What changed in this filing

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Item 9A. Controls and Procedures

2023-02-24 compared with 2022-02-28 · 384 added, 423 removed, 1275 unchanged (39% of the section changed)

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Evaluation of Disclosure Controls and Procedures

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.

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 (the “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.

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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”).

this assessment, our management has concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

Based on this assessment, our management has concluded that, as of December 31, 2022, our internal control over financial reporting was effective.

The effectiveness of our internal control over financial reporting as of December 31, 2022 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Remediation of Previously Reported Material Weakness

As previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2020, our management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2020, 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.

We have taken remediation steps to address the material weakness previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2020 to strengthen our internal control over financial reporting.

These include enhancement of our existing contract review control for patent and technology licensing arrangements, as well as 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.

Consequently, our management has concluded that the identified material weakness in internal control over financial reporting has been considered remediated as of December 31, 2021, as the related internal controls have been in operation for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have not been any changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2021, that materially affected, or that we believe are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the quarter ended December 31, 2022, that materially affected, or that we believe are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

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The information under the heading “Our Executive Officers” in Part I, Item 1 of this Annual Report on Form 10-K 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.

Executive Compensation

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Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 a nd 2019

Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2022, 2021 and 2020

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020

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Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

As discussed in Note 3 to the consolidated financial statements, the Company changed the manner in which it accounts for convertible debt in 2022.

Basis for Opinions

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

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

Acquisition of AnalogX Inc.

and PLDA Group – Valuation of Existing Technology and In-process Research and Development (IPR&D) Intangible Assets

As described in Notes 2 and 21 to the consolidated financial statements, on July 2, 2021, the Company completed the acquisition of AnalogX Inc.

for total consideration of approximately $47.5 million, which resulted in recording $6.3 million of existing technology and $3.8 million of in-process research and development (IPR&D) intangible assets.

The fair value of the existing technology and IPR&D acquired from the AnalogX Inc.

acquisition were estimated using the estimated current replacement cost method under the cost approach.

Management applied significant judgment in estimating the fair value of the existing technology and IPR&D intangible assets from the AnalogX Inc.

acquisition, which involved the use of significant assumptions related to cost of labor to recreate the intangible assets.

On August 18, 2021, the Company completed the acquisition of PLDA Group for total consideration of approximately $85.6 million, which resulted in recording $20.4 million of existing technology and $7.4 million of IPR&D.

The fair value of the existing technology and IPR&D intangible assets acquired from the PLDA acquisition were estimated using the multiple-period excess earnings method under the income approach.

Management applied significant judgment in estimating the fair value of the existing technology and IPR&D intangible assets from the PLDA Group acquisition, which involved the use of significant assumptions related to revenue growth rates and discount rates.

The principal considerations for our determination that performing procedures relating to the valuation of existing technology and IPR&D intangible assets acquired from the AnalogX Inc.

and PLDA Group acquisitions is a critical audit matter are (i) the significant judgment by management in determining the fair value of the existing technology and IPR&D intangible assets, (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to cost of labor to recreate existing technology and IPR&D intangible assets from the AnalogX Inc.

acquisition, and revenue growth rates and discount rates related to the existing technology and IPR&D intangible assets from the PLDA Group acquisition, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the existing technology and IPR&D intangible assets and controls over the development of significant assumptions related to cost of labor to recreate existing technology and IPR&D intangible assets from the AnalogX Inc.

acquisition, and revenue growth rates and discount rates related to the existing technology and IPR&D intangible assets from the PLDA Group acquisition.

These procedures also included, among others (i) reading the purchase agreements, (ii) testing management’s process for determining the fair value of the existing technology and IPR&D intangible assets from both acquisitions, (iii) evaluating the appropriateness of the estimated current replacement cost valuation methods and multi-period excess earnings valuation methods, (iv) testing the completeness and accuracy of the underlying data used in the valuation methods, and (v) evaluating the reasonableness of the significant assumptions used by management related to cost of labor to recreate the existing technology and IPR&D intangible assets from the AnalogX Inc.

acquisition, and revenue growth rates and discount rates related to the existing technology and IPR&D intangible assets from the PLDA Group acquisition.

Evaluating management’s assumptions related to the cost to recreate the intangible assets involved considering the current and historical compensation paid to engineers to recreate the technology.

Evaluating the reasonableness of the revenue growth rates involved considering (i) the current and past performance of PLDA Group, (ii) the consistency with external market and industry data, and (iii) whether these significant assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the (i) the appropriateness of the estimated current replacement cost valuation methods and multi-period excess earnings valuation methods and (ii) the reasonableness of the discount rate significant assumptions.

Critical Audit Matter

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 $7.5 million for the year ended December 31, 2021.

License and customization services revenue is reported as part of contract and other revenue, and was $5 million for the year ended December 31, 2022.

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

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126,709 267,267

Convertible notes — 156,031

Long-term operating lease liabilities 29,079 29,099

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Years Ended December 31,

2021 2020 2019

(In thousands, except per share amounts) 2022 2021 2020

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Restructuring and other charges — 368 4,089

Loss on divestiture — — 7,439

Change in fair value of earn-out liability 3,111 5,300 ( 1,800 )

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Interest income and other income (expense), net 7,771 9,711 17,855

Gain on sale of equity security 3,547 — —

Loss on extinguishment of debt ( 83,626 ) — —

Loss on fair value adjustment of derivatives, net ( 10,585 ) — —

Interest expense ( 1,874 ) ( 10,706 ) ( 10,340 )

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Years Ended December 31,

2021 2020 2019

(In thousands) 2022 2021 2020

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Foreign currency translation adjustment ( 958 ) ( 366 ) 24

Unrealized gain (loss) on marketable securities, net of tax ( 1,005 ) ( 13 ) 54

Unrealized loss on marketable securities, net of tax ( 2,553 ) ( 1,005 ) ( 13 )

Total comprehensive income (loss) $ ( 17,821 ) $ 16,963 $ ( 40,460 )

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

Shares Amount Total

(In thousands)

(In thousands) Shares Amount Total

Balances at December 31, 2019 112,131 $ 112 $ 1,261,142 $ ( 285,789 ) $ ( 92 ) $ 975,373

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Foreign currency translation adjustment — — — — 24 24

Unrealized gain on marketable securities, net of tax — — — — 54 54

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 program ( 2,616 ) ( 3 ) ( 18,575 ) ( 31,491 ) — ( 50,069 )

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

Cumulative effect adjustment from the adoption of ASC 842 — — — 4,469 — 4,469

Balances at December 31, 2020 111,698 112 1,270,426 ( 357,751 ) ( 81 ) 912,706

Net loss — — — ( 40,471 ) — ( 40,471 )

Net income — — — 18,334 — 18,334

Foreign currency translation adjustment — — — — ( 366 ) ( 366 )

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Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 1,745 1 ( 1,657 ) — — ( 1,656 )

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

Issuance of common stock due to PLDA Group (“PLDA”) acquisition 300 — 6,978 — — 6,978

Repurchase and retirement of common stock under repurchase program ( 4,451 ) ( 4 ) ( 4,267 ) ( 95,810 ) — ( 100,081 )

Stock-based compensation — — 27,486 — — 27,486

Balances at December 31, 2021 109,292 109 1,298,966 ( 435,227 ) ( 1,452 ) 862,396

Net income — — — 18,334 — 18,334

Net loss — — — ( 14,310 ) — ( 14,310 )

