPP of $ 1.5 million, $ 1.5 million and $ 1.4 million, respectively. As of December 31, 2020, there was $ 0.7 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP. That cost is expected to be recognized over four months . Valuation Assumptions 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. These variables include expected volatility, expected life of the award, expected dividend rate, and expected risk-free rate of return. The assumptions for expected volatility and expected life are the two assumptions that significantly affect the grant-date fair value. 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 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) 0.5 0.5 0.5 Weighted-average fair value of purchase rights granted under the purchase plan $ 3.46 $ 3.13 $ 2.59 Expected Stock Price Volatility: Given the volume of market activity in its market traded options, Rambus determined that it would use the implied volatility of its nearest-to-the-money traded options. The Company believes that the use of implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. If there is not sufficient volume in its market traded options, the Company will use an equally weighted blend of historical and implied volatility. Risk-free Interest Rate: Rambus bases the risk-free interest rate used in the BSM valuation method on implied yield currently available on the U.S. Treasury zero-coupon issues with an equivalent term. Where the expected terms of Rambus’ stock-based awards do not correspond with the terms for which interest rates are quoted, Rambus uses an approximation based on rates on the closest term currently available. Expected Term: The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The expected term of ESPP grants is based upon the length of each respective purchase period. 90 Table of Contents 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, 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, 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. The shares earned will vest on the third anniversary of the date of grant. The Company’s shares available for grant has been reduced to reflect the shares that could be earned at the maximum target. For the years ended December 31, 2020, 2019 and 2018, the Company recorded stock-based compensation expense of approximately $ 23.7 million, $ 23.9 million and $ 18.6 million, respectively, related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of an estimate of forfeitures, was approximately $ 34.5 million at December 31, 2020. This cost is expected to be recognized over a weighted-average period of 2.1 years. 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 Shares Weighted-Average Grant-Date Fair Value Nonvested at December 31, 2017 5,861,349 $ 12.68 Granted 2,978,558 $ 12.77 Vested ( 1,713,930 ) $ 12.39 Forfeited ( 2,266,842 ) $ 12.97 Nonvested at December 31, 2018 4,859,135 $ 12.71 Granted 4,233,701 $ 10.17 Vested ( 1,896,283 ) $ 12.40 Forfeited ( 1,907,070 ) $ 11.33 Nonvested at December 31, 2019 5,289,483 $ 11.27 Granted 1,986,117 $ 15.60 Vested ( 1,693,659 ) $ 11.70 Forfeited ( 730,676 ) $ 11.83 Nonvested at December 31, 2020 4,851,265 $ 12.82 15. Stockholders’ Equity 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. 91 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 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. During the year ended December 31, 2020, the cumulative price of $31.5 million was recorded as an increase to accumulated deficit. Convertible Note Hedge Transactions On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company entered into the Convertible Note Hedge Transactions with respect to the Common Stock, with the Counterparties. The Company paid an aggregate amount of approximately $33.5 million to the Counterparties for the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions cover, subject to anti-dilution adjustments substantially similar to those in the 2023 Notes, approximately 9.1 million shares of Common Stock, the same number of shares underlying the 2023 Notes, at a strike price that corresponds to the initial conversion price of the 2023 Notes, and are exercisable upon conversion of the 2023 Notes. The Convertible Note Hedge Transactions will expire upon the maturity of the 2023 Notes. The Convertible Note Hedge Transactions are expected generally to reduce the potential dilution to the Common Stock upon conversion of the 2023 Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of the converted 2023 Notes, as the case may be, in the event that the market price per share of the Common Stock, as measured under the terms of the Convertible Note Hedge Transactions, is greater than the strike price of the Convertible Note Hedge Transactions. The Convertible Note Hedge Transactions are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the 2023 Notes. Holders of the 2023 Notes will not have any rights with respect to the Convertible Note Hedge Transactions. Refer to Note 12, Convertible Notes,” for additional details. Warrant Transactions On November 14, 2017 and November 16, 2017, in connection with the 2023 Notes, the Company sold the Warrants to the Counterparties to acquire, collectively, subject to anti-dilution adjustments, approximately 9.1 million shares of the Common Stock at an initial strike price of approximately $23.30 per share, which represents a premium of 60% over the last reported sale price of the Common Stock of $14.56 on November 14, 2017. The Company received aggregate proceeds of approximately $23.2 million from the sale of the Warrants to the Counterparties. The Warrants were sold in private placements to the Counterparties pursuant to an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act. If the market price per share of the Common Stock, as measured under the terms of the Warrants, exceeds the strike price of the Warrants, the Warrants could have a dilutive effect, unless the Company elects, subject to certain conditions, to settle the Warrants in cash. The Warrants are separate transactions, entered into by the Company with the Counterparties, and are not part of the terms of the 2023 Notes. Holders of the 2023 Notes will not have any rights with respect to the Warrants. Refer to Note 12, Convertible Notes,” for additional details. 92 16. Benefit Plans 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. Rambus, at the discretion of its Board of Directors, may match employee contributions to the 401(k) Plan. The Company matches 50 % of eligible employee’s contribution, up to the first 6 % of an eligible employee’s qualified earnings. For the years ended December 31, 2020, 2019 and 2018, Rambus made matching contributions totaling approximately $ 1.8 million, $ 2.0 million and $ 2.1 million, respectively. 