What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2025-02-24 compared with 2024-02-23 · 100 added, 138 removed, 373 unchanged (39% of the section changed)

4 unchanged sentences

Business Overview

We are an industry-leading provider of chips, silicon IP and innovations that address the fundamental challenges of accelerating data and enabling critical performance improvements for data center and other growing markets.

The ongoing growth of the cloud, along with the widespread advancement of artificial intelligence (“AI”) and other data-intensive workloads, continue to drive an exponential increase in data usage and demands on data infrastructure.

Creating fast and safe

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

As an industry pioneer with over 30 years of advanced semiconductor design experience, we are ideally positioned to address the challenges of moving and protecting data.

We are a leader in high-performance memory subsystems, providing chips, silicon intellectual property (“IP”) and innovations that maximize the performance and security in computationally intensive systems.

Whether in the cloud, at the edge or in your hand, real-time and immersive applications depend on data throughput and integrity.

Our products and innovations deliver the increased bandwidth, capacity and security required to meet the world’s data needs and drive ever-greater end-user experiences.

Our strategic objectives include focusing our product portfolio and research around our core strength in semiconductors, optimizing operational efficiency and leveraging strong cash generation to re-invest for growth.

Rambus is a global semiconductor company dedicated to enabling the future of the data center and artificial intelligence (“AI”) by delivering innovative memory and security solutions that address the evolving needs of the technology industry.

As a pioneer with nearly 35 years of advanced semiconductor design experience, Rambus is at the forefront of enabling the next era of AI-driven computing, addressing the critical challenges of accelerating and securing data movement in the data center, edge, and client markets.

We are a leader in high-performance memory subsystems, offering a balanced and diverse portfolio of products encompassing chips and silicon IP.

Focusing primarily on the data center, our innovative solutions maximize performance and security in computationally intensive systems.

The explosion of data-intensive workloads, driven by the proliferation of generative AI, large language models (“LLMs”), and high-performance computing (“HPC”), is placing unprecedented demands on computing infrastructure.

This surge in data processing is exacerbating the performance gap between processors and memory, creating a critical bottleneck—the “memory wall”—that limits overall system efficiency.

As processors and accelerators rapidly increase in speed and core count, memory bandwidth and latency must keep pace to unlock their full potential.

Rambus is uniquely positioned to address this challenge.

Our deep expertise in memory technologies and innovative architectures enables us to deliver solutions that break through the memory wall.

We provide industry-leading memory interface chips that enable the highest bandwidth and capacity server memory modules, maximizing memory performance for the most demanding data-intensive workloads.

These solutions are essential for supporting the training and inference of increasingly complex AI models, including those used in generative AI applications.

We continue to maximize synergies across our businesses and customer base, leveraging the significant overlap in our ecosystem of customers, partners and influencers.

1 unchanged sentence

Executive Summary

The Company’s continued execution delivered strong results during fiscal year 2023, driven by continued demand for our memory interface chips and our Silicon IP solutions, and continued stability from our royalties revenue.

Our continued execution delivered strong results during fiscal year 2024, driven by continued demand for our memory interface chips and our Silicon IP solutions, and stability from our royalties revenue.

Highlights from our annual results for the year ended December 31, 2024 were as follows:

3 unchanged sentences

• Net cash provided by operating activities of $230.6 million.

We generated product revenue of $224.6 million in 2023 which declined modestly as compared to 2022 in a market that declined during the period.

We completed a $100.0 million accelerated share repurchase program.

We completed the sale of our PHY IP group, strengthening our focus on chips and digital IPs.

We also extended our comprehensive patent license agreement with SK hynix by 10 years through 2034.

We generated record product revenue of $246.8 million in 2024 which increased by approximately 10% as compared to 2023.

We also generated record cash provided by operating activities of $230.6 million in 2024.

We continued our product portfolio expansion with the introduction of our DDR5 server PMICs, Client Clock Driver, as well as HBM4, GDDR7 and PCIe 7 IP solutions.

In addition, we unveiled industry-first complete chipsets for next-generation, industry-standard DDR5 MRDIMMs and RDIMMs for the data center and AI.

Furthermore, we extended our comprehensive patent license agreement with Micron by five years through 2029.

Operational Highlights

4 unchanged sentences

Product revenue accounted for 44%, 49% and 50% of our consolidated revenue for the years ended December 31, 2024, 2023 and 2022, respectively.

Royalty revenue is derived from our patent licenses, through which we provide our customers certain rights to our broad worldwide portfolio of patented inventions.

Royalty revenue is primarily derived from our patent licenses, through which we provide our customers certain rights to our broad worldwide portfolio of patented inventions.

Our patent licenses enable our customers to use a portion of our patent portfolio in their own digital electronics products.

The licenses typically range in term up to ten years and may define the specific field of use where our customers may utilize our inventions in their products.

The licenses typically range in duration up to ten years and may define the specific field of use where our customers may utilize our inventions in their products.

Royalties may be structured as fixed, variable or a hybrid of fixed and variable royalty payments.

Leading semiconductor and electronic system companies such as AMD, Broadcom, CXMT, IBM, Infineon, Kioxia, Marvell, MediaTek, Micron, Nanya, Nuvoton, NVIDIA, Phison, Qualcomm, Samsung, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital, and Winbond have licensed our patents.

Leading semiconductor and electronic system companies such as AMD, Amlogic, Broadcom, CXMT, IBM, Infineon, Kioxia, Marvell, MediaTek, Micron, Nanya, Nuvoton, NVIDIA, Phison, Qualcomm, Samsung, Silicon Motion, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital, and Winbond have licensed our patents.

The vast majority of our patents originate from our internal research and development efforts.