Foreign currency translation adjustment — — — — ( 958 ) ( 958 )

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Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan 1,513 2 ( 12,279 ) — — ( 12,277 )

Issuance of common stock due to PLDA Group (“PLDA”) acquisition 300 — 6,978 — — 6,978

Repurchase and retirement of common stock under repurchase plan ( 4,451 ) ( 4 ) ( 4,267 ) ( 95,810 ) — ( 100,081 )

Repurchase and retirement of common stock under repurchase program ( 3,195 ) ( 3 ) ( 10,278 ) ( 90,140 ) — ( 100,421 )

Stock-based compensation — — 35,552 — — 35,552

Retirement of convertible senior note hedges — — 78,415 — — 78,415

Retirement of warrants — — ( 58,423 ) — — ( 58,423 )

Cumulative effect adjustment from adoption of ASU 2020-06 — — ( 34,545 ) 26,421 — ( 8,124 )

Balances at December 31, 2022 107,610 $ 108 $ 1,297,408 $ ( 513,256 ) $ ( 4,963 ) $ 779,297

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Years Ended December 31,

2021 2020 2019

(In thousands) 2022 2021 2020

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Non-cash interest expense and amortization of convertible debt issuance costs 207 7,656 7,243

Loss on extinguishment of debt 83,626 — —

Loss on fair value adjustment of derivatives, net 10,585 — —

Deferred income taxes 689 1,522 624

Loss on divestiture — — 7,439

Gain on sale of equity security ( 3,547 ) — —

Loss on equity investment 1,276 1,071 747

(Gain) loss on disposal of property, plant and equipment ( 82 ) ( 77 ) 157

Realized loss from sale of marketable securities 1,138 — —

Change in fair value of earn-out liability 3,111 5,300 ( 1,800 )

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

Gain on disposal of property, plant and equipment ( 1 ) ( 82 ) ( 77 )

Change in operating assets and liabilities, net of effects of acquisition:

Accounts receivable ( 9,274 ) ( 13,521 ) 16,136

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Purchases of property, plant and equipment ( 17,478 ) ( 13,792 ) ( 29,728 )

Acquisition of intangible assets ( 3,000 ) — —

Purchases of marketable securities ( 150,949 ) ( 567,947 ) ( 909,852 )

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Proceeds from sale of marketable securities 276,687 227,045 25,304

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

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

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

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

Proceeds from sale of equity security 3,009 — —

Acquisition of businesses, net of cash acquired ( 15,932 ) ( 97,115 ) —

Net cash used in investing activities ( 115,655 ) ( 97,573 ) ( 141,474 )

Net cash provided by (used in) investing activities 151,979 ( 115,655 ) ( 97,573 )

Cash flows from financing activities:

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Payments under installment payment arrangements ( 14,378 ) ( 12,472 ) ( 13,201 )

Repurchase of convertible senior notes ( 258,060 ) — —

Proceeds from retirement of convertible senior note hedges 91,729 — —

Payments for retirement of warrants ( 69,528 ) — —

Repurchase and retirement of common stock, including prepayment under accelerated share repurchase program ( 100,421 ) ( 100,081 ) ( 50,069 )

Net cash used in financing activities ( 362,935 ) ( 114,209 ) ( 61,186 )

Effect of exchange rate changes on cash and cash equivalents ( 413 ) 106 ( 497 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 2,007 ) ( 413 ) 106

Net increase (decrease) in cash, cash equivalents and restricted cash 17,430 ( 21,060 ) 26,806

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Years Ended December 31,

2021 2020 2019

(In thousands) 2022 2021 2020

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Property, plant and equipment received and accrued in accounts payable and other liabilities $ 39,035 $ 12,935 $ 20,952

Operating lease right-of-use assets obtained in exchange for operating lease obligations $ 5,931 $ — $ —

Common stock issued pursuant to acquisition $ — $ 6,978 $ —

As of December 31,

2021 2020 2019

(In thousands) 2022 2021 2020

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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 Company makes industry-leading chips and intellectual property (“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, edge and Internet of Things (“IoT”) end points, has led to exponential growth in data usage and tremendous demands on data infrastructure.

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Actual results could differ from those estimates.

Immaterial Correction of Prior-Period Error

Subsequent to the reissuance of the consolidated financial statements as of and for the year ended December 31, 2020, the Company determined that $ 7.2 million in corporate investments originally classified as cash equivalents should have been classified as marketable securities in the consolidated balance sheet as of December 31, 2020.

The Company assessed the effect of this correction based on an analysis of both quantitative and qualitative factors and determined that the correction was not material.

Accordingly, the Company corrected the error as of and for the year ended December 31, 2020 in the accompanying consolidated balance sheet, consolidated statement of cash flows and related footnotes.

The following adjustments were made:

• Cash and cash equivalents as of December 31, 2020 originally reported as $ 136.1 million was corrected to $129.0 million.

• Marketable securities as of December 31, 2020 originally reported as $ 366.5 million was corrected to $373.7 million.

• Correction of Note 8, “Marketable Securities” and Note 9, “Fair Value of Financial Instruments,” to reflect the above adjustments.

• Corrected its presentation of net cash used in investing activities for the year ended December 31, 2020, which was originally reported as $ 90.4 million, to reflect cash used in investing activities of $ 97.6 million, in the accompanying consolidated statement of cash flows.

The corrections did not affect the net cash provided by operating activities nor net cash used in financing activities.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Reclassifications

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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.

Goods and services that are distinct 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;

The Company has established standalone selling prices for all of its distinct 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

To date, none of these accruals have been material.

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.

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.

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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.

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.

• 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, if required, when the Company receives the actual royalty report from the licensee.

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

Contract and Other Revenue

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

Contract and other revenue consists of software license fees and engineering fees associated with integration of the Company’s technology solutions into its customers’ products, and 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 $ 7.5 million for the year ended December 31, 2021.

The Company recognizes license and customization services revenue at a point in time when final delivery is made or based on an over time model, depending on the nature and amount of customization.

For the over time model, the Company recognizes revenue over time by measuring the progress toward complete satisfaction of that performance obligation.

The Company measures progress using an input method.

License and customization services revenue recognized over time, which is reported as part of contract and other revenue, was approximately $ 5.0 million for the year ended December 31, 2022.

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

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

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

The Company recognizes support and maintenance revenue over time.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Significant Judgments

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

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

Historically, no significant judgment has generally been required in determining the amount and timing of revenue from the Company’s contracts with customers, except for the following:

• There is significant judgment by management in determining the estimated man-months necessary for completing development and customization services.

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 significant changes in estimates.

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

• For contract revenue where the Company recognizes revenue over time, the key factor reviewed by management to estimate costs to complete each contract is the estimated man-months necessary to complete the project.

• 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.

• The Company recognizes revenue on variable fee licensing arrangements on the basis of sales and usage which the Company is required to estimate prior to receiving the final related reports from its customers.

Contract Balances

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

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

2018-11 and did not recast comparative periods.

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

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

The Company used its incremental borrowing rate to measure the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 generally between one year and nine years .

The Company’s leases have remaining lease terms generally between one year and eight years .

Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and long-term operating lease liabilities on the Company’s consolidated balance sheets.

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

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

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

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

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

Under the income approach, the Company measures fair value of the indefinite-lived intangible assets based on a projected cash flow method

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

using a discount rate determined by its management which is commensurate with the risk inherent in its current business model.