17. Divestiture During the second quarter of 2019, 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 decision to sell these businesses reflected the Company’s ongoing review of its business to focus on products and offerings that are core to its semiconductor business. The sale of the legal entities comprising the Company’s Payments and Ticketing businesses was completed in October 2019. 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 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. 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., which was part of the former RSD segment. 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 operating results of these businesses did not qualify for reporting as discontinued operations. The reported results and financial position of the businesses did not necessarily reflect the total value of the businesses that the Company realized upon their sale. 18. Restructuring and Other Charges 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, 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 2020 Restructuring Plan is expected to be substantially completed in the first half of 2021. 2019 Restructuring 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 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. 93 Table of Contents 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 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 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. Consequently, the lighting division’s long-lived assets were reclassified as held for sale. 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. 19. Income Taxes Income (loss) before taxes consisted of the following: Years Ended December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) 2018 Domestic $ ( 39,937 ) $ ( 76,848 ) $ ( 63,829 ) Foreign 3,398 ( 5,700 ) ( 6,799 ) $ ( 36,539 ) $ ( 82,548 ) $ ( 70,628 ) The provision for (benefit from) income taxes was comprised of: Years Ended December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) 2018 Federal: Current $ ( 446 ) $ 2,932 $ 5,451 Deferred 2,018 2,016 82,726 State: Current 657 670 333 Deferred ( 1,589 ) ( 1,198 ) 522 Foreign: Current 3,097 1,708 1,592 Deferred 195 ( 2,712 ) ( 3,295 ) $ 3,932 $ 3,416 $ 87,329 94 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The differences between Rambus’ effective tax rate and the U.S. federal statutory regular tax rate were as follows: Years Ended December 31, 2020 (As Restated) 2019 (As Restated) 2018 U.S. federal statutory rate 21.0 % 21.0 % 21.0 % State income tax (expense)/benefit ( 2.5 ) 1.0 ( 1.2 ) Withholding tax ( 4.1 ) ( 3.7 ) ( 7.7 ) Foreign rate differential ( 4.8 ) ( 1.1 ) ( 0.2 ) Research and development credit ( 4.8 ) 1.2 2.2 Executive compensation ( 1.8 ) ( 1.2 ) ( 0.1 ) Stock-based compensation 0.6 ( 2.4 ) ( 2.8 ) Foreign tax credit ( 89.5 ) 3.6 7.7 Foreign derived intangible income deduction 13.7 5.0 14.8 Divestiture ( 20.4 ) 5.1 — Other 0.8 ( 0.4 ) 0.7 Valuation allowance 81.0 ( 32.2 ) ( 158.0 ) ( 10.8 ) % ( 4.1 ) % ( 123.6 ) % The components of the net deferred tax assets (liabilities) were as follows: As of December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) Deferred tax assets: Depreciation and amortization $ 13,199 $ 13,805 Lease liabilities 8,716 10,734 Other timing differences, accruals and reserves 5,347 9,522 Deferred equity compensation 4,631 4,456 Net operating loss carryovers 15,692 20,836 Tax credits 168,978 232,787 Total gross deferred tax assets 216,563 292,140 Deferred tax liabilities: Lease right-of-use assets ( 6,392 ) ( 10,400 ) Convertible debt ( 130 ) ( 151 ) Deferred revenue ( 45,845 ) ( 94,763 ) Total gross deferred tax liabilities ( 52,367 ) ( 105,314 ) Total net deferred tax assets 164,196 186,826 Valuation allowance ( 174,119 ) ( 196,098 ) Net deferred tax liabilities $ ( 9,923 ) $ ( 9,272 ) As of December 31, (In thousands) 2020 (As Restated) 2019 (As Restated) Reported as: Non-current deferred tax assets $ 4,353 $ 4,574 Non-current deferred tax liabilities (14,276) (13,846) Net deferred tax liabilities $ ( 9,923 ) $ ( 9,272 ) 95 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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. federal and California deferred tax assets was appropriate. 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 $ 0.7 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: (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 Year ended December 31, 2018 $ 50,911 — 9,238 — 113,729 $ 173,878 Year ended December 31, 2019 (As Restated) $ 173,878 22,220 — — — $ 196,098 Year ended December 31, 2020 (As Restated) $ 196,098 ( 21,294 ) 3 ( 688 ) — $ 174,119 ______________________________________ * Amounts not charged to operations are charged to other comprehensive income or retained earnings. As of December 31, 2020, Rambus had California and other state net operating loss carryforwards of $ 201.3 million and $ 35.8 million, 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. The California net operating losses begin to expire in 2027. The California research and development credits carry forward indefinitely. In the event of a change in ownership, as defined under federal and state tax laws, Rambus’ net operating loss and tax credit carryforwards could be subject to annual limitations. The annual limitations could result in the expiration of the net operating loss and tax credit carryforwards prior to utilization. As of December 31, 2020, the Company had $134.0 million of unrecognized tax benefits including $ 23.6 million recorded as a reduction of long-term deferred tax assets, $ 109 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea (Korea), and $ 1.9 million recorded in long-term income taxes payable. 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 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. 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. 