4 unchanged sentences

Revenue sources under contract and other include our IP core licenses, software licenses and related implementation, support and maintenance fees and engineering services fees.

The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenue or accounts receivable in

any given period.

The timing and amounts invoiced to customers can vary significantly depending on specific contract terms and can therefore have a significant impact on deferred revenue or accounts receivable in any given period.

Contract and other revenue accounted for 15%, 19% and 19% of our consolidated revenue for the years ended December 31, 2024, 2023 and 2022, respectively.

Costs and Expenses

Cost of product revenue decreased approximately $4.5 million for the year ended December 31, 2023 as compared to 2022, primarily due to a change in product mix and lower product revenue.

Cost of contract and other revenue increased approximately $0.7 million for the year ended December 31, 2023 as compared to 2022.

The increase was primarily due to higher engineering services associated with the contracts.

Research and development expenses continue to play a key role in our efforts to drive product innovations.

Our research and development expenses decreased approximately $2.0 million for the year ended December 31, 2023 as compared to 2022, primarily due to decreases in consulting expenses of $3.4 million, retention bonus expense related to acquisitions of $1.6 million, an increase in engineering costs allocated to cost of revenue of $0.8 million, as well as decreases in prototyping costs of $0.8 million and bonus expense of $0.7 million, offset by an increase in headcount-related expenses of $1.8 million, stock-based compensation expense of $1.4 million, depreciation expense of $1.1 million and facilities costs of $0.9 million.

The cumulative decrease was largely due to the sale of our PHY IP group in the third quarter of 2023, partially offset by increases in research and development for other core initiatives.

Total sales, general and administrative costs increased approximately $1.4 million for the year ended December 31, 2023 as compared to 2022, primarily due to increases in stock-based compensation expense of $8.0 million and accounting and audit fees of $0.6 million, offset by decreases in acquisition related costs of $3.7 million, bonus expense related to acquisitions of $1.7 million, rent and facility expenses of $1.1 million and recruiting expense of $0.6 million.

Cost of product revenue increased approximately $11.4 million for the year ended December 31, 2024 as compared to 2023, primarily due to higher sales volumes of our memory interface chips.

Cost of contract and other revenue decreased approximately $2.4 million for the year ended December 31, 2024 as compared to 2023.

The decrease was primarily due to lower engineering service costs associated with the contracts and the sale of our PHY IP group in the third quarter of 2023.

Total research and development expenses increased approximately $6.1 million for the year ended December 31, 2024 as compared to 2023.

The fluctuation was primarily driven by growth in our research and development initiatives, offset by decreases attributable to the sale of our PHY IP group in the third quarter of 2023.

The increase was primarily due to increases in prototyping costs of $4.4 million, allocated facility expenses of $2.5 million, headcount-related expenses of $2.2 million, stock-based compensation expense of $1.5 million, as well as lower engineering costs allocated to cost of revenue of $2.4 million, offset by decreases in software EDA tool subscriptions of $4.9 million, consulting expenses of $0.7 million, retention bonus expense related to acquisitions of $0.7 million and depreciation expenses of $0.5 million.

Total sales, general and administrative costs decreased approximately $4.0 million for the year ended December 31, 2024 as compared to 2023, primarily due to lower rent and facility expenses allocated to sales, general and administrative expense of $3.8 million, stock-based compensation expense of $1.6 million, accounting and audit fees of $1.0 million, and acquisition-related costs (including retention bonus expenses) of $0.8 million, offset by increases in consulting expense of $1.4 million, headcount-related expenses of $1.0 million, and legal expenses of $0.7 million.

There are a number of trends that may have a material impact on us in the future, including but not limited to, the evolution of memory technology, adoption of security solutions, the use and adoption of our inventions or technologies generally, industry consolidation and global economic conditions with the resulting impact on sales of consumer electronic systems.

We have a high degree of revenue concentration.

Our top five customers represented 62% of our revenue for 2023 as compared to 58% in 2022 and 56% in 2021.

Our top five customers represented 62% of our revenue for both 2024 and 2023 and 58% in 2022.

The particular customers which account for revenue concentration have varied from period-to-period as a result of the addition of new contracts, expiration of existing contracts, renewals of existing contracts, industry consolidation and the volumes and prices at which the customers have recently sold to their customers.

8 unchanged sentences

As a result, we face difficulty in analyzing the extent to which our future revenue will be dependent upon particular system companies.

Several of our licensees have renewed or extended their license agreements with us during the year ended December 31, 2023, including SK hynix and Socionext.

As a part of our overall business strategy, from time to time, we evaluate businesses and technologies for potential acquisitions that are aligned with our core business and designed to supplement our growth, including the acquisition of Hardent in the second quarter of 2022 and the acquisitions of AnalogX and PLDA in the third quarter of 2021.

Several of our licensees have renewed or extended their license agreements with us during the year ended December 31, 2024, including Kioxia, Marvell, Micron and Nanya.

As a part of our overall business strategy, we evaluate businesses and technologies for potential acquisitions that are aligned with our core business and designed to supplement our growth, including the acquisition of Hardent in the second quarter of 2022.

Similarly, we evaluate our current businesses and technologies that are not aligned with our core business for potential divestiture, such as the sale of our PHY IP group to Cadence in the third quarter of 2023.

47 unchanged sentences

Product revenue consists of revenue from the sale of memory and security products.

Product revenue increased by approximately $22.2 million for the year ended December 31, 2024 as compared to 2023, primarily due to higher sales of our memory interface chips.

Product revenue declined modestly by approximately $2.5 million for the year ended December 31, 2023 as compared to 2022 in a market that declined during the period.

Product revenue increased approximately $83.2 million for the year ended December 31, 2022 as compared to 2021.

The increase was primarily due to continued market share gains of our memory interface chips.