The Company first performs a qualitative assessment to determine whether it is more likely than not (more than 50 percent likelihood) that the indefinite-lived intangible assets are impaired.

If after assessing the totality of events and circumstances and their potential effect on significant inputs to the fair value determination, the Company determines that it is more likely than not that the indefinite-lived intangible assets are impaired, then the Company performs a quantitative impairment test by comparing the fair value of the intangible assets with its carrying amount.

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

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

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Property, Plant and Equipment

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Computer software, computer equipment, 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 , 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.

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

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

Definite-Lived Asset Impairment

The Company evaluates definite-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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Stock-Based Compensation and Equity Incentive Plans

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When estimating forfeitures, the Company considers voluntary termination behaviors, as well as trends of actual option forfeitures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and Cash Equivalents

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Marketable Securities

Rambus invests its excess cash and cash equivalents primarily in U.S.

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

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).

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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, and 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:

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.

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, and commercial paper.

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).

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.

The Company does not have any financial assets or liabilities in Level 3 as of December 31, 2022 and 2021, except for the Company’s liability for the earn-out consideration related to the PLDA acquisition.

The Company has classified this liability within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs.

Refer to Note 20, “Acquisitions , ” for additional information.

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, 2022 and 2021.

The Company’s financial instruments are measured and recorded at fair value, except for equity method investments and convertible notes.

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.

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 on the Company’s consolidated statements of operations.

Distributions received from an investee reduce the carrying amount of the investment.

Research and Development

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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, or the if-converted method for the in-the-money conversion benefit feature of the 2023 Notes.

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.

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As of December 31, 2022 and 2021, 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.

Treasuries and U.S.

Government Agencies.

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

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The Company has no investments denominated in foreign country currencies and therefore is not subject to foreign exchange risk from these assets.

The Company holds cash, cash equivalents and marketable securities in excess of federally insured limits.

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.

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The Company mitigates this risk by limiting its counterparties to major financial institutions.

Refer to Note 12, Convertible Notes,” for further details.

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

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.

Refer to Note 7, “Segments and Major Customers,” for additional information.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

Refer to Note 4, “Revenue Recognition,” for additional information.

Foreign Currency Translation and Re-Measurement

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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.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

liabilities assumed, whichever comes first, any subsequent adjustments are recorded on the consolidated statements of operations.

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

On July 2, 2021, the Company completed the acquisition of AnalogX, Inc.

and applied significant judgment in estimating the fair value of the existing technology and IPR&D intangible assets from the acquisition, which involved the use of significant assumptions related to cost of labor to recreate the intangible assets.

On August 18, 2021, the Company completed the acquisition of PLDA Group and applied significant judgment in estimating the fair value of the existing technology and IPR&D intangible assets from the acquisition, which involved the use of significant assumptions related to revenue growth rates and discount rates.

On May 20, 2022, the Company completed the acquisition of Hardent, Inc.

and applied judgment in estimating the fair value of the intangible assets from the acquisition.

This involved the use of assumptions related to revenue growth rates and discount rates for the existing technology acquired, and the use of assumptions related to cost of labor to recreate the intangible assets for the customer contracts and contract relationships acquired.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results.

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Recent Accounting Pronouncements Adopted

In January 2020, the Financial Accounting Standards Board (“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.

The Company adopted this ASU on January 1, 2021 on a prospective basis.

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 Financial Accounting Standards Board (“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) (“ASU 2020-06”).” The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, the guidance removes the liability and equity separation models for convertible instruments.

Instead, entities will account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital.

The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share.

The guidance is effective for fiscal years beginning after December 15, 2021.

The Company adopted this guidance on January 1, 2022 on a modified retrospective basis.

Upon adoption, the Company reversed approximately $ 35.2 million of debt discount related to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company’s 1.375% Convertible Senior Notes due 2023 (the “2023 Notes”) from additional paid-in capital, reversed approximately $ 8.3 million representing the unamortized debt discount from liabilities, and recorded the net impact of $ 26.9 million to accumulated deficit.

The Company also removed approximately $ 0.7 million of debt issuance costs related to the 2023 Notes from additional paid-in capital and recorded approximately $ 0.5 million to accumulated deficit related to the amortization of debt issuance costs that were historically allocated to equity.

The Company expects reported interest expense for its convertible notes to decrease this year and in the future.

In October 2021, the FASB issued ASU No.

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The amendments also provide certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination.

The guidance is effective for fiscal years beginning after December 15, 2022, with early adoption permitted.

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

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 simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

Among other changes, the guidance removes the liability and equity separation models for convertible instruments.

The guidance also requires the application of the if-converted method to calculate the impact of convertible

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

instruments on diluted earnings per share.

The guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for fiscal years beginning after December 15, 2020, and can be adopted on either a retrospective or modified retrospective basis.

The Company will adopt this guidance on January 1, 2022 on modified retrospective basis.

Although the Company continues to evaluate the impact of this guidance on its consolidated financial statements, upon adoption, the Company expects this guidance will result in a reclassification of the conversion feature balances from additional paid-in capital to debt and in a decrease of reported interest expense for its convertible notes.

The guidance is effective for fiscal years beginning after December 15, 2022.

The Company elected to early adopt this ASU on April 1, 2022.

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

Revenue Recognition

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Contracted but unsatisfied performance obligations were approximately $ 28.8 million as of December 31, 2022, which the Company primarily expects to recognize over the next 2 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Earnings (Loss) Per Share

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Diluted net income (loss) per share $ ( 0.13 ) $ 0.16 $ ( 0.36 )

For the years ended December 31, 2020 and 2019, options to purchase approximately 0.3 million and 1.0 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 year ended December 31, 2021, there were no options to purchase shares that were excluded from the calculation.

For the years ended December 31, 2020 and 2019, an additional 2.3 million and 2.4 million shares, respectively, were 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

per share is payable in cash, shares of the Company’s common stock or a combination of both.

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share attributable to the Company’s common stockholders for the periods presented because the impact of including them would have been anti-dilutive (in thousands):

For the Years Ended December 31,

(In thousands) 2022 2020

Stock options 282 227

Restricted stock units 2,361 2,067

Potentially issuable shares related to the in-the-money conversion benefit feature of convertible notes 175 —

Contingently issuable ESPP shares — 12

Total 2,818 2,306

The potentially dilutive securities during the year ended December 31, 2021 were immaterial.

The shares in the table above do not include the par amount of the Company’s 2023 Notes.

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.

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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.

During the year ended December 31, 2021, the Company’s stock price exceeded the 2023 Notes' conversion price of $ 18.93 per share, due to which approximately 1.4 million shares for the year ended December 31, 2021 were included in the weighted-average dilutive shares.

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

During the year ended December 31, 2021, the Company’s stock price exceeded the 2023 Notes’ conversion price of $ 18.93 per share, therefore approximately 1.4 million shares were included in the weighted-average dilutive shares.

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

As a result of the Company’s adoption of ASU No.

2020-06 on January 1, 2022, the dilutive impact of the 2023 Notes on the calculation of diluted net income (loss) per share is considered using the if-converted method.

Furthermore, because the principal amount of the 2023 Notes must be settled in cash, the dilutive impact of applying the if-converted method is limited to the in-the-money portion, if any, of the 2023 Notes.

For periods prior to the Company’s January 1, 2022 adoption of ASU No.

2020-06, the Company applied the treasury stock method to account for the dilutive impact of the 2023 Notes for diluted net income (loss) per share purposes.