96 Table of Contents 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: Additions 18,600 16,485 1,032 Tax positions related to prior years: Additions — 76,158 115 Reductions ( 209 ) ( 472 ) ( 317 ) Settlements — — — 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, and various other state and foreign jurisdictions. The U.S. federal returns are subject to examination from 2016 and forward. The California returns are subject to examination from 2010 and forward. In addition, any research and development credit carryforward or net operating loss carryforward generated in prior years and utilized in these or future years may also be subject to examination. The India returns are subject to examination from fiscal year ending March 2012 and forward. The Company is currently under examination by California for the 2010, 2011 and 2018 tax years. The Company’s India subsidiary is under examination by the Indian tax administration for tax years beginning with 2011, except for 2014, which was assessed in the Company’s favor. These examinations may result in proposed adjustments to the income taxes as filed during these periods. 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. 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. However, if such earnings were distributed, the Company would incur approximately $ 1.8 million of foreign withholding taxes and an immaterial amount of U.S. taxes. 20. Litigation and Asserted Claims Rambus is not currently a party to any material pending legal proceeding; however, from time to time, Rambus may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on our business, operating results, financial position or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management attention and resources and other factors. The Company records a contingent liability when it is probable that a loss has been incurred and the amount is reasonably estimable in accordance with accounting for contingencies. 21. Acquisitions Northwest Logic, Inc. On July 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Northwest Logic, a leading supplier of memory, PCIe, and MIPI digital controllers. On August 23, 2019 (the “Closing Date”), the Company completed its acquisition of Northwest Logic by acquiring all issued and outstanding shares of Northwest Logic through the merger of a wholly-owned Rambus subsidiary with Northwest Logic. 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 97 Table of Contents 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”), 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 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. 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, and reflects adjustments made through the measurement period to finalize the purchase price accounting, as follows: (In thousands) Total Cash and cash equivalents $ 159 Accounts receivable 1,679 Prepaid expenses and other current assets 65 Identified intangible assets 8,800 Goodwill 13,477 Operating lease right-of-use asset 178 Other asset 9 Accounts payable ( 9 ) Operating lease liability ( 178 ) Other current liabilities ( 108 ) 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 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: Total Estimated Weighted-Average Useful Life (in thousands) (in years) Existing technology $ 8,100 5 Customer contracts and contractual relationships 400 2 Customer backlog 300 0.5 Total $ 8,800 Secure Silicon IP and Protocols Business from Verimatrix On September 11, 2019, the Company announced it had signed an asset purchase agreement to acquire the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, for $ 65.0 million in cash. 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 98 Table of Contents 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 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. 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) Total Cash consideration transferred at the Closing Date $ 45,000 Fair value of earn-out liability 1,800 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”), 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 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. The Company performed a valuation of the net assets acquired as of the Closing Date. The Company performed a valuation of the net assets acquired as of the Closing Date. The total consideration from the acquisition was allocated as follows: (In thousands) Total Prepaid expenses and other current assets $ 267 Unbilled receivables 6,765 Operating lease right-of-use assets 852 Identified intangible assets 23,500 Goodwill 16,845 Deferred revenue ( 310 ) Operating lease liabilities ( 852 ) Other current liabilities ( 267 ) Total $ 46,800 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 the Secure Silicon IP and Protocols business. Approximately $ 15.0 million of the goodwill is deductible for tax purposes. 99 Table of Contents 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: 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 The following unaudited pro forma financial information presents the combined results of operations for the Company and Northwest Logic as if the acquisition had occurred on January 1, 2018. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2018, and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition (unaudited, in thousands, except per share amounts): Years Ended December 31, 2019 (As Restated) 2018 Revenue $ 235,068 $ 241,049 Net loss $ ( 86,233 ) $ ( 160,742 ) Net loss per share - diluted $ ( 0.78 ) $ ( 1.48 ) Pro forma loss for 2019 was adjusted to exclude $0.7 million of acquisition-related costs incurred in 2019. Consequently, pro forma loss for 2018 was adjusted to include these costs. 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 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. 100 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 22. Restatement and Revision of Quarterly Condensed Consolidated Financial Statements (Unaudited) In lieu of filing amended quarterly reports on Form 10-Q, the following tables represent the Company’s restated condensed consolidated financial statements (unaudited) for each of the restated quarters for the periods ended September 30, 2019 through September 30, 2020, and revised condensed consolidated financial statements for the nine months ended September 30, 2018. Refer to Note 1, “Restatement and Revision of Consolidated Financial Statements,” for additional information. Following the restated and revised condensed consolidated financial statements (unaudited), reconciliations of the amended quarterly periods as originally reported to the restated and revised amounts are presented. The amounts originally reported were derived from the Company’s Quarterly Reports on Form 10-Q for the interim periods ended September 30, 2019, March 31, 2020, June 30, 2020, and September 30, 2020, as well as the Original Form 10-K filed with the SEC on February 26, 2021 (in thousands, except shares and per share amounts). Certain line items in the quarterly