Growth in our product revenue is dependent on, among other things, the industry transition to a new generation of memory, as well as our ability to continue to obtain orders from customers, meet our customers’ demands and mitigate any supply chain and economic disruption.

3 unchanged sentences

We are continuously in negotiations for licenses with prospective customers.

We expect patent royalties will continue to vary from period to period based on our success in adding new customers, renewing or extending existing agreements, as well as the level of variation in our customers’ reported shipment volumes, sales price and mix, offset in part by the proportion of customer payments that are fixed or hybrid in nature.

We also expect that our technology royalties will continue to vary from period to period based on our customers’ shipment volumes, sales prices and product mix.

We expect royalty revenue will continue to vary from period to period based on our success in adding new customers, renewing or extending existing agreements, as well as the level of variation in our customers’ reported shipment volumes, sales price and product mix, offset in part by the proportion of customer payments that are fixed or hybrid in nature.

Contract and Other Revenue

1 unchanged sentence

Contract and other revenue decreased approximately $2.8 million for the year ended December 31, 2024 as compared to 2023.

The decrease was primarily due to lower revenue resulting from the sale of our PHY IP group in the third quarter of 2023.

Contract and other revenue increased approximately $40.2 million for the year ended December 31, 2022 as compared to 2021.

The increase was primarily due to higher revenue associated with our Silicon IP offerings.

Contract and other revenue decreased approximately $1.5 million for the year ended December 31, 2023 as compared to 2022.

The decreases for both periods were primarily attributed to the sale of our PHY IP group in the third quarter of 2023.

We believe that contract and other revenue will fluctuate over time based on our ongoing technology development contractual requirements, the amount of work performed, the timing of completing engineering deliverables and the changes to work required, as well as new technology development contracts booked in the future.

3 unchanged sentences

Cost of product revenue $ 95.9 $ 84.5 $ 89.0 13.5 % (5.0) %

Cost of product revenue includes costs attributable to the sale of memory and security products.

Cost of product revenue decreased approximately $4.5 million for the year ended December 31, 2023 as compared to 2022.

The decrease was primarily due to a change in product mix and lower product revenue.

Cost of product revenue increased approximately $39.6 million for the year ended December 31 2022 as compared to 2021.

The increase was primarily due to increases in sales volumes of our memory interface chips.

Cost of product revenue mainly includes costs attributable to the sale of memory products.

Cost of product revenue increased approximately $11.4 million for the year ended December 31, 2024 as compared to 2023, primarily due to higher sales volumes of our memory interface chips.

Cost of product revenue decreased approximately $4.5 million for the year ended December 31, 2023 as compared to 2022, primarily due to a change in product mix and lower product revenue.

In the near term, we expect cost of product revenue to fluctuate due to changes in product mix and the timing of orders.

4 unchanged sentences

Cost of contract and other revenue reflects the portion of the total engineering costs which are specifically devoted to individual customer development and support services.

Cost of contract and other revenue increased approximately $0.7 million for the year ended December 31, 2023 as compared to 2022.

The increase was primarily due to higher engineering services associated with the contracts.

Cost of contract and other revenue remained flat for the year ended December 31 2022 as compared to 2021.

Cost of contract and other revenue decreased approximately $2.4 million for the year ended December 31, 2024 as compared to 2023, primarily due to lower engineering services associated with the contracts and the sale of our PHY IP group in the third quarter of 2023.

Cost of contract and other revenue increased approximately $0.7 million for the year ended December 31, 2023 as compared to 2022, primarily due to higher engineering services associated with the contracts.

In the near term, we expect cost of contract and other revenue to vary from period to period based on varying revenue recognized from contract and other revenue.

8 unchanged sentences

Research and development expenses are those expenses incurred for the development of applicable technologies.

Total research and development expenses increased approximately $6.1 million for the year ended December 31, 2024 as compared to 2023.

The fluctuation was primarily driven by growth in our research and development initiatives, offset by decreases attributable to the sale of our PHY IP group in the third quarter of 2023.

Total research and development expenses decreased approximately $2.0 million for the year ended December 31, 2023 as compared to 2022, primarily due to decreases in consulting expenses of $3.4 million, retention bonus expense related to acquisitions of $1.6 million, an increase in engineering costs allocated to cost of revenue of $0.8 million, as well as decreases in prototyping costs of $0.8 million and bonus expense of $0.7 million, offset by an increase in headcount-related expenses of $1.8 million, stock-based compensation expense of $1.4 million, depreciation expense of $1.1 million and facilities costs of $0.9 million.

The cumulative decrease was largely due to the sale of our PHY IP group in the third quarter of 2023, partially offset by increases in research and development for other core initiatives.

Total research and development expenses increased approximately $23.1 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased headcount-related expenses of $8.3 million, engineering development tool costs of $3.4 million, stock-based compensation expense of $2.9 million, consulting costs of $2.5 million, prototyping costs of $2.0 million, bonus accrual expenses of $1.9 million, depreciation expense of $1.0 million and allocated information technology costs of $0.6 million, offset by a decrease in facilities costs of $1.3 million and retention bonus expense related to acquisitions of $0.7 million.

We will continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, security and other technologies.

14 unchanged sentences

Due to the long business development cycles we face and the semi-fixed nature of sales, general and administrative expenses in a given period, these expenses generally do not correlate to the level of revenue in that period or in comparable recent or future periods.

Total sales, general and administrative costs decreased approximately $4.0 million for the year ended December 31, 2024 as compared to 2023, primarily due to lower rent and facility expenses allocated to sales, general and administrative expenses of $3.8 million, stock-based compensation expense of $1.6 million, accounting and audit fees of $1.0 million, and acquisition-related costs (including retention bonus expenses) of $0.8 million, offset by increases in consulting expense of $1.4 million, headcount-related expenses of $1.0 million, and legal expenses of $0.7 million.