As noted in ASU No.

2020-06, for convertible instruments where the principal is required to be paid in cash, the results of applying the if-converted method are similar to the results of applying the historical treasury stock method.

Therefore, even though the Company is required to apply the if-converted method upon adoption of ASU No.

2020-06, there is no impact to its earnings per share calculation.

Under the if-converted method, the cumulative dilutive effect of the 2023 Notes would be approximately 0.5 million shares, if the shares had been dilutive.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Intangible Assets and Goodwill

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(In thousands) December 31,

2020 Additions to Goodwill (1)

2021 Addition to Goodwill (1)

Adjustments to Goodwill (2)

Effect of Exchange Rates (3)

Total goodwill $ 278,810 $ 12,069 $ 1,013 $ 148 $ 292,040

______________________________________

(1) In July 2021, the Company acquired AnalogX and in August 2021, the Company acquired PLDA, which resulted in the Company recognizing additional goodwill.

(1) In May 2022, the Company acquired Hardent, Inc.

(“Hardent”), which resulted in the Company recognizing additional goodwill.

Refer to Note 20, “Acquisitions,” for additional information.

(2) The adjustments to goodwill primarily include a correction of an immaterial error related to an understatement in other current liabilities that originated from the acquisition of AnalogX Inc.

(“AnalogX”) in 2021 and working capital adjustments from the acquisition of Hardent.

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

As of December 31, 2022

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(In thousands) December 31,

2019 Adjustment to Goodwill (1)

2020 Additions to Goodwill (1)

Total goodwill $ 183,222 $ 95,588 $ 278,810

______________________________________

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

(“Northwest Logic”).

(1) In July 2021, the Company acquired AnalogX and in August 2021, the Company acquired PLDA, which resulted in the Company recognizing additional goodwill.

Refer to Note 20, “Acquisitions,” for additional information.

As of December 31, 2021

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Existing technology 3 to 10 years

$ 299,925 $ ( 261,708 ) $ 38,217

Customer contracts and contractual relationships 0.5 to 10 years

37,996 ( 36,533 ) 1,463

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

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______________________________________

(1) In July 2021, the Company acquired AnalogX and in August 2021, the Company acquired PLDA, which resulted in the Company recognizing additional intangible assets.

(1) During the year ended December 31, 2022, the Company acquired certain intangible assets for $ 3.0 million in cash.

The assets were classified as existing technology and are being amortized over their expected useful life of five years .

During the year ended December 31, 2022, the amortization for the acquired assets was not material.

(2) In May 2022, the Company acquired Hardent, which resulted in the Company recognizing additional intangible assets.

Refer to Note 20, “Acquisitions,” for additional information.

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As of December 31, 2021

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

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

Accumulated Amortization (1)

Net Carrying Amount

Existing technology 3 to 10 years

$ 292,058 $ ( 247,422 ) $ 44,636

Customer contracts and contractual relationships 0.5 to 10 years

37,793 ( 35,209 ) 2,584

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

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Total intangible assets $ 341,351 $ ( 282,931 ) $ 58,420

______________________________________

(1) In July 2021, the Company acquired AnalogX and in August 2021, the Company acquired PLDA, which resulted in the Company recognizing additional intangible assets.

Refer to Note 20, “Acquisitions,” for additional information.

Amortization expense for intangible assets for the years ended December 31, 2022, 2021, and 2020 was $ 15.6 million, $ 17.5 million, and $ 18.4 million, respectively.

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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.

Operating segments are based upon the Company’s 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”).

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As of December 31, 2022, 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, 2022 and 2021, respectively, was as follows:

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Customer 3 14 % 19 %

Customer 4 * 11 %

_________________________________________

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Customer C 14 % 11 % 15 %

Customer D * * 14 %

_________________________________________

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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.

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As of December 31, 2022

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

(In thousands, except percentages) Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Weighted Rate of Return

Money market funds $ 15,763 $ 15,763 $ — $ — 2.63 %

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As of December 31, 2021

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

(In thousands, except percentages) Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Weighted Rate of Return

Money market funds $ 7,402 $ 7,402 $ — $ — 0.02 %

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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, 2022 and 2021 are as follows:

Fair Value Gross Unrealized Loss

Fair Value Gross Unrealized Losses

(In thousands) December 31,

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Corporate notes, bonds and commercial paper 45,538 255,783 ( 35 ) ( 770 )

Total cash equivalents and marketable securities in a continuous unrealized loss position for less than 12 months 74,431 338,605 ( 58 ) ( 1,071 )

12 months or greater

Government bonds and notes 62,588 — ( 1,857 ) —

Corporate notes, bonds and commercial paper 49,559 — ( 1,709 ) —

Total cash equivalents and marketable securities in a continuous unrealized loss position for 12 months or greater 112,147 — ( 3,566 ) —

Total cash equivalents and marketable securities in a continuous unrealized loss position $ 186,578 $ 338,605 $ ( 3,624 ) $ ( 1,071 )

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government-sponsored obligations and corporate notes, bonds and commercial paper.

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 does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before the recovery of its related amortized cost.

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.

However, the Company cannot provide any assurance that its portfolio of cash, cash equivalents and marketable securities will not be

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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:

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Total $ 202,726

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

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

Fair Value of Financial Instruments

The Company’s financial instruments are measured and recorded at fair value, except for equity method investments and convertible notes.

The Company’s share of the investee’s profit or loss is recognized on 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:

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.

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.

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 or liabilities in Level 3 as of December 31, 2021 and 2020, except for the Company’s liability for the contingent earn-out consideration related to the PLDA acquisition.

The Company has classified this liability within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs.

Refer to Note 21, “Acquisitions , ” for further details.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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, 2021 and 2020:

The following table presents the financial instruments and liabilities that are carried at fair value and summarizes their valuation by the respective pricing levels detailed in Note 2, “Summary of Significant Accounting Policies,” as of December 31, 2022 and 2021:

As of December 31, 2022

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(Level 2) Significant Unobservable Inputs

Assets carried at fair value

Money market funds $ 15,763 $ 15,763 $ — $ —

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Corporate notes, bonds and commercial paper 106,355 — 106,355 —

Total available-for-sale securities

$ 398,119 $ 7,402 $ 390,717 $ —

Total assets carried at fair value $ 218,489 $ 15,763 $ 202,726 $ —

Liabilities carried at fair value

Earn-out consideration related to PLDA acquisition $ 14,800 $ — $ — $ 14,800

Total liabilities carried at fair value $ 14,800 $ — $ — $ 14,800

As of December 31, 2021

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(Level 2) Significant Unobservable Inputs

Assets carried at fair value

Money market funds $ 7,402 $ 7,402 $ — $ —

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Corporate notes, bonds and commercial paper 287,905 — 287,905 —

Total available-for-sale securities

$ 441,186 $ 18,162 $ 423,024 $ —

Total assets carried at fair value $ 398,119 $ 7,402 $ 390,717 $ —

Liabilities carried at fair value

Earn-out consideration related to PLDA acquisition $ 16,900 $ — $ — $ 16,900

Total liabilities carried at fair value $ 16,900 $ — $ — $ 16,900

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s liabilities related to earn-out consideration are classified within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs.