financial data below were excluded because they were not impacted by the restatement or revision. The restatements for the three months ended March 31, 2020, the three and six months ended June 30, 2020, and the three and nine months ended September 30, 2020 will be effected through the filing of the condensed consolidated financial statements for these periods in the Company’s 2021 Quarterly Reports on Form 10-Q. As Restated September 30, 2020 June 30, 2020 March 31, 2020 September 30, 2019 Consolidated Balance Sheets ASSETS Current assets: Cash and cash equivalents $ 89,475 $ 103,275 $ 175,446 $ 91,838 Marketable securities 430,746 382,802 259,999 246,186 Accounts receivable 33,025 35,198 44,364 38,610 Unbilled receivables 143,514 156,887 172,757 182,934 Inventories 14,218 11,554 9,848 9,854 Assets held for sale — — — 77,203 Prepaids and other current assets 16,292 18,080 17,042 9,812 Total current assets 727,270 707,796 679,456 656,437 Intangible assets, net 41,052 45,624 50,208 35,362 Goodwill 183,222 183,222 183,465 164,488 Property, plant and equipment, net 59,425 50,858 48,154 38,571 Operating lease right-of-use assets 29,961 31,407 34,493 15,503 Deferred tax assets 5,249 5,350 4,541 6,454 Unbilled receivables, long-term 265,701 294,986 319,494 378,430 Other assets 4,671 4,895 5,579 6,381 Total assets $ 1,316,551 $ 1,324,138 $ 1,325,390 $ 1,301,626 LIABILITIES & STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 13,323 $ 14,016 $ 15,730 $ 9,429 Accrued salaries and benefits 15,719 16,170 12,411 13,294 Deferred revenue 14,950 10,841 10,121 9,516 Income taxes payable 20,008 20,044 19,892 18,198 Operating lease liabilities 4,576 4,463 5,194 7,382 Liabilities held for sale — — — 14,620 Other current liabilities 22,306 17,924 16,715 15,854 Total current liabilities 90,882 83,458 80,063 88,293 Convertible notes 154,182 152,359 150,561 147,039 Long-term operating lease liabilities 35,973 37,626 38,074 9,415 101 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Long-term income taxes payable 45,882 50,472 55,163 64,765 Deferred tax liabilities 15,090 14,675 14,140 13,724 Other long-term liabilities 8,714 12,818 15,792 15,308 Total liabilities 350,723 351,408 353,793 338,544 Commitments and contingencies Stockholders’ equity: Convertible preferred stock, $.001 par value: Authorized: 5,000,000 shares; Issued and outstanding: no shares at September 30, 2020, June 30, 2020, March 31, 2020 and September 30, 2019 — — — — Common Stock, $.001 par value: Authorized: 500,000,000 shares; Issued and outstanding: 113,922,520 shares at September 30, 2020, 113,743,652 shares at June 30, 2020, 113,275,229 shares at March 31, 2020 and 111,493,448 shares at September 30, 2019 114 114 113 111 Additional paid in capital 1,280,051 1,274,136 1,264,000 1,254,344 Accumulated deficit ( 314,205 ) ( 301,468 ) ( 292,328 ) ( 278,913 ) Accumulated other comprehensive loss ( 132 ) ( 52 ) ( 188 ) ( 12,460 ) Total stockholders’ equity 965,828 972,730 971,597 963,082 Total liabilities and stockholders’ equity $ 1,316,551 $ 1,324,138 $ 1,325,390 $ 1,301,626 102 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As Restated September 30, 2020 June 30, 2020 March 31, 2020 September 30, 2019 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended Three Months Ended Nine Months Ended Consolidated Statements of Operations Revenue: Royalties $ 16,602 $ 56,828 $ 18,744 $ 40,226 $ 21,482 $ 21,236 $ 73,139 Product revenue 29,769 92,222 31,725 62,453 30,728 21,377 46,372 Contract and other revenue 10,544 35,359 11,248 24,815 13,567 16,574 46,357 Total revenue 56,915 184,409 61,717 127,494 65,777 59,187 165,868 Cost of revenue: Cost of product revenue 9,661 30,281 10,277 20,620 10,343 7,108 17,845 Cost of contract and other revenue 1,267 4,000 1,535 2,733 1,198 2,450 8,268 Amortization of acquired intangible assets 4,336 13,016 4,336 8,680 4,344 3,016 10,686 Total cost of revenue 15,264 47,297 16,148 32,033 15,885 12,574 36,799 Gross profit 41,651 137,112 45,569 95,461 49,892 46,613 129,069 Operating expenses: Research and development 33,733 105,085 34,688 71,352 36,664 41,486 119,995 Sales, general and administrative 20,182 65,209 21,721 45,027 23,306 26,521 76,835 Amortization of acquired intangible assets 236 832 248 596 348 170 2,409 Restructuring and other charges — 836 — 836 836 1,374 4,233 Impairment (recovery) of assets held for sale — — — — — ( 1,853 ) 15,137 Change in fair value of earn-out liability — ( 1,800 ) — ( 1,800 ) ( 1,800 ) — — Total operating expenses 54,151 170,162 56,657 116,011 59,354 67,698 218,609 Operating loss ( 12,500 ) ( 33,050 ) ( 11,088 ) ( 20,550 ) ( 9,462 ) ( 21,085 ) ( 89,540 ) Interest income and other income (expense), net 3,554 14,685 4,688 11,131 6,443 6,751 21,136 Interest expense ( 2,586 ) ( 7,721 ) ( 2,580 ) ( 5,135 ) ( 2,555 ) ( 2,497 ) ( 7,302 ) Interest and other income (expense), net 968 6,964 2,108 5,996 3,888 4,254 13,834 Loss before income taxes ( 11,532 ) ( 26,086 ) ( 8,980 ) ( 14,554 ) ( 5,574 ) ( 16,831 ) ( 75,706 ) Provision for (benefit from) income taxes 1,205 2,330 160 1,125 965 ( 1,299 ) 3,382 Net loss $ ( 12,737 ) $ ( 28,416 ) $ ( 9,140 ) $ ( 15,679 ) $ ( 6,539 ) $ ( 15,532 ) $ ( 79,088 ) Net loss per share: Basic $ ( 0.11 ) $ ( 0.25 ) $ ( 0.08 ) $ ( 0.14 ) $ ( 0.06 ) $ ( 0.14 ) $ ( 0.71 ) Diluted $ ( 0.11 ) $ ( 0.25 ) $ ( 0.08 ) $ ( 0.14 ) $ ( 0.06 ) $ ( 0.14 ) $ ( 0.71 ) Weighted-average shares used in per share calculations: Basic 113,828 113,437 113,572 113,240 112,907 111,315 110,633 Diluted 113,828 113,437 113,572 113,240 112,907 111,315 110,633 103 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As Restated September 30, 2020 June 30, 2020 March 31, 2020 September 30, 2019 Three Months Ended Nine Months Ended Three Months Ended Six Months Ended Three Months Ended Three Months Ended Nine Months Ended Consolidated Statements of Comprehensive Loss Net loss $ ( 12,737 ) $ ( 28,416 ) $ ( 9,140 ) $ ( 15,679 ) $ ( 6,539 ) $ ( 15,532 ) $ ( 79,088 ) Other comprehensive income (loss): Foreign currency translation adjustment 6 8 2 2 — ( 2,096 ) ( 2,270 ) Unrealized gain (loss) on marketable securities, net of tax ( 86 ) ( 48 ) 134 38 ( 96 ) 17 101 Total comprehensive loss $ ( 12,817 ) $ ( 28,456 ) $ ( 9,004 ) $ ( 15,639 ) $ ( 6,635 ) $ ( 17,611 ) $ ( 81,257 ) For the Three Months Ended September 30, 2020 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at June 30, 2020 (As Restated) 113,744 $ 114 $ 1,274,136 $ ( 301,468 ) $ ( 52 ) $ 972,730 Net loss (As Restated) — — — ( 12,737 ) — ( 12,737 ) Foreign currency translation adjustment — — — — 6 6 Unrealized gain (loss) on marketable securities, net of tax — — — — ( 86 ) ( 86 ) Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 179 — ( 919 ) — — ( 919 ) Stock-based compensation — — 6,834 — — 6,834 Balances at September 30, 2020 (As Restated) 113,923 $ 114 $ 1,280,051 $ ( 314,205 ) $ ( 132 ) $ 965,828 For the Nine Months Ended September 30, 2020 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at December 31, 2019 (As Restated) 112,131 $ 112 $ 1,261,142 $ ( 285,789 ) $ ( 92 ) $ 975,373 Net loss (As Restated) — — — ( 28,416 ) — ( 28,416 ) Foreign currency translation adjustment — — — — 8 8 Unrealized gain (loss) on marketable securities, net of tax — — — — ( 48 ) ( 48 ) Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 1,792 2 ( 704 ) — — ( 702 ) Stock-based compensation — — 19,613 — — 19,613 Balances at September 30, 2020 (As Restated) 113,923 $ 114 $ 1,280,051 $ ( 314,205 ) $ ( 132 ) $ 965,828 104 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Three Months Ended June 30, 2020 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at March 31, 2020 (As Restated) 113,275 $ 113 $ 1,264,000 $ ( 292,328 ) $ ( 188 ) $ 971,597 Net loss (As Restated) — — — ( 9,140 ) — ( 9,140 ) Foreign currency translation adjustment — — — — 2 2 Unrealized gain (loss) on marketable securities, net of tax — — — — 134 134 Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 469 1 3,429 — — 3,430 Stock-based compensation — — 6,707 — — 6,707 Balances at June 30, 2020 (As Restated) 113,744 $ 114 $ 1,274,136 $ ( 301,468 ) $ ( 52 ) $ 972,730 For the Six Months Ended June 30, 2020 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at December 31, 2019 (As Restated) 112,131 $ 112 $ 1,261,142 $ ( 285,789 ) $ ( 92 ) $ 975,373 Net loss (As Restated) — — — ( 15,679 ) — ( 15,679 ) Foreign currency translation adjustment — — — — 2 2 Unrealized gain (loss) on marketable securities, net of tax — — — — 38 38 Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 1,613 2 215 — — 217 Stock-based compensation — — 12,779 — — 12,779 Balances at June 30, 2020 (As Restated) 113,744 $ 114 $ 1,274,136 $ ( 301,468 ) $ ( 52 ) $ 972,730 For the Three Months Ended March 31, 2020 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at December 31, 2019 (As Restated) 112,131 $ 112 $ 1,261,142 $ ( 285,789 ) $ ( 92 ) $ 975,373 Net loss (As Restated) — — — ( 6,539 ) — ( 6,539 ) Unrealized gain (loss) on marketable securities, net of tax — — — — ( 96 ) ( 96 ) Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 1,144 1 ( 3,214 ) — — ( 3,213 ) Stock-based compensation — — 6,072 — — 6,072 Balances at March 31, 2020 (As Restated) 113,275 $ 113 $ 1,264,000 $ ( 292,328 ) $ ( 188 ) $ 971,597 105 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Three Months Ended September 30, 2019 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at June 30, 2019 111,127 $ 111 $ 1,246,877 $ ( 263,381 ) $ ( 10,381 ) $ 973,226 Net loss (As Restated) — — — ( 15,532 ) — ( 15,532 ) Foreign currency translation adjustment — — — — ( 2,096 ) ( 2,096 ) Unrealized gain (loss) on marketable securities, net of tax — — — — 17 17 Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 366 — 79 — — 79 Stock-based compensation — — 7,388 — — 7,388 Balances at September 30, 2019 (As Restated) 111,493 $ 111 $ 1,254,344 $ ( 278,913 ) $ ( 12,460 ) $ 963,082 For the Nine Months Ended September 30, 2019 Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Gain (Loss) Common Stock Shares Amount Total Consolidated Statement of Stockholders’ Equity Balances at December 31, 2018 109,018 $ 109 $ 1,226,588 $ ( 204,294 ) $ ( 10,291 ) $ 1,012,112 Net loss (As Restated) — — — ( 79,088 ) — ( 79,088 ) Foreign currency translation adjustment — — — — ( 2,270 ) ( 2,270 ) Unrealized gain (loss) on marketable securities, net of tax — — — — 101 101 Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 2,475 2 6,099 — — 6,101 Stock-based compensation — — 21,657 — — 21,657 Cumulative effect adjustment from the adoption of ASC 842 — — — 4,469 — 4,469 Balances at September 30, 2019 (As Restated) 111,493 $ 111 $ 1,254,344 $ ( 278,913 ) $ ( 12,460 ) $ 963,082 As Restated As Revised Nine Months Ended Six Months Ended Three Months Ended Nine Months Ended September 30, 2020 June 30, 2020 March 31, 2020 September 30, 2019 September 30, 2018 Consolidated Statements of Cash Flows Cash flows from operating activities: Net loss $ ( 28,416 ) $ ( 15,679 ) $ ( 6,539 ) $ ( 79,088 ) $ ( 155,939 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation 19,613 12,779 6,072 21,657 15,591 Depreciation 21,675 15,447 7,711 16,226 8,107 Amortization of intangible assets 13,848 9,276 4,692 13,096 24,352 106 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Non-cash interest expense and amortization of convertible debt issuance costs 5,394 3,571 1,773 5,104 7,587 Deferred income taxes 569 53 327 ( 2,118 ) 78,660 Non-cash restructuring — — — — 670 Loss on equity investment 521 318 212 424 — Gain from sale of marketable equity security — — — — ( 291 ) Impairment of assets held for sale — — — 15,137 — Gain from sale of assets held for sale — — — — ( 1,266 ) (Gain) loss from disposal of property, plant and equipment ( 83 ) 2 — 141 518 Change in fair value of earn-out liability ( 1,800 ) ( 1,800 ) ( 1,800 ) — — Change in operating assets and liabilities, net of effects of acquisitions: Accounts receivable 11,014 8,841 ( 325 ) 10,423 ( 16,862 ) Unbilled receivables 122,498 79,842 39,465 111,453 118,872 Prepaid expenses and other assets 2,114 1,726 1,855 4,544 ( 4,623 ) Inventories ( 4,132 ) ( 1,468 ) 238 ( 3,121 ) ( 1,271 ) Accounts payable 1,063 1,709 416 4,798 153 Accrued salaries and benefits and other liabilities ( 5,067 ) ( 2,030 ) ( 7,966 ) ( 2,179 ) ( 6,823 ) Income taxes payable ( 13,317 ) ( 8,643 ) ( 4,069 ) ( 10,824 ) ( 9,618 ) Deferred revenue 3,003 ( 1,106 ) ( 1,826 ) ( 5,618 ) ( 6,647 ) Operating lease liabilities ( 5,105 ) ( 3,565 ) ( 2,978 ) ( 6,931 ) — Net cash provided by operating activities 143,392 99,273 37,258 93,124 51,170 Cash flows from investing activities: Purchases of property, plant and equipment ( 20,799 ) ( 12,780 ) ( 1,950 ) ( 4,161 ) ( 7,849 ) Purchases of marketable securities ( 655,063 ) ( 487,521 ) ( 169,866 ) ( 463,850 ) ( 192,824 ) Maturities of marketable securities 527,971 407,556 215,164 377,852 181,704 Proceeds from sale of marketable securities 2,948 2,496 — 2,000 — Proceeds from sale of assets held for sale — — — — 4,648 Proceeds from sale of property and property, plant and equipment — — — 29 10 Settlement of working capital adjustment