Total sales, general and administrative costs increased approximately $1.4 million for the year ended December 31, 2023 as compared to 2022, primarily due to increases in stock-based compensation expense of $8.0 million and accounting and audit fees of $0.6 million, offset by decreases in acquisition-related costs of $3.7 million, bonus expense related to acquisitions of $1.7 million, rent and facility expenses of $1.1 million and recruiting expense of $0.6 million.

Total sales, general and administrative costs increased approximately $15.7 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased stock-based compensation expense of $5.0 million, headcount-related expenses of $3.4 million, rent and facility expenses of $2.0 million, bonus accrual expense of $1.8 million, acquisition-related costs (including retention bonus expenses) of $1.8 million, travel expenses of $0.9 million and general legal fees of $0.7 million,

offset by decreases in legal and accounting costs of $3.0 million related to the shareholder activism activity and restatement matters in 2021 and allocated information technology costs of $0.6 million.

In the future, sales, general and administrative expenses will vary from period to period based on the trade shows, advertising, legal, acquisition and other sales, marketing and administrative activities undertaken, and the change in sales, marketing and administrative headcount in any given period.

8 unchanged sentences

Amortization expense is related to various acquired IP.

Total amortization of acquired intangible assets decreased approximately $3.0 million for the year ended December 31, 2024 as compared to 2023, primarily due to certain intangible assets being fully amortized.

Total amortization of acquired intangible assets decreased approximately $0.9 million for the year ended December 31, 2023 as compared to 2022.

1 unchanged sentence

Refer to Note 6, “Intangible Assets and Goodwill,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information.

Total amortization of acquired intangible assets decreased approximately $1.8 million for the year ended December 31, 2022 as compared to 2021, primarily due to certain intangible assets being fully amortized, partially offset by additional amortization from intangible assets acquired in 2022.

Restructuring and Other Charges

5 unchanged sentences

During the year ended December 31, 2023, we recorded charges of approximately $9.4 million related to the reduction in workforce, as well as write-downs of obligations related to certain IP development costs and software licenses for engineering development tools.

In November 2020, we initiated a restructuring plan 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”).

During the year ended December 31, 2021, we recorded charges of approximately $0.4 million, related primarily to the reduction in workforce.

The 2020 Restructuring Plan was completed in the second quarter of 2021.

The 2023 Restructuring Plan was substantially completed in the fourth quarter of 2023.

Refer to Note 17, “Restructuring and Other Charges,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information.

5 unchanged sentences

(the “Purchaser”), pursuant to which we agreed to sell certain assets and the Purchaser agreed to assume certain liabilities from us, in each case with respect to our PHY IP group.

The decision to sell this business reflects the evolution of our core semiconductor business to focus on the development of digital IP and chips, including novel memory solutions for high-performance computing, to support the continued advancement of the data center and artificial intelligence.

The decision to sell this portion of our business reflected the ongoing review of our core semiconductor business to focus on our development of digital IP and chips, including novel memory solutions for high-performance computing, to support the continued evolution of the data center and AI.

Consequently, we recognized a net gain of approximately $90.8 million during the year ended December 31, 2023.

4 unchanged sentences

Impairment of assets $ 1.1 $ 10.0 $ — (89.3) % 100.0%

During the year ended December 31, 2024, we recorded a charge of approximately $1.1 million in our Consolidated Statements of Operations of this Form 10-K, related to the write-off of certain fixed assets no longer in use and for which we determined they had no alternate economic use.

Concurrent with the sale of our PHY IP group to Cadence, we recorded a charge of approximately $10.0 million in our Consolidated Statements of Operations for the year ended December 31, 2023.

5 unchanged sentences

Change in fair value of earn-out liability $ (5.0) $ 9.2 $ 3.1 (154.6) % 196.8%

The changes in the fair value of the earn-out liability related to the 2021 acquisition of the PLDA Group (“PLDA”), which is subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition, and which is settled annually in shares of our common stock based on the fair value of that common stock fixed at the time we acquired PLDA.

The fair value of the earn-out liability is remeasured each quarter, depending on the acquired business’s revenue performance relative to target over the applicable period, and adjusted to reflect changes in the per share value of our common stock.

During the years ended December 31, 2023 and 2022, we remeasured the fair value of the earn-out liability, which resulted in additional expense of $9.2 million and $3.1 million, respectively, in our Consolidated Statements of Operations of this Form 10-K.

The changes in the fair value of the earn-out liability related to the 2021 acquisition of the PLDA Group (“PLDA”), which was subject to certain revenue targets of the acquired business for a period of three years from the date of acquisition, and which was settled annually in shares of our common stock based on the fair value of that common stock fixed at the time we acquired PLDA.

The fair value of the earn-out liability was remeasured each quarter, depending on the acquired business’s revenue performance relative to target over the applicable period, and adjusted to reflect changes in the per share value of our common stock.

During the years ended December 31, 2024, 2023 and 2022, we remeasured the fair value of the earn-out liability, which resulted in a reduction of $5.0 million and additional expenses of $9.2 million and $3.1 million, respectively, in our Consolidated Statements of Operations of this Form 10-K.

The final earn-out was achieved as of September 30, 2024 and was fully paid during the fourth quarter of 2024.