The following table presents additional information about liabilities measured at fair value for which the Company utilizes Level 3 inputs to determine fair value, as of December 31, 2022 and 2021:

Years Ended December 31,

(In thousands) 2022 2021 2020

Balance as of January 1 $ 16,900 $ — $ 1,800

Addition of earn-out liability due to acquisition — 11,600 —

Change in fair value of earn-out liability due to remeasurement 3,111 5,300 ( 1,800 )

Change in fair value of earn-out liability due to achievement of revenue target ( 5,211 ) — —

Balance as of December 31 $ 14,800 $ 16,900 $ —

For the years ended December 31, 2022 and 2021, the change in the fair value of the earn-out liability related to the 2021 acquisition of PLDA, which is subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition.

During the year ended December 31, 2022, the first-year earn-out target was achieved, and the fair value relating to the remaining two years of the earn-out period were remeasured.

As a result of these adjustments, the Company recorded a net loss of $ 2.1 million on the Company’s consolidated statements of operations.

During the year ended December 31, 2021, the Company remeasured the fair value of the earn-out liability, which resulted in an additional expense of $ 5.3 million on the Company’s consolidated statements of operations.

During the year ended December 31, 2020, the Company recorded a full reduction in the fair value of the earn-out liability related to the 2019 asset purchase agreement to acquire the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, since the specified performance milestones were not met for the year ended December 31, 2020, which resulted in a gain on the Company’s consolidated statements of operations.

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

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The Company recorded immaterial amounts on its consolidated statements of operations representing its share of the investee’s loss for the years ended December 31, 2022, 2021 and 2020.

During the year ended December 31, 2022, the Company recorded a gain on fair value of approximately $ 3.5 million related to the sale of an equity security with an immaterial carrying value on its consolidated statement of operations.

During the years ended December 31, 2022 and 2021, there were no transfers of financial instruments between different categories of fair value.

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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, 2021, the convertible notes were 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, approximated fair value due to their short maturities.

As discussed in Note 12, “Convertible Notes,” as of December 31, 2022, the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

convertible notes were carried at their face value of $ 10.4 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, approximated 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.”

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”).

On July 8, 2019, the Company entered into a 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”).

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As of December 31, 2022, the weighted-average remaining lease term for the Company’s operating leases was 7.1 years, and the weighted-average discount rate used to determine the present value of the Company’s operating leases was 5.3 %.

Operating lease costs included in research and development and selling, general and administrative costs on the statements of operations were $ 7.4 million and $ 9.5 million for the years ended December 31, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities were $ 7.8 million and $ 7.2 million for the years ended December 31, 2021 and 2020, respectively.

Operating lease costs included in research and development and selling, general and administrative costs on the statements of operations were $ 7.5 million, $ 7.4 million and $ 9.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Cash paid for amounts included in the measurement of operating lease liabilities were $ 8.6 million, $ 7.8 million and $ 7.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

_________________________________________

(1) On January 1, 2022, the Company adopted ASU No.

Refer to Note 3, “Recent Accounting Pronouncements,” for additional information.

1.375% Convertible Senior Notes due 2023.

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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.

In accounting for the 2023 Notes at issuance and prior to the adoption of ASU No.

2020-06, the Company had 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 .

The unamortized discount related to the 2023 Notes was being amortized to interest expense using the effective interest method over approximately five years .

As a result of the adoption of ASU No.

2020-06 on January 1, 2022, the Company reversed approximately $ 35.2 million of debt discount related to the 2023 Notes from additional paid-in capital, reversed approximately $ 8.3 million representing the unamortized debt discount from liabilities, and recorded the net impact of $ 26.9 million to accumulated deficit.

Refer to Note 3, “Recent Accounting Pronouncements,” for additional information.

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.

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The Company incurred transaction costs of approximately $ 3.3 million related to the issuance of the 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.

In accounting for these costs and prior to the adoption of ASU No.

2020-06, the Company had 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 were 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.

As a result of the adoption of ASU No.

2020-06 on January 1, 2022, the Company removed approximately $ 0.7 million of debt issuance costs related to the 2023 Notes from additional paid-in capital and recorded approximately $ 0.5 million to accumulated deficit related to the amortization of debt issuance costs that were historically allocated to equity.

Refer to Note 3, “Recent Accounting Pronouncements,” for additional information.

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).

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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.

Upon the occurrence of a fundamental change (as defined in the 2023 Indenture) prior to the maturity date, holders may require

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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;

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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:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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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.

On March 2, 2022, the Company entered into individual, privately negotiated transactions with certain holders of its outstanding 2023 Notes, pursuant to which the Company paid an aggregate of approximately $ 199.1 million in cash for the repurchase of approximately $ 123.1 million aggregate principal amount of its 2023 Notes (“Q1 2022 Partial Notes Repurchase”).

The cash consideration was based on a volume-weighted average price of $ 29.6789 for the 19-trading day measurement period ending March 29, 2022.

Of the $ 123.1 million aggregate principal amount, approximately $ 107.9 million was settled on March 31, 2022 for $ 174.5 million in cash.

The remaining $ 15.2 million aggregate principal amount was settled on April 1, 2022 for $ 24.6 million in cash.

In addition, this transaction resulted in a loss on extinguishment of debt of $ 66.5 million and a loss on fair value adjustment of derivatives, net of $ 8.3 million.

On August 11, 2022, the Company entered into individual, privately negotiated transactions with certain holders of its outstanding 2023 Notes, pursuant to which the Company paid an aggregate of approximately $ 58.9 million in cash for the repurchase of approximately $ 39.0 million aggregate principal amount of its 2023 Notes (“Q3 2022 Partial Notes Repurchase”).

The cash consideration was based on a volume-weighted average price of $ 27.8456 for the 10-trading day measurement period ending August 25, 2022.

In addition, this transaction resulted in a loss on extinguishment of debt of $ 17.1 million and a loss on fair value adjustment of derivatives, net of $ 2.3 million.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Upon entering into the Q1 2022 and Q3 2022 Partial Notes Repurchase agreements, the conversion feature related to the 2023 Notes repurchased, as well as the settlements of the convertible senior note hedges and warrants, were subject to derivative accounting.

As described in the preceding paragraphs above, the combination of these two transactions resulted in $ 10.6 million in losses on fair value adjustment of derivatives, net, for the year ended December 31, 2022.

During the year ended December 31, 2022, no holders elected to convert their 2023 Notes which had met the trigger for early conversion as of December 31, 2021, March 31, 2022 and September 30, 2022, respectively.

The early conversion had been met as of December 31, 2021, March 31, 2022 and September 30, 2022, as the last reported sale price of the Company’s common stock exceeded 130 % of the conversion price of the 2023 Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2021, March 31, 2022 and September 30, 2022, respectively.

Since November 1, 2022, the remaining outstanding 2023 Notes were convertible at the option of the holders and continue to be convertible until the close of business on the second scheduled trading day immediately preceding the maturity date, and holders of the 2023 Notes may convert all or a portion of their 2023 Notes regardless of the foregoing conditions.

Note Hedges and Warrants.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the Q1 2022 Partial Notes Repurchase, the Company entered into agreements with certain financial institutions to retire the corresponding portions of convertible senior note hedges and warrants the Company had previously entered into with the counterparties in connection with the issuance of the 2023 Notes.

Upon settlement, the Company received $ 72.4 million in cash for the retirement of the proportionate amount of convertible senior note hedges and paid $ 55.1 million in cash for the retirement of the proportionate amount of warrants during the three months ended March 31, 2022.