from disposal of business ( 1,131 ) ( 1,131 ) ( 1,131 ) — — Proceeds from sale of equity security — — — — 1,350 Investment in privately-held companies — — — ( 1,000 ) — Acquisition of businesses, net of cash acquired — — — ( 21,779 ) — 107 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Net cash provided by (used in) investing activities ( 146,074 ) ( 91,380 ) 42,217 ( 110,909 ) ( 12,961 ) Cash flows from financing activities: Repayment of 1.125 % convertible notes due 2018 — — — — ( 81,207 ) Proceeds received from issuance of common stock under employee stock plans 8,083 7,880 4,005 11,748 9,266 Payments under installment payment arrangement ( 9,152 ) ( 6,600 ) ( 2,551 ) ( 4,330 ) — Principal payments against financing lease obligation — — — — ( 786 ) Repurchase and retirement of common stock, including prepayment under accelerated share repurchase program — — — — ( 50,031 ) Payments of taxes on restricted stock units ( 8,785 ) ( 7,663 ) ( 7,218 ) ( 5,665 ) ( 5,964 ) Net cash provided by (used in) financing activities ( 9,854 ) ( 6,383 ) ( 5,764 ) 1,753 ( 128,722 ) Effect of exchange rate changes on cash and cash equivalents ( 157 ) ( 419 ) ( 452 ) ( 497 ) ( 797 ) Less: net decrease in cash classified within assets held for sale — — — ( 7,545 ) — Net increase (decrease) in cash, cash equivalents and restricted cash ( 12,693 ) 1,091 73,259 ( 24,074 ) ( 91,310 ) Cash, cash equivalents and restricted cash at beginning of year 102,518 102,518 102,518 116,252 225,844 Cash, cash equivalents and restricted cash at end of year $ 89,825 $ 103,609 $ 175,777 $ 92,178 $ 134,534 September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Unbilled receivables $ 141,341 $ 2,173 $ 143,514 Prepaids and other current assets 16,229 63 16,292 Total current assets 725,034 2,236 727,270 Unbilled receivables, long-term 260,404 5,297 265,701 Total assets 1,309,018 7,533 1,316,551 LIABILITIES & STOCKHOLDERS’ EQUITY Deferred tax liabilities 15,139 ( 49 ) 15,090 Total liabilities 350,772 ( 49 ) 350,723 Stockholders’ equity: Accumulated deficit ( 321,787 ) 7,582 ( 314,205 ) Total stockholders’ equity 958,246 7,582 965,828 Total liabilities and stockholders’ equity 1,309,018 7,533 1,316,551 108 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Unbilled receivables $ 155,448 $ 1,439 $ 156,887 Prepaids and other current assets 17,970 110 18,080 Total current assets 706,247 1,549 707,796 Unbilled receivables, long-term 289,044 5,942 294,986 Total assets 1,316,647 7,491 1,324,138 LIABILITIES & STOCKHOLDERS’ EQUITY Deferred tax liabilities 14,724 ( 49 ) 14,675 Total liabilities 351,457 ( 49 ) 351,408 Stockholders’ equity: Accumulated deficit ( 309,008 ) 7,540 ( 301,468 ) Total stockholders’ equity 965,190 7,540 972,730 Total liabilities and stockholders’ equity 1,316,647 7,491 1,324,138 March 31, 2020 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Unbilled receivables $ 172,042 $ 715 $ 172,757 Prepaids and other current assets 17,057 ( 15 ) 17,042 Total current assets 678,756 700 679,456 Property, plant and equipment, net 47,743 411 48,154 Unbilled receivables, long-term 314,706 4,788 319,494 Total assets 1,319,491 5,899 1,325,390 LIABILITIES & STOCKHOLDERS’ EQUITY Stockholders’ equity: Accumulated deficit ( 298,227 ) 5,899 ( 292,328 ) Total stockholders’ equity 965,698 5,899 971,597 Total liabilities and stockholders’ equity 1,319,491 5,899 1,325,390 109 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Balance Sheet ASSETS Current assets: Prepaids and other current assets $ 9,824 $ ( 12 ) $ 9,812 Total current assets 656,449 ( 12 ) 656,437 Unbilled receivables, long-term 376,619 1,811 378,430 Total assets 1,299,827 1,799 1,301,626 LIABILITIES & STOCKHOLDERS’ EQUITY Stockholders’ equity: Accumulated deficit ( 280,712 ) 1,799 ( 278,913 ) Total stockholders’ equity 961,283 1,799 963,082 Total liabilities and stockholders’ equity 1,299,827 1,799 1,301,626 For the Three Months Ended September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Interest income and other income (expense), net $ 3,464 $ 90 $ 3,554 Interest and other income (expense), net 878 90 968 Income (loss) before income taxes ( 11,622 ) 90 ( 11,532 ) Provision for income taxes 1,157 48 1,205 Net income (loss) ( 12,779 ) 42 ( 12,737 ) Net income (loss) per share: Basic $ ( 0.11 ) $ — $ ( 0.11 ) Diluted $ ( 0.11 ) $ — $ ( 0.11 ) 110 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Nine Months Ended September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 53,253 $ 3,575 $ 56,828 Total revenue 180,834 3,575 184,409 Gross profit 133,537 3,575 137,112 Operating expenses: Sales, general and administrative 64,387 822 65,209 Total operating expenses 169,340 822 170,162 Operating income (loss) ( 35,803 ) 2,753 ( 33,050 ) Interest income and other income (expense), net 14,435 250 14,685 Interest and other income (expense), net 6,714 250 6,964 Income (loss) before income taxes ( 29,089 ) 3,003 ( 26,086 ) Provision for income taxes 2,454 ( 124 ) 2,330 Net income (loss) ( 31,543 ) 3,127 ( 28,416 ) Net income (loss) per share: Basic $ ( 0.28 ) $ 0.03 $ ( 0.25 ) Diluted $ ( 0.28 ) $ 0.03 $ ( 0.25 ) For the Three Months Ended June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 16,957 $ 1,787 $ 18,744 Total revenue 59,930 1,787 61,717 Gross profit 43,782 1,787 45,569 Operating expenses: Sales, general and administrative 21,310 411 21,721 Total operating expenses 56,246 411 56,657 Operating income (loss) ( 12,464 ) 1,376 ( 11,088 ) Interest income and other income (expense), net 4,597 91 4,688 Interest and other income (expense), net 2,017 91 2,108 Income (loss) before income taxes ( 10,447 ) 1,467 ( 8,980 ) Provision for income taxes 334 ( 174 ) 160 Net income (loss) ( 10,781 ) 1,641 ( 9,140 ) Net income (loss) per share: Basic $ ( 0.09 ) $ 0.01 $ ( 0.08 ) Diluted $ ( 0.09 ) $ 0.01 $ ( 0.08 ) 111 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Six Months Ended June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 36,651 $ 3,575 $ 40,226 Total revenue 123,919 3,575 127,494 Gross profit 91,886 3,575 95,461 Operating expenses: Sales, general and administrative 44,205 822 45,027 Total operating expenses 115,189 822 116,011 Operating income (loss) ( 23,303 ) 2,753 ( 20,550 ) Interest income and other income (expense), net 10,971 160 11,131 Interest and other income (expense), net 5,836 160 5,996 Income (loss) before income taxes ( 17,467 ) 2,913 ( 14,554 ) Provision for income taxes 1,297 ( 172 ) 1,125 Net income (loss) ( 18,764 ) 3,085 ( 15,679 ) Net income (loss) per share: Basic $ ( 0.17 ) $ 0.03 $ ( 0.14 ) Diluted $ ( 0.17 ) $ 0.03 $ ( 0.14 ) For the Three Months Ended March 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 19,694 $ 1,788 $ 21,482 Total revenue 63,989 1,788 65,777 Gross profit 48,104 1,788 49,892 Operating expenses: Sales, general and administrative 22,895 411 23,306 Total operating expenses 58,943 411 59,354 Operating income (loss) ( 10,839 ) 1,377 ( 9,462 ) Interest income and other income (expense), net 6,374 69 6,443 Interest and other income (expense), net 3,819 69 3,888 Income (loss) before income taxes ( 7,020 ) 1,446 ( 5,574 ) Provision for income taxes 963 2 965 Net income (loss) ( 7,983 ) 1,444 ( 6,539 ) Net income (loss) per share: Basic $ ( 0.07 ) $ 0.01 $ ( 0.06 ) Diluted $ ( 0.07 ) $ 0.01 $ ( 0.06 ) 112 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Three Months Ended September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 19,448 $ 1,788 $ 21,236 Total revenue 57,399 1,788 59,187 Gross profit 44,825 1,788 46,613 Operating income (loss) ( 22,873 ) 1,788 ( 21,085 ) Interest income and other income (expense), net 6,727 24 6,751 Interest and other income (expense), net 4,230 24 4,254 Income (loss) before income taxes ( 18,643 ) 1,812 ( 16,831 ) Provision for income taxes ( 1,312 ) 13 ( 1,299 ) Net income (loss) ( 17,331 ) 1,799 ( 15,532 ) Net income (loss) per share: Basic $ ( 0.16 ) $ 0.02 $ ( 0.14 ) Diluted $ ( 0.16 ) $ 0.02 $ ( 0.14 ) For the Nine Months Ended September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Operations Revenue: Royalties $ 71,351 $ 1,788 $ 73,139 Total revenue 164,080 1,788 165,868 Gross profit 127,281 1,788 129,069 Operating income (loss) ( 91,328 ) 1,788 ( 89,540 ) Interest income and other income (expense), net 21,112 24 21,136 Interest and other income (expense), net 13,810 24 13,834 Income (loss) before income taxes ( 77,518 ) 1,812 ( 75,706 ) Provision for income taxes 3,369 13 3,382 Net income (loss) ( 80,887 ) 1,799 ( 79,088 ) Net income (loss) per share: Basic $ ( 0.73 ) $ 0.02 $ ( 0.71 ) Diluted $ ( 0.73 ) $ 0.02 $ ( 0.71 ) For the Three Months Ended September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 12,779 ) $ 42 $ ( 12,737 ) Total comprehensive income (loss) ( 12,859 ) 42 ( 12,817 ) 113 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Nine Months Ended September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 31,543 ) $ 3,127 $ ( 28,416 ) Total comprehensive income (loss) ( 31,583 ) 3,127 ( 28,456 ) For the Three Months Ended June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 10,781 ) $ 1,641 $ ( 9,140 ) Total comprehensive income (loss) ( 10,645 ) 1,641 ( 9,004 ) For the Six Months Ended June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 18,764 ) $ 3,085 $ ( 15,679 ) Total comprehensive income (loss) ( 18,724 ) 3,085 ( 15,639 ) For the Three Months Ended March 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 7,983 ) $ 1,444 $ ( 6,539 ) Total comprehensive income (loss) ( 8,079 ) 1,444 ( 6,635 ) For the Three Months Ended September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 17,331 ) $ 1,799 $ ( 15,532 ) Total comprehensive income (loss) ( 19,410 ) 1,799 ( 17,611 ) For the Nine Months Ended September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Comprehensive Loss Net income (loss) $ ( 80,887 ) $ 1,799 $ ( 79,088 ) Total comprehensive income (loss) ( 83,056 ) 1,799 ( 81,257 ) 114 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Nine Months Ended September 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 31,543 ) $ 3,127 $ ( 28,416 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 20,853 822 21,675 Deferred income taxes 618 ( 49 ) 569 Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 126,324 ( 3,826 ) 122,498 Prepaid expenses and other assets 2,188 ( 74 ) 2,114 Net cash provided by operating activities 143,392 — 143,392 For the Six Months Ended June 30, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 18,764 ) $ 3,085 $ ( 15,679 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 14,625 822 15,447 Deferred income taxes 102 ( 49 ) 53 Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 83,577 ( 3,735 ) 79,842 Prepaid expenses and other assets 1,849 ( 123 ) 1,726 Net cash provided by operating activities 99,273 — 99,273 For the Three Months Ended March 31, 2020 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 7,983 ) $ 1,444 $ ( 6,539 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 7,300 411 7,711 Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 41,321 ( 1,856 ) 39,465 Prepaid expenses and other assets 1,854 1 1,855 Net cash provided by operating activities 37,258 — 37,258 115 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) For the Nine Months Ended September 30, 2019 As Originally Reported Adjustments As Restated Consolidated Statement of Cash Flows Cash flows from operating activities: Net loss $ ( 80,887 ) $ 1,799 $ ( 79,088 ) Adjustments to reconcile net loss to net cash provided by operating activities: Change in operating assets and liabilities, net of effects of acquisitions: Unbilled receivables 113,264 ( 1,811 ) 111,453 Prepaid expenses and other assets 4,532 12 4,544 Net cash provided by operating activities 93,124 — 93,124 For the Nine Months Ended September 30, 2018 As Originally Reported Revisions As Revised Consolidated Statement of Cash Flows Cash flows from operating activities: Adjustments to reconcile net loss to net cash provided by operating activities: Prepaid expenses and other assets $ ( 3,729 ) $ ( 894 ) $ ( 4,623 ) Net cash provided by operating activities 52,064 ( 894 ) 51,170 Cash flows from investing activities: Proceeds from sale of assets held for sale 3,754 894 4,648 Net cash used in investing activities ( 13,855 ) 894 ( 12,961 ) 116 Table of Contents Supplementary Financial Data RAMBUS INC. CONSOLIDATED SUPPLEMENTARY FINANCIAL DATA Quarterly Statements of Operations (Unaudited) The following table sets forth selected unaudited quarterly consolidated statements of operations data for each of the eight quarters in the period ended December 31, 2020. Amounts contained herein have been updated, where applicable, to reflect the effects of the restatement described in Note 1, Restatement and Revision of Consolidated Financial Statements, and further described above. As Restated (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 $ 61,717 $ 65,777 $ 61,735 $ 59,187 $ 58,297 $ 48,384 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 $ 45,569 $ 49,892 $ 47,159 $ 46,613 $ 45,270 $ 37,186 Total operating expenses $ 59,466 $ 54,151 $ 56,657 $ 59,354 $ 57,760 $ 67,698 $ 82,316 $ 68,595 Operating loss $ ( 11,004 ) $ ( 12,500 ) $ ( 11,088 ) $ ( 9,462 ) $ ( 10,601 ) $ ( 21,085 ) $ ( 37,046 ) $ ( 31,409 ) Net loss $ ( 12,055 ) $ ( 12,737 ) $ ( 9,140 ) $ ( 6,539 ) $ ( 6,876 ) $ ( 15,532 ) $ ( 36,980 ) $ ( 26,576 ) Net loss per share — basic $ ( 0.11 ) $ ( 0.11 ) $ ( 0.08 ) $ ( 0.06 ) $ ( 0.06 ) $ ( 0.14 ) ( 0.33 ) $ ( 0.24 ) Net loss per share — diluted $ ( 0.11 ) $ ( 0.11 ) $ ( 0.08 ) $ ( 0.06 ) $ ( 0.06 ) $ ( 0.14 ) ( 0.33 ) $ ( 0.24 ) Shares used in per share calculations — basic 112,706 113,828 113,572 112,907 111,883 111,315 110,875 109,692 Shares used in per share calculations — diluted 112,706 113,828 113,572 112,907 111,883 111,315 110,875 109,692 117 Table of Contents INDEX TO EXHIBITS Exhibit Number Description of Document 3.1(1) Amended and Restated Certificate of Incorporation of Registrant filed May 29, 1997. 