Interest and Other Income (Expense), Net

2 unchanged sentences

Interest income and other income (expense), net $ 18.5 $ 11.3 $ 7.8 62.9 % 45.8 %

Gain on fair value of equity security — 3.5 — (100.0) % 100.0 %

Loss on extinguishment of debt — (83.6) — (100.0) % 100.0 %

Gain on fair value of equity security — — 3.5 NM* (100.0) %

Loss on extinguishment of debt — — (83.6) NM* (100.0) %

Loss on fair value adjustment of derivatives, net — (0.2) (10.6) 100.0 % (97.7) %

1 unchanged sentence

Interest expense (1.4) (1.5) (1.9) (5.0) % (20.5) %

Interest and other income (expense), net $ 33.5 $ (84.8) $ (1.0) (139.5)% NM*

Interest and other income (expense), net $ 17.1 $ 33.5 $ (84.8) (49.2)% (139.5)%

_____________________________________

1 unchanged sentence

Interest income and other income (expense), net, includes interest income from our investment portfolio and from the significant financing component of licensing agreements, as well as any gains or losses from the re-measurement of our monetary assets or liabilities denominated in foreign currencies.

For the years ended December 31, 2023 and 2022, interest income and other income (expense), net, consisted primarily of interest income from our investment portfolio of $10.6 million, and $1.0 million, respectively, as well as interest income from the significant financing component of licensing agreements of $2.2 million, and $5.6 million, respectively.

For the years ended December 31, 2024, 2023 and 2022, interest income and other income (expense), net, consisted primarily of interest income from our investment portfolio of $18.5 million, $10.6 million and $1.0 million, respectively, as well as interest income from the significant financing component of licensing agreements of $0.5 million, $2.2 million and $5.6 million, respectively.

The gain on fair value of equity security was $3.5 million in 2022 and related to the sale of an equity security with an immaterial carrying value in our Consolidated Statement of Operations of this Form 10-K.

The $83.6 million loss on extinguishment of debt and the $10.6 million loss on fair value adjustment of derivatives, net, for the year ended December 31, 2022, related to the repurchases of $162.1 million aggregate principal amount of our 1.375% Convertible Senior Notes due 2023 (the “2023 Notes”) and the settlement of the related convertible senior note hedges and warrants.

The $0.2 million loss on fair value adjustment of derivatives, net, for the year ended December 31, 2023, related to the settlement of the remaining outstanding warrants in the first quarter of 2023.

The $0.2 million loss on fair value adjustment of derivatives, net, for the years ended December 31, 2023, related to the settlement of the remaining outstanding warrants in the first quarter of 2023.

We made an investment in a non-marketable equity security of a private company in 2018.

3 unchanged sentences

Refer to Note 9, “Fair Value of Financial Instruments,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information.

Interest expense consists primarily of interest expense associated with long term software licenses for the year ended December 31, 2023.

Interest expense consists primarily of interest expense associated with long-term software licenses for the years ended December 31, 2024 and 2023.

Prior to the second quarter of 2023, interest expense consisted primarily of interest expense associated with long-term software licenses, the non-cash interest expense related to the amortization of the debt issuance costs on the 2023 Notes, as well as the coupon interest related to these notes.

The remaining outstanding 2023 Notes were paid in full upon maturity in the first quarter of 2023.

Interest expense remained relatively flat for the year ended December 31, 2023 as compared to 2022.

Interest expense decreased approximately $8.8 million for the year ended December 31, 2022 as compared to 2021, primarily due to the partial repurchases of the 2023 Notes in the first and third quarters of 2022 and the adoption of ASU 2020-06 on January 1, 2022.

Refer to Note 3, “Recent Accounting Pronouncements,” and Note 12, “Convertible Notes, ” of Notes to Consolidated Financial Statements of this Form 10-K for additional information on the adoption of ASU 2020-06 and the partial repurchases of the convertible notes, respectively.

Interest expense remained relatively flat for the years ended December 31, 2024, 2023 and 2022.

Refer to Note 12, “Convertible Notes, ” of Notes to Consolidated Financial Statements of this Form 10-K for additional information on the repurchases of the convertible notes.

Provision for (Benefit from) Income Taxes

6 unchanged sentences

Our effective tax rate for the year ended December 31, 2024 differed from the U.S.

statutory rate primarily due to foreign-derived intangible income deductions and the tax effect of stock-based compensation.

Our effective tax rate for the year ended December 31, 2023, differed from the U.S.

statutory rate primarily due to the valuation allowance release on our U.S.

3 unchanged sentences

deferred tax assets.

We recorded a provision for income taxes of $20.2 million for the year ended December 31, 2024, which was primarily driven by the statutory tax expense for domestic and foreign jurisdictions for 2024, including withholding taxes, offset by tax benefits from excess stock-based compensation deductions and foreign-derived intangible income deductions.

For the year ended December 31, 2024, we paid withholding taxes of $20.6 million.

We recorded a benefit from income taxes of $146.7 million for the year ended December 31, 2023, which was primarily driven by the $177.9 million valuation allowance release on our U.S.

1 unchanged sentence

For the year ended December 31, 2023, we paid withholding taxes of $22.9 million.

We recorded a provision for incomes taxes of $6.5 million for the year ended December 31, 2022, which was primarily comprised of taxes on foreign earnings, withholding tax expense and tax expense from the amortization of indefinite-lived intangibles.

For the year ended December 31, 2022, we paid withholding taxes of $21.1 million.

We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.

The realizability of our net deferred tax assets is dependent on our ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets.

During the second quarter of 2023, based on all available positive and negative evidence, we determined that it was appropriate to release the valuation allowance on the majority of our U.S.

During 2023, based on all available positive and negative evidence, we determined that it was appropriate to release the valuation allowance on the majority of our U.S.

federal and other state deferred tax assets.

During the third quarter of 2023, we further adjusted our valuation allowance release as a result of a change in our forecasted income and tax expense, primarily due to the sale of intangible assets as part of our PHY IP group divestiture.