In connection with the Q3 2022 Partial Notes Repurchase, the Company entered into agreements with certain financial institutions to retire the corresponding portions of convertible senior note hedges and warrants the Company had previously entered into with the counterparties in connection with the issuance of the 2023 Notes.

Upon settlement, the Company received $ 19.3 million in cash for the retirement of the proportionate amount of convertible senior note hedges and paid $ 14.4 million in cash for the retirement of the proportionate amount of warrants during the three months ended September 30, 2022.

Impact to Earnings per Share.

During the year ended December 31, 2021, the Company’s stock price exceeded the 2023 Notes' conversion price of $18.93 per share, due to which approximately 1.4 million shares for the year ended December 31, 2021 were included in the weighted-average dilutive shares.

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.

As a result of the Company’s adoption of ASU No.

2020-06, the dilutive impact of the 2023 Notes on the calculation of diluted net income (loss) per share is considered using the if-converted method.

For periods prior to the Company’s January 1, 2022 adoption of ASU

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2020-06, the Company applied the treasury stock method to account for the dilutive impact of the 2023 Notes for diluted net income (loss) per share purposes.

As noted in ASU .

2020-06, for convertible instruments where the principal is required to be paid in cash, the results of applying the if-converted method are consistent with the results of applying the historical treasury stock method.

Therefore, even though the Company is required to apply the if-converted method upon adoption of ASU No.

2020-06, there is no impact to its earnings per share calculation.

Under the if-converted method, the cumulative dilutive effect of the 2023 Notes would be approximately 0.5 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.

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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.

In December 2021, the trigger for early conversion of the 2023 Notes was met as the last reported sale price of the Company’s common stock exceeded 130% of the conversion price of the 2023 Notes for more than 20 trading days during the 30 consecutive trading days ended December 31, 2021.

As a result, the 2023 Notes will be convertible at the option of the holders during the first quarter of 2022, and the net carrying amount of the 2023 Notes was reclassified to current liabilities on the consolidated balance sheet as of December 31, 2021.

Interest expense related to the notes for the years ended December 31, 2021, 2020 and 2019 was as follows:

Interest expense related to the convertible notes for the years ended December 31, 2022, 2021 and 2020 was as follows:

Years Ended December 31,

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2023 Notes coupon interest at a rate of 1.375 %

2023 Notes amortization of discount and debt issuance cost at an additional effective interest rate of 4.9% 7,656 7,243 6,854

$ 610 $ 2,372 $ 2,372

2023 Notes amortization of discount and debt issuance cost 194 7,656 7,243

Total interest expense on convertible notes

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Contractual obligations (1) (2)

Other contractual obligations $ 3,800 $ 3,200 $ 600 $ — $ — $ —

Software licenses (3)

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Interest payments related to convertible notes 71 71 — — — —

3,564 2,372 1,192 — — —

$ 201,940 $ 19,163 $ 179,133 $ 3,644 $ — $ —

Total $ 62,545 $ 34,553 $ 19,559 $ 8,433 $ — $ —

______________________________________

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(2) For the Company’s lease commitments as of December 31, 2022, refer to Note 10, “Leases.”

(3) The Company’s other contractual obligations as of December 31, 2021 were not material.

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

During the second and fourth quarters of 2022, the Company renewed certain software license agreements for engineering development tools, which are included in the table above.

As of December 31, 2022, approximately $ 15.6 million of the fair value of the liability was included in other current liabilities and $ 22.2 million was included in other long-term liabilities, in the accompanying consolidated balance sheet.

(4) In connection with the acquisition of Northwest Logic, Inc.

(“Northwest Logic”) in the third quarter of 2019, the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, in the fourth quarter of 2019, the acquisitions of AnalogX and PLDA in the third quarter of 2021, and the acquisition of Hardent in the second quarter of 2022, the Company is obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions including the condition of employment.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) In connection with the acquisitions of Northwest Logic in the third quarter of 2019 and the Secure Silicon IP and Protocols business in the fourth quarter of 2019, and the acquisitions of AnalogX and PLDA in the third quarter of 2021, the Company is obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions including the condition of employment.

(5) 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.

During the year ended December 31, 2022, the Company repurchased $ 162.1 million aggregate principal amount of its 2023 Notes.

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

Indemnifications

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

The fair value of the liability as of December 31, 2021 and 2020 was not material.

The fair value of the liability as of December 31, 2022 and 2021, respectively, was not material.

Equity Incentive Plans and Stock-Based Compensation

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Total shares available for grant as of December 31, 2020 12,412,320

Increase in shares approved for issuance (4)

Stock options granted

Stock options forfeited

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Total shares available for grant as of December 31, 2021 10,492,178

Stock options forfeited

Nonvested equity stock and stock units granted (2) (5)

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______________________________________

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

(2) 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.

(3) Amount includes approximately 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.

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

(5) Amount includes approximately 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.

(6) Amount includes approximately 0.4 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in the first quarter of 2021 and discussed under the section titled “Nonvested Equity Stock and Stock Units” below .

(3) Amount includes approximately 0.5 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in 2020 and discussed under the section titled “Nonvested Equity Stock and Stock Units” below.

(4) Amount includes approximately 0.4 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in 2021 and discussed under the section titled “Nonvested Equity Stock and Stock Units” below .

(5) Amount includes approximately 0.6 million shares that have been reserved for potential future issuance related to certain performance unit awards granted in 2022 and discussed under the section titled “Nonvested Equity Stock and Stock Units” below.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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Outstanding as of December 31, 2020 964,211 $ 11.08

Options granted

40,000 $ 15.59

Options exercised

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Outstanding as of December 31, 2021 549,581 $ 10.71

Options granted

Options exercised

( 117,138 ) $ 7.43

Options forfeited

( 54,327 ) $ 14.98

Outstanding as of December 31, 2022 432,443 $ 11.60 3.8 $ 10,472

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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 384,087 shares at a price of $ 12.95 per share during the year ended December 31, 2021.

The Company issued 255,614 shares at a price of $ 20.60 p er share during the year ended December 31, 2022.

The Company issued 384,087 shares at a price of $ 12.95 per share during the year ended December 31, 2021.

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Stock Options

There were no stock options granted during the year ended December 31, 2021.

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

There were no stock options granted during the years ended December 31, 2022 and 2021, respectively.

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

During the years ended December 31, 2022, 2021 and 2020, the Company recorded stock-based compensation related to stock options of $ 0.1 million, $ 0.4 million and $ 0.6 million, respectively.

1 unchanged sentence

This cost is expected to be recognized over a weighted-average period of 0.8 years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The total fair value of options vested f or the years ended December 31, 2022, 2021 and 2020 was $ 1.7 million, $ 2.0 million and $ 3.3 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Employee Stock Purchase Plan

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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,

Stock Option Plan for Year Ended December 31,

Stock Option Plan

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Risk free interest rate 0.2 %

0.2 % 1.4%-1.6%

Expected term (in years) 5.5

Weighted-average fair value of stock options granted $ 5.46

There were no stock options granted during the year ended December 31, 2021.

There were no stock options granted during the years ended December 31, 2022 and 2021, respectively.

Employee Stock Purchase Plan for Years Ended December 31,

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Expected stock price volatility

32%-33% 37%-46% 32 %

Risk free interest rate

1.49 %- 4.58 %

0.04 %- 0.05 %

Expected term (in years)

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Where the expected terms of the Company’s stock-based awards do not correspond with the terms for which interest rates are quoted, the Company uses an approximation based on rates on the closest term currently available.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 was determined based on historical experience of similar awards, giving consideration to the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

the previous authorization.