3.2(2) Certificate of Amendment of Amended and Restated Certificate of Incorporation of Registrant filed June 14, 2000. 3.3(3) Amended and Restated Bylaws of Registrant dated April 25, 2013. 4.1(4) Form of Registrant’s Common Stock Certificate. 4.2(5) Indenture, dated November 17, 2017, between Rambus Inc and U.S. Bank National Association (including form of 1.375% Convertible Senior Note due 2023). 4.3(12) Description of Securities. 10.1(6) Form of Indemnification Agreement entered into by Registrant with each of its directors and executive officers. 10.2(7)* Form of Change of Control Severance Agreement, Agreement entered into by Registrant with each of its named executive officers other than its chief executive officer. 10.3(8)* 2006 Equity Incentive Plan, as amended. 10.4(8)* Forms of agreements under the 2006 Equity Incentive Plan, as amended. 10.5(8)* 2006 Employee Stock Purchase Plan, as amended. 10.6(9)* 2015 Equity Incentive Plan, as amended. 10.7(10)* Form of Restricted Stock Unit Agreement (2015 Equity Incentive Plan). 10.8(10)* Form of Stock Option Agreement (2015 Equity Incentive Plan). 10.9(9)* 2015 Employee Stock Purchase Plan, as amended. 10.10(11) Triple Net Space Lease, dated as of December 15, 2009, by and between Registrant and MT SPE, LLC. 10.11+ Settlement Agreement, dated January 19, 2010, among Registrant, Samsung Electronics Co., Ltd, Samsung Electronics America, Inc., Samsung Semiconductor, Inc. and Samsung Austin Semiconductor, L.P. 10.12+ Semiconductor Patent License Agreement, dated January 19, 2010, between Registrant and Samsung Electronics Co., Ltd. 10.13(13) First Amendment of Lease, dated November 4, 2011, by and between Registrant and MT SPE, LLC. 10.14(14) Employment Agreement between the Company and Luc Seraphin, dated as of October 25, 2018. 10.15(14) Amended and Restated Change of Control Severance Agreement between the Company and Luc Seraphin, dated as of October 25, 2018. 10.16+ Settlement Agreement, dated June 11, 2013, among Registrant, SK hynix and certain SK hynix affiliates. 10.17+ Semiconductor Patent License Agreement, dated June 11, 2013, between Registrant and SK hynix. 10.18+ Settlement Agreement, dated December 9, 2013, between Rambus Inc., Micron Technology, Inc., and certain Micron affiliates. 10.19+ Semiconductor Patent License Agreement, dated December 9, 2013, between Rambus, Inc. and Micron Technology, Inc. 10.20(15)** Amendment to Semiconductor Patent License Agreement, dated December 30, 2013, by and between Rambus Inc. and Samsung Electronics Co., Ltd. 10.21(16)** Amendment 1 to Semiconductor Patent License Agreement, dated June 17, 2015, by and between Rambus Inc. and SK hynix Inc. 10.22(17) Asset Purchase Agreement, dated June 29, 2016, by and between Rambus Inc., Bell ID Singapore Ptd Ltd, Inphi Corporation and Inphi International Pte. Ltd. 10.23(18) Offer Letter, dated September 9, 2016, by and between Rambus Inc. and Rahul Mathur. 10.24(5) Form of Convertible Note Hedge Confirmation. 10.25(5) Form of Warrant Confirmation. 10.26(19) Share Purchase Agreement by and between Rambus Inc. and VISA International Service Association dated June 20, 2019. 10.27(19) Lease agreement between Rambus Inc. and 237 North First Street Holdings, LLC dated July 8, 2019. 10.28(20) Offer Letter, dated August 9, 2019, by and between Rambus Inc. and Sean Fan. 10.29(20) 2019 Inducement Equity Incentive Plan. 10.30(20) Form of Restricted Stock Unit Agreement (2019 Inducement Equity Incentive Plan). 10.31(20) Form of Performance Based Restricted Stock Unit Agreement (2019 Inducement Equity Incentive Plan). 118 Table of Contents 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. 23.1 Consent of Independent Registered Public Accounting Firm. 24.1^ Power of Attorney. 31.1 Certification of Principal Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1† Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2† Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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) ______________________________________ ^ Previously submitted. * Management contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate. ** Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. + 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/A 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. (2) Incorporated by reference to the Form 10-Q filed on May 4, 2001. (3) Incorporated by reference to the Form 8-K filed on April 30, 2013. (4) Incorporated by reference to the Form S-1/A (file no. 333-22885) filed on April 24, 1997. (5) Incorporated by reference to the Form 8-K filed on November 17, 2017. (6) Incorporated by reference to the Form S-1 (file no. 333-22885) filed on March 6, 1997. (7) Incorporated by reference to the Form 8-K filed on March 9, 2015. (8) Incorporated by reference to the Form 8-K filed on April 30, 2014. (9) Incorporated by reference to the Form 8-K filed on May 6, 2020. 119 Table of Contents (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. (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. (15) Incorporated by reference to the Form 10-K filed on February 21, 2014. (16) Incorporated by reference to the Form 10-Q filed on July 23, 2015. (17) Incorporated by reference to the Form 10-Q filed on July 22, 2016. (18) Incorporated by reference to the Form 8-K filed on September 21, 2016. (19) Incorporated by reference to the Form 10-Q filed on August 2, 2019. (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. 120 SIGNATURES 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. RAMBUS INC. By: /s/ Luc Seraphin Luc Seraphin Chief Executive Officer and President (Principal Executive Officer) Date: March 29, 2021 121