During the second quarter of 2023, we reached a cumulative income position over the previous three years.

The cumulative three-year income is considered positive evidence, which is considered objective and verifiable, and thus received significant weighting.

Additional positive evidence considered by us in our assessment included recent utilization of tax attribute carryforwards and future forecasts of continued profitability in the United States.

Negative evidence we considered included economic uncertainties, including volatility of the industry, and the possibility of a recession or a decline in the market.

Upon considering the relative impact of all evidence during the second quarter of 2023, both negative and positive, and the weight accorded to each, we concluded that it was more likely than not that the majority of our deferred tax assets would be realizable, with the exception of primarily our California research and development credits that have not met the “more likely than not” realization threshold criteria.

As a result, we released the related valuation allowance against the majority of our federal and state deferred tax assets.

The effect of the valuation allowance release is included as a component of the benefit from income taxes in the accompanying Consolidated Statements of Operations of this Form 10-K.

We recognized a $177.9 million tax benefit during the year ended December 31, 2023 as a result of the valuation allowance release.

Upon considering the relative impact of all evidence during 2024, both negative and positive, and the weight accorded to each, we concluded that it was more likely than not that the majority of our deferred tax assets would be realizable, with the exception of primarily our California research and development credits that have not met the “more likely than not” realization

threshold criteria.

As a result, we continue to maintain a valuation allowance on only those deferred tax assets that we do not think will be realizable.

federal deferred tax assets related to research and development credits, foreign tax credits and other tax attributes that can be used to offset U.S.

21 unchanged sentences

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

There is no expiration

date applicable to the 2020 Repurchase Program.

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

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

1 unchanged sentence

Operating Activities

Cash provided by operating activities of $230.6 million for the year ended December 31, 2024 was primarily a t tributable to the cash generated from customer licensing, product sales and engineeri ng services fees.

Changes in operating assets and liabilities for the year ended December 31, 2024, primarily included decreases in unbilled receivables, prepaids and other current assets and an increase in income taxes payable, offset by increases in accounts receivable, inventories and income tax receivable.

Cash provided by operating activities of $195.8 million for the year ended December 31, 2023 was primarily a t tributable to the cash generated from customer licensing, product sales and engineering services fees.

2 unchanged sentences

C hanges in operating assets and liabilities for the year ended December 31, 2022, primarily included a decrease in unbilled receivables and increases in accounts payable and accrued salaries and benefits and other liabilities , offset by decreases in income taxes payable, operating lease liabilities and deferred revenue, as well as increases in inventories, accounts receivable and prepaids and other current assets.

Cash provided by operating activities of $209.2 million for the year ended December 31, 2021 was primarily attributable to the cash generated from customer licensing, product sales and engineering services fees.

Changes in operating assets and liabilities for the year ended December 31, 2021 primarily include d decreases in unbilled receivables, inventories, prepaids and other current assets and increases in accounts payable and deferred revenue, offset by increases in accounts receivable, as well as decreases in income taxes payable, accrued salaries and benefits and other liabilities and operating lease liabilities.

Investing Activities

Cash used in investing activities of $57.4 million for the year ended December 31, 2023 consisted of purchases of available-for-sale marketable securities of $434.2 million and $23.2 million paid to acquire property, plant and equipment, offset by proceeds from sale and maturities of a vailable-for-sale marketable securities of $117.8 million and $175.9 million, respectively, and the sale of our PHY IP group of $106.3 million.

Cash provided by investing activities of $152.0 million for the year ended December 31, 2022 consisted of proceeds from the sale and maturities of available-for-sale marketable securities of $276.7 million and $59.6 million , respectively, and proceeds from the sale of an equity security of $3.0 million, offset by purchases of available-for-sale marketable securities of $150.9 million , $17.5 million paid to acquire property, plant and equipment, the acquisition of Hardent for $16.1 million, net of cash acquired of $0.2 million, and the acquisition of intangible assets for $3.0 million .

Cash used in investing activities of $115.7 million for the year ended December 31, 2021 consisted of purchases of available-for-sale marketable securities of $567.9 million, $97.1 million paid for the acquisitions of AnalogX and PLDA, net of total cash acquired of $8.6 million, and $13.8 million paid to acquire property, plant and equipment, offset by proceeds from the maturities and sale of available-for-sale marketable securities of $336.2 million and $227.0 million, respectively.

Cash used in investing activities of $56.7 million for the year ended December 31, 2024 consisted of purchases of available-for-sale marketable securities of $415.4 million and $30.7 million paid to acquire property and equipment, offset by proceeds from the maturities and sales of available-for-sale marketable securities of $280.8 million and $85.7 million, respectively, and net proceeds from the sale of a non-marketable equity security of $22.8 million.

Cash used in investing activities of $57.4 million for the year ended December 31, 2023 consisted of purchases of available-for-sale marketable securities of $434.2 million and $23.2 million paid to acquire property and equipment, offset by proceeds from sale and maturities of a vailable-for-sale marketable securities of $117.8 million and $175.9 million, respectively, and the sale of our PHY IP group of $106.3 million.

Cash provided by investing activities of $152.0 million for the year ended December 31, 2022 consisted of proceeds from the sale and maturities of available-for-sale marketable securities of $276.7 million and $59.6 million , respectively, and proceeds from the sale of an equity security of $3.0 million, offset by purchases of available-for-sale marketable securities of $150.9 million , $17.5 million paid to acquire property and equipment, the acquisition of Hardent for $16.1 million, net of cash acquired of $0.2 million, and the acquisition of intangible assets for $3.0 million .