During the years ended December 31, 2022 and 2021, the Company repurchased shares of its common stock under the 2020 Repurchase Program as discussed below.

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During the fourth quarter of 2021, the accelerated share repurchase program was completed and the Company received an additional 0.4 million shares of its common stock, which were retired, as the final settlement of the accelerated share repurchase program.

On September 9, 2022, the Company entered into an accelerated share repurchase program with Wells Fargo Bank, National Association (“Wells Fargo”) (the “2022 ASR Program”).

The 2022 ASR Program was part of the share repurchase program previously authorized by the Board on October 29, 2020.

Under the 2022 ASR Program, the Company pre-paid to Wells Fargo the $ 100.0 million purchase price for its common stock and, in turn, the Company received an initial delivery of approximately 3.1 million shares of its common stock from Wells Fargo in the third quarter of 2022, which were retired and recorded as a $ 80.0 million reduction to stockholders’ equity.

The remaining $ 20.0 million of the initial payment was recorded as a reduction to stockholders’ equity as an unsettled forward contract indexed to the Company’s stock.

During the fourth quarter of 2022, the accelerated share repurchase program was completed and the Company received an additional 0.1 million shares of its common stock, which were retired, as the final settlement of the accelerated share repurchase program.

During the year ended December 31, 2022, there were no other repurchases of the Company’s common stock under the 2020 Repurchase Program.

As of December 31, 2022, there remained an outstanding authorization to repurchase approximately 9.7 million shares of the Company’s outstanding common stock under the 2020 Repurchase Program.

The Company records stock 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, 2021, the cumulative price of $95.8 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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.

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

During the years ended December 31, 2022 and 2021, the cumulative price of $ 90.1 million and $ 95.8 million, respectively, were recorded as increases to accumulated deficit.

Benefit Plans

4 unchanged sentences

For the years ended December 31, 2022, 2021 and 2020, the Company made matching contributions totaling approximately $ 1.9 million, $ 1.8 million and $ 1.8 million, respectively.

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.

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 November 2020, the Company initiated a restructuring program to reduce overall expenses 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 years ended December 31, 2021 and 2020, the Company

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recorded charges of approximately $ 0.4 million and $ 3.3 million, respectively, related primarily to the reduction in workforce.

During the years ended December 31, 2021 and 2020, the Company recorded charges of approximately $ 0.4 million and $ 3.3 million, respectively, related primarily to the reduction in workforce.

The 2020 Restructuring Plan was completed in the second quarter 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.

Income (loss) before taxes consisted of the following:

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( 1,814 ) ( 844 ) 195

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

$ 6,485 $ 4,952 $ 3,932

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

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Acquisition ( 25.1 ) 8.8 —

Debt extinguishment ( 226.7 ) — —

Other ( 1.0 ) ( 0.2 ) 0.8

15 unchanged sentences

Lease right-of-use assets ( 5,501 ) ( 5,323 )

Convertible debt ( 81 ) ( 130 )

Deferred revenue ( 76 ) ( 267 )

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$ ( 21,933 ) $ ( 19,938 )

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.

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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.

In 2021, based on available evidence, the Company recorded a full valuation allowance on its California deferred tax assets.

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

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The federal foreign tax credits and research and development credits begin to expire in 2023.

Approximately $ 9.0 million of federal foreign tax credits would expire if not utilized in 2022.

Approximately $ 10.8 million of federal foreign tax credits will expire in 2023.

The California net operating losses begin to expire in 2024.

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As of December 31, 2021, the Company had $ 146.2 million of unrecognized tax benefits including $ 18.9 million recorded as a reduction of long-term deferred tax assets, $ 126.1 million recorded as a reduction of other assets associated with refundable withholding taxes previously withheld from licensees in South Korea, and $ 1.3 million recorded to long term income taxes payable.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of the beginning and ending amounts of unrecognized income tax benefits for the years ended December 31, 2022, 2021 and 2020 was as follows:

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(In thousands) 2022 2021 2020

Balance at January 1

Balance as of January 1

$ 146,215 $ 134,044 $ 115,653

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— ( 5,606 ) —

Balance at December 31

Balance as of December 31

$ 164,531 $ 146,215 $ 134,044

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

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

At December 31, 2022, no other income taxes (state or foreign) have been provided on undistributed earnings of approximately $ 32.3 million from the Company’s international subsidiaries since these earnings have been, and under current plans will continue to be, indefinitely reinvested outside the United States.

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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.

2022 Acquisition

Hardent, Inc.

On May 20, 2022, (the “Closing Date”), the Company completed its acquisition of Hardent, a leading electronic design company, by acquiring all of its outstanding shares.

The Company acquired Hardent for a total consideration of approximately $ 16.1 million, which consisted of $ 14.7 million in initial cash consideration paid at the Closing Date, $ 1.2 million was deposited into an escrow account to fund indemnification obligations to be released within 18 months after the Closing Date, and $ 0.2 million was deposited into an escrow account to fund other contractual provisions related to certain working capital

The addition of the technology and expertise from Hardent augments the Company’s CXL memory interconnect initiative.

As part of the acquisition, the Company agreed to pay certain Hardent employees approximately $ 1.2 million in cash over three years following the Closing Date (the “Retention Bonus”), to be paid in three equal installments 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.

Therefore, the Retention Bonus payouts will be treated as compensation and will be expensed ratably over the retention period.

As of December 31, 2022, the Company had incurred approximately $ 1.2 million in external acquisition costs in connection with the transaction, which were expensed as incurred.

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

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

The fair value of the intangible 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 fair values of the remaining assets acquired and liabilities assumed approximated their carrying values at 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 of the Closing Date, and reflects adjustments made during the measurement period, as described in Note 6, “Intangible Assets and Goodwill,” to finalize the purchase price accounting, as follows:

(In thousands) Total

Cash and cash equivalents $ 209

Accounts receivable 1,088

Unbilled receivables 239

Prepaid expenses and other current assets 16

Identified intangible assets 5,000

Goodwill 12,069

Accounts payable ( 55 )

Deferred revenue ( 578 )

Income taxes payable ( 466 )

Deferred tax liability ( 1,325 )

Other current liabilities ( 56 )

Total $ 16,141

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 acquired business.

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

The identified intangible assets assumed in the acquisition of Hardent 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 $ 4,800 5 years

Customer contracts and contractual relationships 200 2 years

Total $ 5,000

Unaudited Pro Forma Combined Consolidated Financial Information

The following pro forma financial information presents the combined results of operations for the Company and Hardent as if the acquisition had occurred on January 1, 2021.

The 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, 2021, and should not be taken as indicative of future consolidated operating results.

Additionally, the pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition:

Years Ended December 31,

(In thousands) 2022 2021

Total revenue $ 457,852 $ 336,258

Net income (loss) $ ( 13,251 ) $ 19,452

The pro forma net loss for 2022 was adjusted to exclude $ 1.2 million of acquisition-related costs incurred during the year ended December 31, 2022.

Consequently, the pro forma net income for 2021 was adjusted to include these costs.

2021 Acquisitions

On July 2, 2021 (the “AnalogX Closing Date”), the Company completed its acquisition of AnalogX, a premier interconnect IP company, by acquiring all of its outstanding shares.