Financing Activities

Cash used in financing activities of $168.0 million for the year ended December 31, 2024 was primarily due to an aggregate payment of $113.3 million as part of our 2024 ASR program and the Buying Plan (includes $0.2 million in fees related to the ASR program), $41.3 million in payments of taxes on restricted stock units, and $16.4 million paid under installment payment arrangements to acquire fixed assets, offset by $5.5 million in proceeds from the issuance of common stock under equity incentive plans.

Cash used in financing activities of $169.6 million for the year ended December 31, 2023 was primarily due to an aggregate payment of $100.5 million as part of our 2020 Repurchase Program (includes $100.3 million related to the 2023 ASR program and $0.2 million related to the Buying Plan), $38.3 million in payments of taxes on restricted stock units, $16.2 million paid under installment payment arrangements to acquire fixed assets, $10.7 million paid for the retirement of the remaining outstanding warrants, $10.4 million in aggregate principal amount paid upon maturity of the remaining outstanding 2023 Notes, offset by $9.0 million in proceeds from the issuance of common stock under equity incentive plans.

Cash used in financing activit ies of $362.9 million for the year ended December 31, 2022 was primarily due to $258.1 million paid in connection with the partial repurchases of our 2023 Notes in the first and third quarters of 2022, an aggregate payment of $100.4 million as part of our 2022 ASR program (includes $0.4 million in fees related to the 2022 ASR program), $69.5 million paid in connection with the settlement of warrants associated with the partial repurchases of our 2023 Notes, $18.4 million in payments of taxes on restricted stock units and $14.4 million paid under installment payment arrangements to acquire fixed assets, offset by proceeds of $91.7 million from the settlement of senior convertible note hedges associated with the partial repurchases of our 2023 Notes and $6.1 million in proceeds from the issuance of common stock under equity incentive plans.

Cash used in financing activit ies of $114.2 million for the year ended December 31, 2021 was primarily due to an aggregate payment of $100.0 million to Deutsche Bank as part of the 2021 ASR Program.

We also paid $10.6 million in payments of taxes on restricted stock units, $12.5 million under installment payment arrangements to acquire fixed assets and $0.1 million in fees related to the 2021 ASR Program, offset by $9.0 million in proceeds from the issuance of common stock under equity incentive plans.

Contractual Obligations

13 unchanged sentences

(3) We have commitments with various software vendors for agreements generally having terms longer than one year.

As of December 31, 2023, approximately $14.6 million of the fair value of the software licenses was included in other current liabilities and $8.0 million was included in other long-term liabilities, in the accompanying Consolidated Balance Sheet of this Form 10-K.

(4) In connection with the acquisitions of Hardent in the second quarter of 2022 and PLDA in the third quarter of 2021, we are obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions, including the condition of employment.

(5) In connection with the acquisition of AnalogX in the third quarter of 2021, we were obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions, including the condition of employment.

In September 2023, we divested our PHY IP group, which included AnalogX and resulted in us recognizing an immaterial decrease related to the remaining AnalogX acquisition retention bonus liability.

Refer to Note 20, “Divestiture,” of this Form 10-K for additional information.

Share Repurchase Program

3 unchanged sentences

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

On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank.

The 2020 ASR Program was part of the 2020 Repurchase Program.

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

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

During the second quarter of 2021, the accelerated share repurchase program was completed and we received an additional 0.1 million shares of our common stock, which were retired, as the final settlement of the accelerated share repurchase program.

On June 15, 2021, we entered into the 2021 ASR Program with Deutsche Bank.

The 2021 ASR Program was part of the 2020 Repurchase Program.

Under the 2021 ASR Program, we pre-paid to Deutsche Bank the $100.0 million purchase price for

our common stock and, in turn, we received an initial delivery of approximately 3.9 million shares of our common stock from Deutsche Bank in the second quarter of 2021, which were retired and recorded as an $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 our stock.

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

On September 9, 2022, we entered into the 2022 ASR Program with Wells Fargo.

7 unchanged sentences

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

On September 22, 2023, the accelerated share repurchase program was completed and we received an additional 0.2 million shares of its common stock, which were retired, as the final settlement of the 2023 ASR Program.

On September 22, 2023, the accelerated share repurchase program was completed and we received an additional 0.2 million shares of our common stock, which were retired, as the final settlement of the 2023 ASR Program.

On November 2, 2023, we entered into the Buying Plan with RBCCM.

2 unchanged sentences

During the Repurchase Period, RBCCM may purchase an aggregate amount of $50.0 million of our common stock, and its execution is dependent on our stock price reaching certain levels.

Share repurchases shall not exceed $25.0 million in a quarter.

During the fourth quarter of 2023, an immaterial amount of shares were repurchased, retired and recorded as a reduction to stockholders’ equity.

Share repurchases could not exceed $25.0 million in a quarter.

During the year ended December 31, 2023, an immaterial amount of shares were repurchased, retired and recorded as a reduction to stockholders’ equity.

During the first quarter of 2024, the Buying Plan was amended and as a result, no purchases were made from the Buying Plan during the period from March 1, 2024 to March 28, 2024, while the 2024 ASR Program was in effect.

During the third quarter of 2024, the Buying Plan was further amended to allow RBCCM to purchase an aggregate amount of $100.0 million of our common stock during the Repurchase Period, not to exceed $50.0 million in a quarter.

The execution of

share repurchases is dependent on our stock price reaching certain levels.

During the year ended December 31, 2024, we repurchased approximately 1.4 million shares for approximately $63.1 million as part of the Buying Plan, which were retired and recorded as a reduction to stockholders’ equity.

On February 29, 2024, we entered into the 2024 ASR Program with RBC.

The 2024 ASR Program was part of the 2020 Repurchase Program.

Under the 2024 ASR Program, we pre-paid to RBC the $50.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 0.7 million shares of our common stock from RBC on March 1, 2024, which were retired and recorded as a $40.0 million reduction to stockholders’ equity.

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

On March 18, 2024, the accelerated share repurchase program was completed and we received an additional 0.1 million shares of our common stock, which were retired, as the final settlement of the 2024 ASR Program.

Effective January 1, 2023, our share repurchases are subject to a 1% excise tax as a result of the Inflation Reduction Act of 2022.

As of December 31, 2023, there was no exercise tax liability as the fair market value of our common stock issuances in 2023 exceeded the fair market value of the total repurchases during the same period.

As of December 31, 2024, we recorded an immaterial excise tax liability on our Consolidated Balance Sheet of this Form 10-K.

During the year ended December 31, 2024, there were no other repurchases of our common stock under the 2020 Repurchase Program.

23 unchanged sentences

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 material.

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

5 unchanged sentences

Where a licensee has the contractual right to terminate a fixed-fee arrangement for convenience without any substantive penalty payable upon such termination, we recognize revenue for the duration of the contract in which the parties have present enforceable rights and obligations.

• For variable arrangements, we recognize revenue based on an estimate of the licensee’s sale or usage of the IP during the period the licensee’s sale or usage occur, typically quarterly, with a true-up recorded, if required, when we receive the actual royalty report from the licensee.

• For variable arrangements, we recognize revenue based on an estimate of the licensee’s sale or usage of the IP during the periods the sale or usage occur, typically quarterly, with a true-up recorded, if required, when we receive the actual royalty report from the licensee.

• We recognize license renewal revenue commencing with the start of the renewal period.

2 unchanged sentences

An initial software arrangement may consist 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.

We recognize 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.

We recognize 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, we recognize revenue over time by measuring the progress toward complete satisfaction of that performance obligation.

We measure 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 $ 6.1 million for the year ended December 31, 2023.

Due to the nature of the work performed in these arrangements, the estimation of the over time model may involve judgment.

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

We recognize support and maintenance revenue over time.

We recognize support and maintenance revenue over the time those services are provided.

Significant Judgments

The only significant judgment required in determining the amount and timing of revenue from our contracts with customers is determining the estimated man-months necessary for completing development and customization services.

We apply significant judgment in determining the amount and timing of revenue from our contracts with customers, based on our estimate of the man-months necessary for completing development and customization services.

We have 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 we recognize revenue over time, the key factor reviewed by us 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 one year, we calculate 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 take 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.

• We recognize revenue on variable fee licensing arrangements on the basis of sales and usage which we are required to estimate prior to receiving the final related reports from our customers.

We recognize revenue on variable fee licensing arrangements on the basis of estimated sales and usage, which we then true up to actual results when we receive the final related reports from our customers.

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

25 unchanged sentences

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

We first perform 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.

We first perform a qualitative assessment to determine whether it is more likely than not (more than 50% 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, we determine that it is more likely than not that the indefinite-lived intangible assets are impaired, then we perform a quantitative impairment test by comparing the fair value of the intangible assets with its carrying amount.

9 unchanged sentences

During the second quarter of 2023, based on all available positive and negative evidence, we determined that it was appropriate to release the valuation allowance on the majority of our U.S.

During 2023, based on all available positive and negative evidence, we determined that it was appropriate to release the valuation allowance on the majority of our U.S.

federal and other state deferred tax assets.

During the third quarter of 2023, we further adjusted our valuation allowance release as a result of a change in forecasted income and tax expense, primarily due to the sale of intangible assets as part of the PHY IP group divestiture.

We recognized a $177.9 million tax benefit during the year ended December 31, 2023 as a result of the valuation allowance release.

Our position on the realizability of our net deferred tax assets has not changed based on our review of all available evidence for 2024.

We maintain liabilities for uncertain tax positions within our long-term income taxes payable accounts and as a reduction to existing deferred tax assets or other refundable taxes to the extent tax attributes are available to offset such liabilities.

These liabilities involve judgment and estimation and are monitored by us based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.

liabilities involve judgment and estimation and are monitored by us based on the best information available including changes in tax regulations, the outcome of relevant court cases and other information.

The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions.

1 unchanged sentence

If the ultimate resolution of tax uncertainties is different from what is currently estimated, it could materially affect income tax expense.

Stock-Based Compensation

We maintain stock plans covering a broad range of equity grants including stock options, nonvested equity stock and equity stock units and performance-based instruments.

In addition, we sponsor an Employee Stock Purchase Plan (“ESPP”), whereby eligible employees are entitled to purchase common stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the common stock as of specific dates.

The accounting guidance for share-based payments requires the measurement and recognition of compensation expense in our Consolidated Statements of Operations for all share-based payment awards made to our employees, directors and consultants including employee stock options, nonvested equity stock and equity stock units, and employee stock purchase grants.

Stock-based compensation expense is measured at grant date, based on the estimated fair value of the award, reduced by an estimate of the annualized rate of expected forfeitures, and is recognized as expense over the employees’ expected requisite service period, generally using the straight-line method.

In addition, the accounting guidance for share-based payments requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow.

Our forfeiture rate represents the historical rate at which our stock-based awards were surrendered prior to vesting.

The accounting

guidance for share-based payments requires forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Refer to Note 14, “Equity Incentive Plans and Stock-Based Compensation,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information regarding the valuation of stock-based compensation.

Business Combinations

We account for acquisitions of businesses using the purchase method of accounting, which requires us to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

While we use our best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date, as well as contingent consideration, where applicable, the estimates are inherently uncertain and subject to refinement.

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

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

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

Although we believe the assumptions and estimates made in the past have been reasonable and appropriate, they are based in part on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

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

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

Recent Accounting Pronouncements

1 unchanged sentence

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 7. Management’s Discussion and Analysis