The Company acquired AnalogX for total consideration of approximately $ 47.5 million, including certain adjustments for working capital, which consisted of $ 40.4 million in initial cash consideration at the AnalogX Closing Date and additional deferred payments totaling approximately $ 7.4 million, initially

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

recorded at its present value of approximately $ 7.1 million, (the “Deferred Payments”).

The Deferred Payments will be paid in cash over three years following the AnalogX Closing Date, in three installments on each of the dates that are 12 months, 24 months and 36 months following the AnalogX Closing Date.

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As of December 31, 2021, the Company had incurred approximately $ 0.8 million in external acquisition costs in connection with the transaction, which were expensed as incurred.

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

The fair value of the intangible assets acquired was determined by management primarily by using the estimated current replacement cost under the cost approach.

The fair values of the remaining assets acquired and liabilities assumed approximated their carrying values at the AnalogX Closing Date.

The fair values of the remaining assets acquired and liabilities assumed approximated

their carrying values at the AnalogX Closing Date.

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

The total consideration from the acquisition was preliminarily allocated as follows:

The total consideration from the business combination was allocated as of the Closing Date, and reflects adjustments made through the measurement period, as described in Note 6, “Intangible Assets and Goodwill,” to finalize the purchase price accounting, as follows:

(In thousands) Total

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Approximately $ 26.9 million of the goodwill is expected to be deductible for tax purposes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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The fair value of the earn-out liability will be remeasured each quarter, depending on the acquired business’s revenue performance relative to target over the applicable period.

The Company has classified its liability for the contingent earn-out consideration related to the PLDA acquisition within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs.

The Company has classified its liability for the contingent earn-out consideration related to the PLDA acquisition within Level 3 of the fair value hierarchy because the fair value is

determined using significant unobservable inputs.

A portion of the purchase price, $ 10.0 million of the consideration, was deposited into an escrow account to fund indemnification obligations and other contractual provisions, to be released 24 months after the PLDA Closing Date.

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As of December 31, 2021, the Company had incurred approximately $ 1.4 million in external acquisition costs in connection with the transaction, which were expensed as incurred.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of the remaining assets acquired and liabilities assumed approximated their carrying values at the PLDA Closing Date.

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

The total consideration from the acquisition was preliminarily allocated as follows:

The total consideration from the business combination was allocated as of the Closing Date as follows:

(In thousands) Total

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The following pro forma financial information presents the combined results of operations for the Company and AnalogX and PLDA as if the acquisitions had occurred on January 1, 2020.

The 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 acquisitions actually taken place on January 1, 2020, and should not be taken as indicative of future consolidated

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

operating results.

Additionally, the pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisitions (in thousands, except per share amounts):

The 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 acquisitions actually taken place on January 1, 2020, and should not be taken as indicative of future consolidated operating results.

Additionally, the pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisitions:

For the Years Ended December 31,

(In thousands) 2021 2020

Total revenue $ 338,961 $ 267,006

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Consequently, the pro forma net loss for 2020 was adjusted to include these costs.

2019 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 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 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 on 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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.

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.

Subsequent Event

During the first quarter of 2023, the Company paid upon maturity the remaining $ 10.4 million in aggregate principal amount of the 2023 Notes.

Additionally, the Company delivered approximately 0.3 million shares of the Company's common stock as settlement related to the in-the-money conversion feature of the 2023 Notes at maturity, and received an equal amount of shares due to the exercise of the related Convertible Note Hedge Transactions.

INDEX TO EXHIBITS

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and SK hynix Inc.

10.20(16) Asset Purchase Agreement, dated June 29, 2016, by and between Rambus Inc., Bell ID Singapore Ptd Ltd, Inphi Corporation and Inphi International Pte.

10.21(17) Offer Letter, dated September 9, 2016, by and between Rambus Inc.

and Rahul Mathur.

10.20(4) Form of Convertible Note Hedge Confirmation.

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and 237 North First Street Holdings, LLC dated July 8, 2019.

10.23(18) Director Transition and Consulting Agreement dated March 11, 2022, by and between Rambus Inc.

and James Mitarotonda.

10.24(19) Offer Letter, dated August 9, 2019, by and between Rambus Inc.

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and Micron Technology, Inc.

Exhibit Number Description of Document

10.31(22) 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.

10.30(22)+ Amendment No.

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and Micron Technology, Inc.

10.33(24) Letter agreement dated as of March 12, 2021, among Rambus Inc.

and Barington Companies Equity Partners, L.P.

and certain other parties .

10.33(25) Master Confirmation between Deutsche Bank AG, London Branch, through its agent Deutsche Bank Securities Inc.

(“Dealer”) and Rambus Inc., dated June 15, 2021.

10.34(26) Employment Agreement for Vice President, Finance and Interim Chief Financial Officer between the C ompany and Keith Jones, dated as of October 12, 2021.

Exhibit Number Description of Document

10.31+ Amendment No.

2 dated October 2 7 , 2022, to the Semiconductor Patent License Agreement, dated January 19, 2010, between Registrant and Samsung Electronics Co., Ltd.

10.32(23) Form of Accelerated Share Repurchase Program Agreement.

21.1 Subsidiaries of Registrant.

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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 February 28, 2022.

(2) Incorporated by reference to the Form 8-K filed on April 30, 2013.

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(16) Incorporated by reference to the Form 10-Q filed on July 23, 2015.

(16) Incorporated by reference to the Form 10-Q filed on July 22, 2016.

(17) Incorporated by reference to the Form 8-K filed on September 21, 2016.

(17) Incorporated by reference to the Form 10-Q filed on August 2, 2019.

(18) Incorporated by reference to the Form 8-K filed on March 11, 2022.

(19) Incorporated by reference to the Form 8-K filed on August 28, 2019.

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(21) Incorporated by reference to the Form 10-Q filed on November 6, 2020.

(22) Incorporated by reference to the Form 8-K dated November 12, 2020.

(22) Incorporated by reference to the Form 10-K filed on February 26, 2021.

(24) Incorporated by reference to the Form 8-K filed on March 16, 2021.

(25) Incorporated by reference to the Form 8-K filed on June 16, 2021.

(26) Incorporated by reference to the Form 8-K filed on October 13, 2021.

(23) Incorporated by reference to the Form 8-K filed on September 12, 2022.

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.

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Luc Seraphin, Keith Jones and John Shinn as his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign, and file with the Securities and Exchange Commission any and all amendments to this Annual Report on Form 10-K, together with all schedules and exhibits thereto, (ii) act on, sign, and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions that may be necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Luc Seraphin, Desmond Lynch and John Shinn as his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign, and file with the Securities and Exchange Commission any and all amendments to this Annual Report on Form 10-K, together with all schedules and exhibits thereto, (ii) act on, sign, and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, and (iii) take any and all actions that may be necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agent, proxy and attorney-in-fact or any of his substitutes may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

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/s/ LUC SERAPHIN Chief Executive Officer, President and Director (Principal Executive Officer) February 24, 2023

/s/ KEITH JONES Vice President, Finance and Interim Chief Financial Officer

/s/ DESMOND LYNCH Senior Vice President, Finance and Chief Financial Officer

(Principal Financial and Accounting Officer) February 24, 2023

Desmond Lynch

/s/ CHARLES KISSNER Chairman of the Board of Directors February 24, 2023

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Emiko Higashi

/s/ JAMES MITAROTONDA Director February 28, 2022

James Mitarotonda

/s/ STEVEN LAUB Director February 24, 2023

/s/ MEERA RAO Director February 24, 2023

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures