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What changed in RAMBUS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of RAMBUS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+279 added−335 removedSource: 10-K (2025-02-24) vs 10-K (2024-02-23)

Top changes in RAMBUS INC's 2024 10-K

279 paragraphs added · 335 removed · 227 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThroughout our history, Rambus has been focused on advancing memory technologies and novel architectures, as well as delivering the solutions needed to break down the memory wall. We provide industry-leading memory interface chips that enable the highest bandwidth and capacity server memory modules, maximizing memory performance for data-intensive workloads.
Biggest changeWe 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.
Using this foundation of innovation, our technical teams develop new semiconductor solutions that enable increased performance, greater power efficiency and increased levels of security, as well as other improvements and benefits. Our solution design and development process is a multi-disciplinary effort requiring expertise in multiple fields across all of our operational units.
Using this foundation of innovation, our technical teams develop new semiconductor solutions that enable increased performance, greater power 4 efficiency and increased levels of security, as well as other improvements and benefits. Our solution design and development process is a multi-disciplinary effort requiring expertise in multiple fields across all of our operational units.
We have used, and intend to continue to use, our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The inclusion of our website address in this report does not include or incorporate by reference into this report any information on our website.
We have used, and intend to continue to use, our investor relations website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD. The inclusion of our website address in this report does not 5 include or incorporate by reference into this report any information on our website.
Shinn held the Sr. Director of Legal, Commercial Transactions at Brocade Communication Systems, Inc. Mr. Shinn has also worked in private practice with the law firm of Wilson Sonsini Goodrich & Rosati, advising high tech and emerging growth companies on technology transactions and mergers and acquisitions. Mr.
Shinn held the position of Sr. Director of Legal, Commercial Transactions at Brocade Communication Systems, Inc. Mr. Shinn has also worked in private practice with the law firm of Wilson Sonsini Goodrich & Rosati, advising high tech and emerging growth companies on technology transactions and mergers and acquisitions. Mr.
The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that 5 file electronically with the SEC at www.sec.gov . Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at www.sec.gov . Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
Memory Interface Chips Made for high performance, reliability and power efficiency, Rambus DDR memory interface chips for server memory modules (e.g., RDIMMs) enable increased bandwidth and expanded capacity in enterprise and cloud servers. The Rambus portfolio includes DDR5 and DDR4 memory interface chipsets.
Memory Interface Chips Made for high performance, reliability and power efficiency, Rambus DDR memory interface chips for server memory modules (e.g., RDIMMs and MRDIMMs) enable increased bandwidth and expanded capacity in enterprise and cloud servers. The Rambus portfolio includes DDR5 and DDR4 memory interface chipsets.
Additionally, approximately 69% of our employees were engineers with the remaining employees in sales, general and administrative positions. None of our employees are covered by collective bargaining agreements. We believe that our future success largely depends upon our continued ability to identify, attract, motivate and retain qualified personnel.
Additionally, approximately 70% of our employees were engineers with the remaining employees in sales, general and administrative positions. None of our employees are covered by collective bargaining agreements. We believe that our future success largely depends upon our continued ability to identify, attract, motivate and retain qualified personnel.
Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There is no family relationship between any of our executive officers. Name Age Position and Business Experience Luc Seraphin 60 President & Chief Executive Officer. Mr.
Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There is no family relationship between any of our executive officers. Name Age Position and Business Experience Luc Seraphin 61 President & Chief Executive Officer. Mr.
We have a program to file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection is appropriate and would further our overall business strategy and objectives. In some instances, obtaining appropriate levels of protection may involve prosecuting continuation and counterpart patent applications based on a common parent application.
We file applications for and obtain patents in the United States and in selected foreign countries where we believe filing for such protection is appropriate and would further our overall business strategy and objectives. In some instances, obtaining appropriate levels of protection may involve prosecuting continuation and counterpart patent applications based on a common parent application.
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 for use in their own products.
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 for use in their own products.
Seraphin also holds an MBA from the University of Hartford and has completed the senior executive program of Columbia University and the Stanford Directors’ Consortium. Desmond Lynch 44 Chief Financial Officer. Mr.
Seraphin also holds an MBA from the University of Hartford and has completed the senior executive program of Columbia University and the Stanford Directors’ Consortium. Desmond Lynch 45 Chief Financial Officer. Mr.
In the memory interface chip market, we compete with international semiconductor companies, including Renesas and Montage Technology. In the Silicon IP market, Rambus competes with the in-house design teams at our potential customers, as well as with third-party IP suppliers, such as Cadence and Synopsys.
In the memory interface chip market, we compete with international semiconductor companies, including Monolithic Power System, Montage Technology, Renesas and Texas Instruments. In the Silicon IP market, Rambus competes with the in-house design teams at our potential customers, as well as with third-party IP suppliers, such as Cadence and Synopsys.
A significant number of our scientists and engineers spend all or a portion of their time on research and development. For the years ended December 31, 2023, 2022 and 2021, research and development expenses were $156.8 million, $158.8 million and $135.7 million, respectively. We expect to continue to invest substantial funds in research and development activities.
A significant number of our scientists and engineers spend all or a portion of their time on research and development. For the years ended December 31, 2024, 2023 and 2022, research and development expenses were $162.9 million, $156.8 million and $158.8 million, respectively. We expect to continue to invest substantial funds in research and development activities.
Competition The semiconductor industry is intensely competitive and is characterized by rapid technological change, short product life cycles, cyclical market patterns, price erosion, increasing foreign and domestic competition and market consolidation. Rambus competes with product offerings from various companies depending upon the particular Rambus product line.
Competition The semiconductor industry is intensely competitive and is characterized by rapid technological change, short product life cycles, cyclical market patterns, price erosion, increasing foreign and domestic competition, market consolidation and geopolitical developments that increasingly impact business. Rambus competes with product offerings from various companies depending upon the particular Rambus product line.
Prior to Rambus, from March 2019 to June 2019, he served as Vice President and General Manager at Renesas Electronics Corporation, responsible for the datacenter business unit, a premier supplier of advanced semiconductor solutions. Prior to his role at Renesas, Mr.
Prior to Rambus, from March 2019 to June 2019, he served as Corporate Vice President and General Manager at Renesas Electronics Corporation, responsible for the datacenter business unit with full profit and loss responsibilities, a premier supplier of advanced semiconductor solutions. Prior to his role at Renesas, Mr.
Rambus Silicon IP is sold primarily through our direct sales force operating out of offices in the United States, France, Japan, South Korea, Taiwan and China. Patent Licenses Our patented inventions are foundational to the semiconductor industry and are licensed to leading semiconductor and system companies around the world. Rambus continues to innovate and invent, thereby advancing semiconductor technology.
Rambus Silicon IP is sold primarily through our direct sales force operating out of offices in the United States, India, Netherlands, France, Japan, South Korea, Taiwan and China. Patent Licenses Our patented inventions are foundational to the semiconductor industry and are licensed to leading semiconductor and system companies around the world.
In addition, because our customer agreements often call for us to provide engineering support, a portion of our total engineering costs are allocated to the cost of contract and other revenue. 4 Human Capital Resources As of December 31, 2023, we had 623 employees, of which approximately 42% were in the United States and 58% in other global regions.
In addition, because our customer agreements often call for us to provide engineering support, a portion of our total engineering costs are allocated to the cost of contract and other revenue. Human Capital Resources As of December 31, 2024, we had 712 employees, of which approximately 48% were in the United States and 52% in other global regions.
We believe our patented innovations provide our customers with the legal rights and licenses to use our inventions to achieve improved performance, greater cost-effectiveness and other technological benefits in their own products and services. We intend to continue our innovation efforts and allocate significant investment in our IP development programs.
We believe our patented innovations provide our customers with the ability to achieve improved performance, lower risk, greater cost-effectiveness and other benefits in their products and services. We intend to continue our innovation efforts and allocate significant investment in our IP development programs.
As of December 31, 2023, our technologies are covered by 2,221 U.S. and foreign patents, having expiration dates ranging from 2024 to 2043. Additionally, we have 547 patent applications pending. Some of the patents and pending patent applications are derived from a common parent patent application or are foreign counterpart patent applications.
As of December 31, 2024, our semiconductor, security and other technologies are covered by 2,224 U.S. and foreign patents, with expiration dates ranging from 2025 to 2043. Additionally, we have 547 patent applications pending in various countries. Some of the patents and pending patent applications are derived from a common parent patent application or are foreign counterpart patent applications.
Our security IP offerings comprise one of the industry’s most comprehensive portfolios of solutions, including crypto cores, hardware roots of trust, high-speed protocol engines and chip provisioning technologies. We sell Silicon IP solutions to leading chip makers worldwide for integration into their SoC and FPGA designs.
Our security IP offerings comprise one of the industry’s most comprehensive portfolios of solutions, including crypto cores, hardware roots of trust, high-speed protocol engines and chip provisioning technologies. We sell Silicon IP solutions to leading chip makers worldwide for integration into their custom silicon, Application Specific Standard Products (“ASSP”) and Field Programmable Gate Array (“FPGA”) designs.
Lynch is a Chartered Accountant with the Institute of Chartered Accountants of Scotland and holds a bachelor’s degree in Accountancy and Finance from the University of Glasgow in Scotland. Sean Fan 58 Senior Vice President, Chief Operating Officer. Mr. Fan has served as the Senior Vice President, Chief Operating Officer since August 2019.
Lynch is a Chartered Accountant with the Institute of Chartered Accountants of Scotland and holds a bachelor’s degree in Accountancy and Finance from the University of Glasgow in Scotland. Sean Fan 59 Executive Vice President, Chief Operating Officer. Mr.
These licenses may also define the specific field of use where our customers may use or employ our inventions in their products. License agreements are structured with fixed or variable, or a hybrid of fixed and variable royalty payments over certain periods typically ranging up to ten years.
License agreements are structured with fixed or variable, or a hybrid of fixed and variable royalty payments over certain periods typically ranging up to ten years.
Silicon IP Rambus Silicon IP includes interface and security IP solutions that move and protect data in advanced data center, government and automotive applications. Our interface IP solutions feature both high-speed memory and chip-to-chip digital 3 Table of Contents controller IP.
Outsourcing also allows us the flexibility needed to respond to new market opportunities, simplifies our operations and significantly reduces our capital requirements. Silicon IP Rambus Silicon IP includes interface and security IP solutions that move and protect data in advanced data center, government and automotive applications. Our interface IP solutions feature both high-speed memory and chip-to-chip digital controller IP.
With a broad worldwide portfolio of patents covering memory architecture, high-speed serial links and security, we enhance our value and relevance in our target markets and create a platform for investment in product development. Our patent licenses enable our customers to use specified portions of our portfolio of patented inventions in the customer’s own digital electronics products, systems or services.
Rambus continues to innovate and invent, thereby advancing semiconductor technology. With a broad worldwide portfolio of patents covering memory architecture, high-speed serial links and security, we enhance our value and relevance in our target markets and create a platform for investment in product development.
We also inspect and test parts in our U.S.-based facilities. This outsourced manufacturing approach allows us to focus our investment and resources on the research, development, design, sale and marketing of our products. Outsourcing also allows us the flexibility needed to respond to new market opportunities, simplifies our operations and significantly reduces our capital requirements.
We operate a fabless business model and use third-party foundries and manufacturing contractors to fabricate, assemble and test our memory interface chips. We also inspect and test parts in our U.S.-based facilities. This outsourced manufacturing approach allows us to focus our investment and resources on the research, development, design, sale and marketing of our 3 Table of Contents products.
Prior to joining IDT, Mr. Fan served in various engineering and management roles with Lucent Microelectronics, Mitel Semiconductor and the National Lab of Telecom Research in China. John Shinn 55 Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer. Mr.
Prior to joining IDT, Mr. Fan served in various engineering and management roles with Lucent Microelectronics, Mitel Semiconductor and the National Lab of Telecom Research in China. Mr. Fan holds a master’s degree in Computer Engineering from the University of Cincinnati where he also conducted a PhD program study in Computer and Electrical Engineering.
In addition, this year Rambus successfully closed and extended key patent licensing agreements, solidifying our foundation of sustained cash generation to fuel investments in our product and technology roadmaps and delivering consistent return of value to stockholders.
Finally, further fueling our continuous technology investment, we successfully secured and extended key patent licensing agreements, providing a strong foundation for sustained cash generation and consistent return of value to our stockholders.
Our leading-edge DDR5 chipset solution includes the Registering Clock Driver (“RCD”), Serial Presence Detect Hubs (“SPD Hub”) and Temperature Sensors (“TS”). We sell memory interface chips directly and indirectly to memory module manufacturers, OEMs and hyperscalers worldwide through multiple channels, including our direct sales force and distributors.
We sell memory interface chips directly and indirectly to memory module manufacturers, OEMs and hyperscalers worldwide through multiple channels, including our direct sales force and distributors, and we employ sales personnel to support such operations in the United States, South Korea, Taiwan and China.
The broadening adoption of AI also creates opportunities for our silicon IP solutions. Our high-performance digital controller cores are increasingly critical to accelerated computing chips. In addition, the proliferation of application-specific silicon creates increased vulnerabilities to attack as data is distributed across systems, amplifying the need for our industry-leading security IP.
Furthermore, the pervasive adoption of AI across diverse applications is creating significant opportunities for our silicon IP portfolio. Our high-performance digital controller cores are becoming increasingly vital components in accelerated computing chips, including custom silicon chips, which are the workhorses of AI processing. The expanding attack surface in today’s accelerated computing environments necessitates robust security solutions.
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Item 1. Business Overview As an industry pioneer with over 30 years of advanced semiconductor design experience, Rambus is dedicated to addressing the challenges of accelerating and protecting data in hardware for the data center and other growing markets.
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Item 1. Business Overview 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.
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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. With the exponential increase in the complexity, size and number of advanced workloads, like generative artificial intelligence (“AI”), the demands on computing infrastructure continue to grow at an accelerated pace.
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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 signal and power integrity at increasingly extreme data rates in the data center, edge, and client markets.
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The performance gap between processors and memory is an increasingly significant bottleneck in high-performance systems. Processors and accelerators continue to increase in speed and core count, while memory latency and bandwidth lag behind, creating a “memory wall” inhibiting overall system performance improvements.
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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.
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Rambus offers a balanced and diverse portfolio of solutions across chips, silicon IP and patent licensing, each of them contributing at scale. The data center continues to be the Company’s primary focus market, demanding the highest performance and security, and represents greater than 75% of the revenue from Rambus chip and silicon IP sales.
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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.
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Benefiting from the increasing demands in data center, our product revenue, which consists primarily of memory interface chips, has grown at a 5-year compound annual growth rate of 42% from 2018 through 2023. Silicon IP has sustained momentum, driven by design wins at leading system on chip (“SoC”) customers, and is well positioned to capture the growing opportunities.
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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.
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We have sales operations in the United States, France, Japan, South Korea, Taiwan and China, where we employ sales personnel who serve our direct customers and manage our channel partners. We operate a fabless business model and use third-party foundries and manufacturing contractors to fabricate, assemble and test our memory interface chips.
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Our industry-leading security IP plays a crucial role in safeguarding data and protecting against evolving cyber threats. Rambus is committed to the sustained investment in our technology development and product roadmap to stay at the forefront of the innovation cycle and advance our product leadership.
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In 2024, we expanded our product portfolio with a new line of server power management ICs (“PMIC”) that will be increasingly important as the power-performance demands of computing continue to rise.
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In addition, we introduced the industry’s first complete chipset for next-generation DDR5 Multiplexed Ranked Dual Inline Memory Modules (“MRDIMMs”), delivering breakthrough levels of memory performance for data center and AI. Beyond the data center, cutting-edge technologies first leveraged in servers are cascading into the client market where we introduced our Client Clock Driver chip to enable state-of-the-art notebooks and desktops.
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Our leading-edge DDR5 chipset solutions include the Registering Clock Driver (“RCD”), Multiplexed Registering Clock Driver (“MRCD”), Multiplexed Data Buffer (“MDB”), Power Management Integrated Circuits (“PMIC”), Serial Presence Detect Hubs (“SPD Hub”), Temperature Sensors (“TS”), and Client Clock Driver (“CKD”).
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Our patent licenses enable our customers to use specified portions of our portfolio of patented inventions in the customer’s own digital electronics products, systems or services. These licenses may also define the specific field of use where our customers may use or employ our inventions in their products.
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Fan has served as the Executive Vice President, Chief Operating Officer since November 2024 and as the Senior Vice President, Chief Operating Officer since August 2019.
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He also holds a bachelor's degree in Computer Engineering and Telecommunications from the Beijing University of Posts & Telecom. He continued his executive management education at Stanford University and the Wharton School of Business. John Shinn 56 Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer. Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe principal factors and uncertainties that make investing in our company risky include, among others: • We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive. • Much of our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations, acquisitions or other means, our revenue may decrease substantially. • Products that fail to meet their specifications or are defective could impose significant costs on us or result in loss of business. • If we do not keep pace with technological innovations or customers’ increasing technological requirements, we may not be able to enhance our existing products and our products may not be competitive, and our revenue and operating results may suffer. • If our customers do not incorporate our technologies into their products, or if our customers’ products are not commercially successful, our business would suffer. • Our products may not be successful in new markets. • We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial condition. • The markets for semiconductor products are cyclical, and increased levels of inventory may lead to overcapacity and lower prices, and conversely, we may not be able to satisfy unexpected demand for our products. • A meaningful portion of our future revenue depends on sustaining or growing our licensing revenue and the failure to achieve such revenue would lead to a material decline in our results of operations. • Our licensing cycle is lengthy and costly, and our marketing and licensing efforts may be unsuccessful. • Some of our license agreements may convert from royalty generating to fully paid-up licenses at the expiration of their terms, or upon certain milestones, and we may not receive royalties after that time. • Future revenue is difficult to predict for several reasons, and our failure to predict revenue or revenue trends accurately may result in our stock price declining. • We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline. • A substantial portion of our revenue is derived from sources outside of the United States and this revenue and our business generally are subject to risks related to international operations that are often beyond our control. • Weak global economic conditions may adversely affect demand for the products and services of our customers and could otherwise harm our business. • Our operations are subject to the effects of a rising rate of inflation. • We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately or change our allocation of their services/capacity due to industry or other pressures could materially and adversely affect our business. • Our business and operations could suffer in the event of physical and cybersecurity breaches and incidents. • We have in the past made and may in the future make acquisitions or enter into mergers, strategic investments, sales of assets, divestitures or other arrangements that may not produce expected operational benefits or operating and financial results. • If we are unable to attract and retain qualified personnel globally, our business and operations could suffer. • Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breaches or incidents at our domestic and international locations, any one of which could result in a business stoppage and negatively affect our operating results. • In the future, we may fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations. • Unanticipated changes in our tax rates or in the tax laws, treaties and regulations could expose us to additional income tax liabilities, which could affect our operating results and financial condition. • We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption and other technology and those related to privacy and other consumer protection matters. • Litigation and government proceedings could affect our business in materially negative ways. 8 Table of Contents • If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected. • Third parties may claim that our products or services infringe on their intellectual property (“IP”) rights, exposing us to litigation that, regardless of merit, may be costly to defend. • Warranty, service level agreement and product liability claims brought against us could cause us to incur significant costs and adversely affect our operating results, as well as our reputation and relationships with customers. • Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. 9 Table of Contents Risks Associated with Our Business, Industry and Market Conditions We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive.
Biggest changeThe principal factors and uncertainties that make investing in our company risky include, among others: • We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive. • Much of our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations, acquisitions or other means, our revenue may decrease substantially. • Products that fail to meet their specifications or are defective could impose significant costs on us or result in loss of business. • We may not be successful with new product introductions and/or expanding into new markets. • If we do not keep pace with technological innovations or customers’ increasing technological requirements, we may not be able to enhance our existing products and our products may not be competitive, and our revenue and operating results may suffer. • If our customers do not incorporate our technologies into their products, or if our customers’ products are not commercially successful, our business would suffer. • We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial condition. • Our business is dependent on distributors to service our end customers. • A meaningful portion of our future revenue depends on sustaining or growing our licensing revenue and the failure to achieve such revenue would lead to a material decline in our results of operations. • Our licensing cycle is lengthy and costly, and our marketing and licensing efforts may be unsuccessful. • Some of our license agreements may convert from royalty generating to fully paid-up licenses at the expiration of their terms, or upon certain milestones, and we may not receive royalties after that time. • Future revenue is difficult to predict for several reasons, and our failure to predict revenue or revenue trends accurately may result in our stock price declining. • We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline. • A substantial portion of our revenue is derived from sources outside of the United States and this revenue and our business generally are subject to risks related to international operations that are often beyond our control. • Weak global economic conditions may adversely affect demand for the products and services of our customers and could otherwise harm our business. • Our operations are subject to the effects of inflation. • We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately or change our allocation of their services/capacity due to industry or other pressures could materially and adversely affect our business. • Our business and operations could suffer in the event of physical and cybersecurity breaches and incidents. • We have in the past made and may in the future make acquisitions or enter into mergers, strategic investments, sales of assets, divestitures or other arrangements that may not produce expected operational benefits or operating and financial results. • If we are unable to attract and retain qualified personnel globally, our business and operations could suffer. • Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breaches or incidents at our domestic and international locations, any one of which could result in a business stoppage and negatively affect our operating results. • In the future, we may fail to maintain an effective system of internal control over financial reporting or adequate disclosure controls and procedures, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations. 8 Table of Contents • Unanticipated changes in our tax rates or in the tax laws, treaties and regulations could expose us to additional income tax liabilities, which could affect our operating results and financial condition. • We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption and other technology, those related to privacy, other consumer protection matters, other import/export controls and national security matters. • Litigation and government proceedings could affect our business in materially negative ways. • If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected. • Third parties may claim that our products or services infringe on their intellectual property (“IP”) rights, exposing us to litigation that, regardless of merit, may be costly to defend. • Warranty, service level agreement and product liability claims brought against us could cause us to incur significant costs and adversely affect our operating results, as well as our reputation and relationships with customers. • Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. 9 Table of Contents Risks Associated with Our Business, Industry and Market Conditions We have traditionally operated in, and may enter other, industries that are highly cyclical and competitive.
Therefore, we may be required to commit significant resources to enhancing and developing new technology, which may include purchasing or licensing advanced design tools and test equipment, hiring additional highly qualified engineering and other technical personnel, and continuing and expanding research and development activities on existing and potential technologies.
We may therefore be required to commit significant resources to enhancing and developing new technology, which may include purchasing or licensing advanced design tools and test equipment, hiring additional highly qualified engineering and other technical personnel, and continuing and expanding research and development activities on existing and potential technologies.
There can be no assurance, however, that: • any current or future U.S. or foreign patent applications will be approved and not be challenged by third parties; • our issued patents will protect our IP and not be challenged by third parties; • the validity of our patents will be upheld; • our patents will not be declared unenforceable; • the patents of others will not have an adverse effect on our ability to do business; • Congress or the U.S. courts or foreign countries will not change the nature or scope of rights afforded patents or patent owners or alter in an adverse way the process for seeking or enforcing patents; • changes in law will not be implemented, or changes in interpretation of such laws will occur, that will affect our ability to license, protect and/or enforce our patents and other IP; 25 Table of Contents • new legal theories and strategies utilized by our competitors will not be successful; • others will not independently develop similar or competing chip interfaces or design around any patents that may be issued to us; or • factors such as difficulty in obtaining cooperation from inventors, pre-existing challenges or litigation or license or other contract issues will not present additional challenges in securing protection with respect to patents and other IP that we acquire.
There can be no assurance, however, that: • any current or future U.S. or foreign patent applications will be approved and not be challenged by third parties; • our issued patents will protect our IP and not be challenged by third parties; • the validity of our patents will be upheld; • our patents will not be declared unenforceable; • the patents of others will not have an adverse effect on our ability to do business; 25 Table of Contents • Congress or the U.S. courts or foreign countries will not change the nature or scope of rights afforded patents or patent owners or alter in an adverse way the process for seeking or enforcing patents; • changes in law will not be implemented, or changes in interpretation of such laws will occur, that will affect our ability to license, protect and/or enforce our patents and other IP; • new legal theories and strategies utilized by our competitors will not be successful; • others will not independently develop similar or competing chip interfaces or design around any patents that may be issued to us; or • factors such as difficulty in obtaining cooperation from inventors, pre-existing challenges or litigation or license or other contract issues will not present additional challenges in securing protection with respect to patents and other IP that we acquire.
Additional risks related to our acquisitions or strategic investments include, but are not limited to: • difficulty in combining the technology, products or operations of the acquired business with our business; • difficulty in integrating and retaining the acquired workforce, including key employees; • diversion of capital and other resources, including management’s attention; • assumption of liabilities and incurring amortization expenses, impairment charges to goodwill or write-downs of acquired assets; • integrating financial forecasting and controls, procedures and reporting cycles; • coordinating and integrating operations in countries in which we have not previously operated; • acquiring business challenges and risks, including, but not limited to, disputes with management and integrating international operations and joint ventures; • difficulty in realizing a satisfactory return, if any return at all; • difficulty in obtaining or inability to obtain governmental and regulatory consents and approvals, other approvals or financing; • the potential impact of complying with governmental or other regulatory restrictions placed on an acquisition; • the potential impact on our stock price and financial results if we are unable to obtain regulatory approval for an acquisition, are required to pay reverse breakup fees or are otherwise unable to close an acquisition; • failure and costs associated with the failure to consummate a proposed acquisition or other strategic investment; • legal proceedings initiated as a result of an acquisition or investment; • the potential for our acquisitions to result in dilutive issuances of our equity securities; • the potential variability of the amount and form of any performance-based consideration; • uncertainties and time needed to realize the benefits of an acquisition or strategic investment, if at all; • negative changes in general economic conditions in the regions or the industries in which we or our acquired business operate; • the need to determine an alternative strategy if an acquisition does not meet our expectations; • potential failure of our due diligence processes to identify significant issues with the acquired assets or company; and • impairment of relationships with, or loss of our acquired business’ employees, vendors and customers, as a result of our acquisition or investment.
Additional risks related to our acquisitions or strategic investments include, but are not limited to: • difficulty in combining the technology, products or operations of the acquired business with our business; • difficulty in integrating and retaining the acquired workforce, including key employees; • diversion of capital and other resources, including management’s attention; • assumption of liabilities and incurring amortization expenses, impairment charges to goodwill or write-downs of acquired assets; • integrating financial forecasting and controls, procedures and reporting cycles; • coordinating and integrating operations in countries in which we have not previously operated; • acquiring business challenges and risks, including, but not limited to, disputes with management and integrating international operations and joint ventures; • difficulty in realizing a satisfactory return, if any return at all; • difficulty in obtaining or inability to obtain governmental and regulatory consents and approvals, other approvals or financing; • the potential impact of complying with governmental or other regulatory restrictions placed on an acquisition; • the potential impact on our stock price and financial results if we are unable to obtain regulatory approval for an acquisition, are required to pay reverse breakup fees or are otherwise unable to close an acquisition; • failure and costs associated with the failure to consummate a proposed acquisition or other strategic investment; • legal proceedings initiated as a result of an acquisition or investment; • the potential for our acquisitions to result in dilutive issuances of our equity securities; • the potential variability of the amount and form of any performance-based consideration; • uncertainties and time needed to realize the benefits of an acquisition or strategic investment, if at all; • negative changes in general economic conditions in the regions or the industries in which we or our acquired business operate; 20 Table of Contents • the need to determine an alternative strategy if an acquisition or strategic investment does not meet our expectations; • potential failure of our due diligence processes to identify significant issues with the acquired assets or company; and • impairment of relationships with, or loss of our acquired business’ employees, vendors and customers, as a result of our acquisition or investment.
In addition, we may not be able to expand our operations in a sufficiently timely manner, procure adequate resources and raw materials, locate suitable third-party suppliers or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers, and our current or future business could be materially and adversely affected.
In addition, we may not be able to expand our operations in a sufficiently timely manner, procure adequate resources and raw materials, locate suitable third-party suppliers or respond effectively to changes in demand for our existing products or to demand for new products requested by our customers and/or distributors, and our current or future business could be materially and adversely affected.
While most of our contracts with our customers and distributors include lead time requirements and cancellation penalties that are designed to protect us from misalignment between customer orders and inventory levels, we must nonetheless make some predictions when we place orders with our manufacturers and we are not always able to make adjustments to align with our inventory needs.
While most of our contracts with our customers and distributors include lead time requirements and cancellation penalties that are designed to protect us from misalignment between orders and inventory levels, we must nonetheless make some predictions when we place orders with our manufacturers and we are not always able to make adjustments to align with our inventory needs.
The theft or other unauthorized acquisition of, unauthorized use or publication of or access to our IP and/or confidential business information could harm our competitive position and reputation, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.
The theft or other unauthorized acquisition of, unauthorized use, publication or other processing of or access to our IP and/or confidential business information could harm our competitive position and reputation, reduce the value of our investment in research and development and other strategic initiatives or otherwise adversely affect our business.
In addition, some of our material license agreements may contain rights by the customer to terminate for convenience, or upon certain other events, such as change of control, material breach, insolvency or bankruptcy proceedings.
In addition, our license agreements may contain rights by the customer to terminate for convenience, or upon certain other events, such as change of control, material breach, insolvency or bankruptcy proceedings.
Furthermore, any adverse determination or other resolution in litigation could result in our losing certain rights beyond the 24 Table of Contents rights at issue in a particular case, including, among other things: our being effectively barred from suing others for violating certain or all of our IP rights; our patents being held invalid or unenforceable or not infringed; our being subjected to significant liabilities; our being required to seek licenses from third parties; our being prevented from licensing our patented technology; or our being required to renegotiate with current customers on a temporary or permanent basis.
Furthermore, any adverse determination or other resolution in litigation could result in our losing certain rights beyond the rights at issue in a particular case, including, among other things: our being effectively barred from suing others for violating certain or all of our IP rights; our patents being held invalid or unenforceable or not infringed; our being subjected to significant liabilities; our being required to seek licenses from third parties; our being prevented from licensing our patented technology; or our being required to renegotiate with current customers on a temporary or permanent basis.
Our international operations and revenue are subject to a variety of risks that are beyond our control, including: • hiring, maintaining and managing a workforce and facilities remotely and under various legal systems, including compliance with local labor and employment laws; • non-compliance with our code of conduct or other corporate policies; • compliance with and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, sanctions and anti-corruption laws, export and import laws and similar rules and regulations; • natural disasters, acts of war, terrorism, widespread global pandemics or illness, such as COVID-19 and its variants, or security breaches or incidents; • export controls, tariffs, import and licensing restrictions, climate-change regulations and other trade barriers; • profits, if any, earned abroad being subject to local tax laws and not being repatriated to the United States or, if repatriation is possible, limited in amount; • adverse tax treatment of revenue from international sources and changes to tax laws and regulations, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions; • longer payment cycles and greater difficulty in collecting accounts receivable; • unanticipated changes in foreign government laws and regulations including imposition of bans on sales of goods or services to one or more of our significant foreign customers; • increased financial accounting and reporting burdens and complexities; • lack of protection of our IP and other contract rights by jurisdictions in which we may do business to the same extent as the laws of the United States; • potential vulnerability to computer system, internet or other systemic attacks, such as denial of service, viruses or other malware which may be caused by criminals, terrorists or other groups or sophisticated organizations; • social, political and economic instability; • geopolitical instability, including changes in diplomatic and trade relationships, in particular with China and Taiwan, and potentially in Israel and the Middle East; and • cultural differences in the conduct of business both with customers and in conducting business in our international facilities and international sales offices.
Our international operations and revenue are subject to a variety of risks that are beyond our control, including: • hiring, maintaining and managing a workforce and facilities remotely and under various legal systems, including compliance with local labor and employment laws; • non-compliance with our code of conduct or other corporate policies; • compliance with and international laws involving international operations, including the Foreign Corrupt Practices Act of 1977, as amended, sanctions and anti-corruption laws, export and import laws and similar rules and regulations; • natural disasters, acts of war, terrorism, widespread global pandemics or illness, such as COVID-19 and its variants, or security breaches or incidents; • export controls, tariffs, import and licensing restrictions, climate-change regulations and other trade barriers; • profits, if any, earned abroad being subject to local tax laws and not being repatriated to the United States or, if repatriation is possible, limited in amount; • adverse tax treatment of revenue from international sources and changes to tax laws and regulations, including being subject to foreign tax laws and being liable for paying withholding, income or other taxes in foreign jurisdictions; 15 Table of Contents • longer payment cycles and greater difficulty in collecting accounts receivable; • unanticipated changes in foreign government laws and regulations, including imposition of bans on sales of goods or services to one or more of our significant foreign customers; • increased financial accounting and reporting burdens and complexities; • lack of protection of our IP and other contract rights by jurisdictions in which we may do business to the same extent as the laws of the United States; • potential vulnerability to computer system, internet or other systemic attacks, such as denial of service, viruses or other malware which may be caused by criminals, terrorists or other groups or sophisticated organizations; • social, political and economic instability; • geopolitical instability, including changes in diplomatic and trade relationships, in particular with China and Taiwan, and potentially in Israel and the Middle East; • disruptions in global logistics, including air, waterway and other delivery methods; and • cultural differences in the conduct of business both with customers and in conducting business in our international facilities and international sales offices.
Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers and our business, operating results and financial position. Our operations are subject to the effects of a rising rate of inflation.
Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our solutions to existing and prospective customers and our business, operating results and financial position. Our operations are subject to the effects of inflation.
In addition, our patents will continue to expire according to their terms, with expected expiration dates ranging from 2024 to 2043. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations or cash flows.
In addition, our patents will continue to expire according to their terms, with expected expiration dates ranging from 2025 to 2043. Our failure to continuously develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business, financial condition, results of operations, or cash flows.
While we are not currently involved in IP litigation, any future litigation, whether or not determined in our favor or settled by us, would be expected to be costly, may cause delays applicable to our business (including delays in negotiating licenses with other actual or potential customers), would be expected to discourage future design partners, would tend to impair adoption of our existing technologies and would divert the efforts and attention of our management and technical personnel from other business operations.
While we are not currently involved in IP litigation, any future litigation, whether or not determined in our favor or settled by us, would be expected to be costly, may cause delays applicable to our business (including delays in negotiating licenses with other actual or potential customers), would be expected to discourage future design partners, would tend to impair adoption of our existing technologies and would divert the efforts 24 Table of Contents and attention of our management and technical personnel from other business operations.
Some of these third parties are, and may be, our sole manufacturer or sole source of certain production materials and may be located in regions subject to geopolitical uncertainty ( e.g. , tensions between China and Taiwan and evolving export/import restrictions).
Some of these third parties are, and may be, our sole manufacturer or sole source of certain production materials and may be located in regions subject to geopolitical uncertainty ( e.g. , tensions between China and Taiwan and evolving export/import and national security restrictions).
In the event of any security breach or incident, including any breach or incident that results in inappropriate access to, or loss, corruption, unavailability or unauthorized acquisition, disclosure or other processing of our or our customers’ confidential information or any personally identifiable information we or our third-party service providers maintain, including that of our employees, we could suffer a loss of IP or loss of data, may be subject to claims, liability and proceedings and may incur liability and otherwise suffer financial harm.
In the event of any security breach or incident, including any breach or incident that results in inappropriate access to, or loss, corruption, unavailability or unauthorized acquisition, disclosure or other processing of our or our customers’ confidential information or any personal information we or our third-party service providers maintain, including that of our employees, we could suffer a loss of IP or loss of data, may be subject to claims, liability and proceedings and may incur liability and otherwise suffer financial harm.
The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the imposition of large 18 Table of Contents deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.
The successful assertion of one or more large claims against us that exceed available insurance coverage, the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, or denials of coverage, could have a material adverse effect on our business, including our financial condition, results of operations and reputation.
We generally incur significant marketing and sales expenses prior to entering into our license agreements, generating a license fee and establishing a royalty stream from 13 Table of Contents each customer. The length of time it takes to establish a new licensing relationship can take many months or even years.
We generally incur significant marketing and sales expenses prior to entering into our license agreements, generating a license fee and establishing a royalty stream from each customer. The length of time it takes to establish a new licensing relationship can take many months or even years.
In the course of our participation in the development of emerging standards for some of our present and future products, we may be obligated to grant to all other participants a license to our patents that are essential to the practice of those standards on reasonable and non-discriminatory, or RAND, terms.
In the course of our participation in the development of emerging standards for some of our present and future products, we may be obligated to grant to all other participants a license to our patents that are essential to the practice of those standards on reasonable and non-discriminatory, or RAND, terms, or on a royalty-free basis.
In addition, while some of our license agreements provide for fixed, quarterly royalty payments, many of our license agreements provide for volume-based royalties and may also be subject to caps on royalties in a given period. The sales volume and prices of our customers’ products in any given period can be difficult to predict.
In addition, while some of our license agreements provide for fixed, quarterly royalty payments, many of our license agreements provide for volume-based royalties and may also be subject to caps on royalties or other adjustments in a given period. The sales volume and prices of our customers’ products in any given period can be difficult to predict.
From time to time, we may also divest certain assets. These divestitures or proposed divestitures may involve the loss of revenue and/or potential customers, and the market for the associated assets may dictate that we sell such assets for less than 20 Table of Contents what we paid.
From time to time, we may also divest certain assets. These divestitures or proposed divestitures may involve the loss of revenue and/or potential customers, and the market for the associated assets may dictate that we sell such assets for less than what we paid.
Our target customers are companies that develop and market high volume business and consumer products in semiconductors, computing, data centers, networks, tablets, handheld devices, mobile applications, gaming and graphics, high-definition televisions, cryptography and data security.
Our target customers are companies that develop and market high volume business and consumer products in semiconductors, computing, data centers, networks, artificial intelligence (“AI”), tablets, handheld devices, mobile applications, gaming and graphics, high-definition televisions, cryptography and data security.
In the event that we order products that we are unable to sell due to a decrease in orders, unexpected order cancellations, import/export 12 Table of Contents restrictions or product returns, we may have excess inventory which, if not sold, may need to be written down or would result in a decrease in our revenue in future periods.
In the event that we order products that we are unable to sell due to a decrease in orders, unexpected order cancellations, import/export restrictions or product returns, we may have excess inventory which, if not sold, may need to be written down or would result in a decrease in our revenue in future periods.
In addition, if we were to combine our proprietary software solutions with open source software in certain 22 Table of Contents manners, we could, under certain open source licenses, be required to publicly release the source code of our proprietary software solutions.
In addition, if we were to combine our proprietary software solutions with open source software in certain manners, we could, under certain open source licenses, be required to publicly release the source code of our proprietary software solutions.
Any adjustment that reduces royalties from current customers or licensees may have a material adverse effect on our operating results and financial condition. We continue to negotiate with customers and prospective customers to enter into license agreements.
Any adjustment that reduces royalties from current customers or licensees may have a material adverse effect on our operating results and financial condition. 10 Table of Contents We continue to negotiate with customers and prospective customers to enter into license agreements.
Our data, corporate systems, third-party systems and security measures and those of our customers or vendors may be subject to breaches or intrusions due to the actions of outside parties, employee error, malfeasance, a combination of these or otherwise, including social engineering and employee and contractor error or malfeasance, especially as certain of our employees engage in work from home arrangements, and, as a result, an unauthorized party may obtain access to our systems, networks or data, including IP and confidential business information of ourselves and our customers.
Our data, corporate systems, third-party systems and security measures and those of our customers or the third parties that support us or our services may be subject to breaches or intrusions due to the actions of outside parties, employee error, malfeasance, a combination of these or otherwise, including social engineering and employee and contractor error or malfeasance, especially as certain of our 18 Table of Contents employees engage in work from home arrangements, and, as a result, an unauthorized party may obtain access to our systems, networks or data, including IP and confidential business information of ourselves and our customers.
Any breaches, defects, errors or vulnerabilities in our products and services could result in: • expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate or work around breaches, errors, bugs or defects or to address and eliminate vulnerabilities; • financial liability to customers for breach of certain contract provisions, including indemnification obligations; • loss of existing or potential customers; • product shipment restrictions or prohibitions to certain customers; • delayed or lost revenue; • delay or failure to attain market acceptance; • negative publicity, which would harm our reputation; and • litigation, regulatory inquiries or investigations that would be costly and harm our reputation.
Any breaches, defects, errors or vulnerabilities in our products and services could result in: • expenditure of significant financial and research and development resources in efforts to analyze, correct, eliminate or work around breaches, errors, bugs or defects or to address and eliminate vulnerabilities; • financial liability to customers for breach of certain contract provisions, including indemnification obligations; • loss of existing or potential customers; • product shipment restrictions or prohibitions to certain customers; • delayed or lost revenue; • delay or failure to attain market acceptance; • negative publicity, which would harm our reputation; and • litigation, regulatory inquiries or investigations that would be costly and harm our reputation. 19 Table of Contents Changes in accounting principles and guidance could result in unfavorable accounting charges or effects.
Our customers may cancel orders for many reasons, including but not limited to trends in the global economy, business challenges, supply chain constraints, longer than expected inventory digestion or other changes in their business requirements.
Our customers and distributors may also fail to place orders or cancel orders for many reasons, including but not limited to trends in the global economy, business challenges, supply chain constraints, longer than expected inventory digestion or other changes in their business requirements.
The GDPR, CCPA and other existing and proposed laws and regulations can be costly and challenging to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs and subject us to claims or other remedies.
Existing and proposed laws and regulations relating to these matters can be costly and challenging to comply with and can delay or impede the development of new products, result in negative publicity, increase our operating costs and subject us to claims or other remedies.
Any future agreement may trigger our obligation to offer comparable terms or modifications to agreements with our existing customers, which may be 10 Table of Contents less favorable to us than the existing license terms.
Any future agreement may trigger our obligation to offer comparable terms or modifications to agreements with our existing customers, which may be less favorable to us than the existing license terms.
Inflationary pressures and shortages have increased, and may continue to increase, costs for materials, supplies and labor, which could cause our expenses to increase at a rate faster 15 Table of Contents than our product pricing to recover such increases, which may further result in a material adverse effect on our business, financial condition or results of operations.
Inflationary pressures and shortages have in the past increased, and may increase in the future, costs for materials, supplies and labor, which could cause our expenses to increase at a rate faster than our product pricing to recover such increases, which may further result in a material adverse effect on our business, financial condition or results of operations.
Difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. As a result, downturns in the worldwide economy could have a material adverse effect on our business, results of operations or financial condition.
Difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. As a result, downturns in, or other events or uncertainty that impact, the worldwide economy could have a material adverse effect on our business, results of operations and financial condition.
For the years ended December 31, 2023, 2022 and 2021, revenue received from our international customers constituted approximately 62%, 39% and 36%, respectively, of our total revenue. We expect that future revenue derived from international sources will continue to represent a significant portion of our total revenue.
For the years ended December 31, 2024, 2023 and 2022, revenue from our international customers constituted approximately 64%, 62% and 39%, respectively, of our total consolidated revenue. We expect that future revenue derived from international sources will continue to represent a significant portion of our total revenue.
If our customers experience reduced demand or excess inventory as a result of global or regional economic conditions or otherwise, this could result in reduced royalty revenue and/or product sales and our business and results of operations could be harmed.
Adverse economic conditions could also affect demand for our products and our customers’ products. If our customers experience reduced demand or excess inventory as a result of global or regional economic conditions or otherwise, this could result in reduced royalty revenue and/or product sales and our business and results of operations could be harmed.
Research and development expenses account for a significant portion of our operating expenses. Additionally, the United States is experiencing an acute workforce shortage of qualified applicable talent, which in turn, has created a competitive wage environment that may increase our operating costs.
Research and development expenses account for a significant portion of our operating expenses. Additionally, the United States has recently experienced an acute workforce 16 Table of Contents shortage of qualified applicable talent, which in turn has created a competitive wage environment that may increase our operating costs.
Changes in accounting principles and guidance could result in unfavorable accounting charges or effects. We prepare our financial statements in accordance with accounting principles generally accepted in the United States and these principles are subject to interpretation by the SEC, the Financial Accounting Standards Board (“FASB”) and various bodies formed to interpret and create appropriate accounting principles and guidance.
We prepare our financial statements in accordance with accounting principles generally accepted in the United States and these principles are subject to interpretation by the SEC, the Financial Accounting Standards Board (“FASB”) and various bodies formed to interpret and create appropriate accounting principles and guidance.
Even after successful qualification and sales of a product to a customer, a subsequent revision in third-party manufacturing processes may require a new qualification process with our customers, which may result in delays and in our holding excess or obsolete inventory.
Even after successful qualification and sales of a product to a customer, a subsequent revision in third-party manufacturing processes or in customer requirements may require a new qualification process with our customers or changes to our yield or margin profiles, which may result in delays, our holding of excess or obsolete inventory, or other business challenges.
In addition, the U.S. government has announced controls affecting the ability to send certain products and technology related to semiconductors, semiconductor manufacturing and supercomputing to China without an export license and added additional entities to restricted party lists.
In addition, the U.S. government has implemented controls affecting the ability to send certain products and technology related to semiconductors, semiconductor manufacturing and supercomputing to China without an export license and added additional entities to restricted party lists in addition to other import/export and national security laws and regulations.
While the Company currently has not been materially adversely impacted by these new restrictions, we may be impacted in the future if such controls are expanded to cover our key products/markets. We currently have international business, business development, and design operations in Bulgaria, Canada, China, India, Finland, France, the Netherlands, South Korea, and Taiwan.
We may be impacted by any of these current or new restrictions in the future if such controls are expanded to cover our key products/markets. We currently have international business, business development, and design operations in Bulgaria, Canada, China, Finland, France, India, the Netherlands, South Korea, and Taiwan.
We may be subject to legal claims or regulatory matters involving consumer, stockholder, employment, competition, IP and other issues on a global basis. Litigation can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty.
We have been and may be subject to legal claims or regulatory matters involving consumer, stockholder class action and derivative, employment, competition, IP and other issues on a global basis. Litigation, such as we experienced in our history, can be lengthy, expensive and disruptive to our operations, and results cannot be predicted with certainty.
We are also subject to increased inventory risks and costs because we build our products based on forecasts provided by customers before receiving purchase orders for the product.
We place orders with our manufacturers based on existing and expected orders from our customers and distributors for particular products. We are also subject to increased inventory risks and costs because we build our products based on forecasts provided by our customers and distributors before receiving purchase orders for the product.
In addition, many jurisdictions are actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.
If we are subject to additional tax liabilities, our financial performance may be adversely affected. In addition, many jurisdictions are actively considering changes to existing tax laws or have proposed or enacted new laws that could increase our tax obligations in countries where we do business or cause us to change the way we operate our business.
We may in the future experience periods of customer inventory adjustments that may adversely affect our operating results.
We may in the future experience periods of inventory adjustments by our customers and distributors that may adversely affect our operating results.
Current and future uncertainty in the worldwide economy due to inflation, geopolitics, major central bank policies including interest rate increases or related changes, public health crises or other global factors could adversely affect our business. Adverse economic conditions could also affect demand for our products and our customers’ products.
Current and future uncertainty in the worldwide economy due to inflation, geopolitics, major central bank policies, including interest rate changes, public health crises or other global factors, could adversely affect our business.
From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products or alleging that these companies have violated the terms of an open source license.
We use open source software in our services and we intend to continue to use open source software in the future. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their products or alleging that these companies have violated the terms of an open source license.
While we have managed prior product transitions and have previously sold multiple generations of products at the same time, these transitions are difficult to forecast and may result in under-supply or over-supply of inventory by product generation, which may negatively impact revenue and inventory reserves. Our products may not be successful in new markets.
While we have managed prior product transitions and have previously sold multiple generations of products at the same time, these transitions are difficult to forecast and may result in under-supply or over-supply of inventory by product generation, which may negatively impact revenue and inventory reserves. Our business is dependent on distributors to service our end customers.
These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause us to lose customers, any of which could materially adversely affect our business. 17 Table of Contents Certain software and/or IP blocks that we use in or with some of our products is licensed from third parties and, for that reason, may not be available to us in the future, which has the potential to delay product development and production or cause us to incur additional expense, which could materially adversely affect our business, financial condition, operating results and cash flow.
Certain software and/or IP blocks that we use in or with some of our products are licensed from third parties and, for that reason, may not be available to us in the future; this has the potential to delay product development and production or cause us to incur additional expense, which could materially adversely affect our business, financial condition, operating results and cash flow.
We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. A disruption in our relationship with any of our customers could adversely affect our business.
Our customers’ demand for our products may fluctuate due to factors beyond our control. We could experience fluctuations in our customer base or the mix of revenue by customer as markets and strategies evolve. A disruption in our relationship with any of our customers could adversely affect our business.
Many of our acquisitions or strategic investments entail a high degree of risk, including those involving new areas of technology and such investments may not become accretive for several years after the date of the investment, if at all.
For example, we acquired Hardent, Inc. in May 2022. We also divested our PHY IP group in September 2023. Many of our acquisitions or strategic investments entail a high degree of risk, including those involving new areas of technology and such investments may not become accretive for several years after the date of the investment, if at all.
We also rely on our network infrastructure and technology systems for operational support and business activities which are subject to physical and cyber damage, and also susceptible to other related vulnerabilities common to networks and computer systems. New epidemics, pandemics or outbreaks of novel diseases may arise at any time.
We also rely on our network infrastructure and technology systems for operational support and business activities which are subject to physical and cyber damage, and also susceptible to other related vulnerabilities common to networks and computer systems.
Changing laws, regulations and standards relating to corporate governance and public disclosure have historically created uncertainty for companies such as ours.
Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. Changing laws, regulations and standards relating to corporate governance and public disclosure have historically created uncertainty for companies such as ours.
Correctly identifying the key factors affecting business conditions and predicting future events is an inherently uncertain process. Any guidance that we provide may not always be accurate, or may vary from actual results, due to our inability to correctly identify and quantify risks and uncertainties to our business and to quantify their impact on our financial performance.
Any guidance that we provide may not always be accurate, or may vary from actual results, due to our inability to correctly identify and quantify risks and uncertainties to our business and to quantify their impact on our financial performance.
In addition, our efforts to expand into new markets subject us to additional risks. We may have limited or no experience in new products and markets, and our customers may not adopt our new offerings. These and other new offerings may present new and difficult challenges, which could negatively affect our operating results.
In addition, our efforts to introduce new products and/or expand into new markets subject us to additional risks. We may have limited or no experience in new products and markets, and our customers may not adopt our new offerings and/or new customers may not adopt our offerings.
Much of our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations or acquisitions, our revenue may decrease substantially. We have a high degree of revenue concentration.
These and other new offerings may present new and difficult challenges, which could negatively affect our operating results. Much of our revenue is concentrated in a few customers, and if we lose any of these customers through contract terminations, acquisitions or other means, our revenue may decrease substantially. We have a high degree of revenue concentration.
From time to time, we use limited financial instruments to hedge foreign exchange rate risk, however such instruments may not be sufficient to cover such risk. 14 Table of Contents Trade-related government actions, whether implemented by the United States, China, the European Union or other countries, that impose barriers or restrictions impacting our ability to sell or ship products to certain customers may have a negative impact on our financial condition and results of operations.
Trade-related government actions, whether implemented by the United States, China, the European Union or other countries, that impose barriers or restrictions impacting our ability to sell or ship products to certain customers may have a negative impact on our financial condition and results of operations.
Our top five customers for each reporting period represented approximately 62%, 58% and 56% of our revenue for the years ended December 31, 2023, 2022 and 2021, respectively. We expect to continue to experience significant revenue concentration for the foreseeable future. Our customers’ demand for our products may fluctuate due to factors beyond our control.
Our top five customers for each reporting period represented approximately 62% of our consolidated revenue for both the years ended December 31, 2024 and 2023 and 58% of our consolidated revenue for the year ended December 31, 2022. We expect to continue to experience significant revenue concentration for the foreseeable future.
Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and, therefore, could materially adversely affect our business, financial condition, operating results and cash flow. We use open source software in our services and we intend to continue to use open source software in the future.
If we are unable to successfully implement the information systems enhancements as planned, our operating results could be negatively impacted. Certain software we use is from open source code sources, which, under certain circumstances, may lead to unintended consequences and therefore could materially adversely affect our business, financial condition, operating results and cash flow.
Further, we are continuing to expand into new segments and if our memory interface chips fail to achieve acceptance by customers in such segments, then our business could suffer as a result. Changes in our customers’ order patterns could result in us holding excess quantities of inventory which could result in us recording reserves for excess and obsolete inventory.
Further, we are continuing to expand into new segments and if our memory interface chips fail to achieve acceptance by customers in such segments, then our business could 12 Table of Contents suffer as a result.
Furthermore, such disruption in the global financial markets may reduce our ability to access capital or our customers’ ability to pay us for past or future purchases, which could negatively affect our liquidity. 21 Table of Contents We and our suppliers could be affected by laws and regulations enacted in response to concerns regarding climate change, conflict minerals, responsible sourcing practices, public health crises, contagious disease outbreaks or other matters, which could limit the supply of our materials and/or increase the cost.
We and our suppliers could be affected by laws and regulations enacted in response to concerns regarding climate change, conflict minerals, responsible sourcing practices, public health crises, contagious disease outbreaks or other matters, which could limit the supply of our materials and/or increase the cost.
As a result of the necessary interdependence within our network of manufacturing and packaging facilities, an operational disruption at one of our or a subcontractor’s facilities may have a disproportionate impact on our ability to produce many of our products.
As a result of the necessary interdependence within our network of manufacturing and packaging facilities, an operational disruption at one of our or a subcontractor’s facilities may have a disproportionate impact on our ability to produce many of our products. 17 Table of Contents From time to time, there have been disruptions in our subcontractors’ operations as a result of power outages, improperly functioning equipment, disruptions in supply of raw materials or components or equipment failures.
Any such reserves would have an adverse effect on our operating results and financial condition. We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial condition.
We purchase inventory in advance based on expected demand for our products, and if demand is not as expected, we may have insufficient or excess inventory, which could adversely impact our financial condition. As a fabless semiconductor company, we purchase our inventory from third-party manufacturers in advance of selling our products.
We and our service providers may face difficulties or delays in identifying or responding to any actual or perceived security breach or incident.
Geopolitical tensions, instability and conflicts may increase the cybersecurity risks that we, our customers, and the third parties that support us face. We and our service providers may face difficulties or delays in identifying or responding to any actual or perceived security breach or incident.
In particular, to the extent we do not have sufficient wafer and packaging substrate firm commitments from our third-party suppliers or they are otherwise unable to provide such services and materials, we may not obtain the materials needed on our desired timelines or at reasonable prices. 16 Table of Contents Large swings in demand could exceed our contracted supply and/or our suppliers’ capacity to meet those demand changes resulting in a shortage of parts, materials or capacity needed to manufacture our products.
For example, to the extent we do not have sufficient wafer and packaging substrate firm commitments from our third-party suppliers or they are otherwise unable to provide such services and materials, we may not obtain the materials needed on our desired timelines or at reasonable prices.
The COVID-19 pandemic or other disease outbreak may continue to adversely affect the economies and financial markets of many countries, resulting in an economic downturn that may impact overall technology spending, adversely affecting demand for our products and impacting our operating results.
New epidemics, pandemics or outbreaks of novel diseases may arise at any time, and may adversely affect the economies and financial markets of many countries, resulting in an economic downturn that may impact overall technology spending, demand for our products and our operating results.
Technological 11 Table of Contents advances could render our products and technologies less competitive or obsolete, and we may not be able to respond effectively to the technological requirements of evolving markets.
Technological advances, the introduction of new products and services, including AI, and new design techniques could adversely affect our business unless we are able to adapt to changing conditions. Technological advances could render our products and technologies less competitive or obsolete, and we may not be able to respond effectively to the technological requirements of evolving markets.
In the event that our predictions are inaccurate due to unexpected increases in orders or our manufacturers are unable to provide the inventory that we require, we may have insufficient inventory to meet our customers’ demands. In addition, a perceived negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory.
In the event that our predictions are inaccurate due to unexpected increases in orders or our manufacturers are unable to provide the inventory that we require, we may have insufficient inventory to meet our customers’ and distributors’ demands.
Any of the foregoing items could have a material adverse effect on our operating results and financial condition. If we do not keep pace with technological innovations or customers’ increasing technological requirements, we may not be able to enhance our existing products and our products may not be competitive, and our revenue and operating results may suffer.
If we do not keep pace with technological innovations or customers’ increasing technological requirements, we may not be able to enhance our existing products and our products may not be competitive, and our revenue and operating results may suffer. We operate in rapidly changing, highly competitive markets.
Additionally, our information systems may not support new business models and initiatives and significant investments could be required in order to upgrade them. Delays in adapting our information systems to address new business models and accounting standards could limit the success or result in the failure of such initiatives and impair the effectiveness of our internal controls.
Delays in adapting our information systems to address new business models and accounting standards could limit the success or result in the failure of such initiatives and impair the effectiveness of our internal controls. Even if we do not encounter these adverse effects, the implementation of these enhancements may be much more costly than we anticipated.
If we inaccurately assess market conditions for our products, we could have insufficient inventory to meet our customer demands resulting in loss of revenue.
In addition, a perceived negative trend in market conditions could lead us to decrease the manufacturing volume of our products to avoid excess inventory. If we inaccurately assess market conditions for our products, we could have insufficient inventory to meet the demands of our customers and distributors, resulting in loss of revenue.
For example, for any pending or completed acquisitions, we may discover unidentified issues not discovered in due diligence, and we may be subject to regulatory approvals or liabilities that are not covered by indemnification protection or become subject to litigation. 19 Table of Contents Achieving the anticipated benefits of business acquisitions depends in part upon our ability to integrate the acquired businesses in an efficient and effective manner and achieve anticipated synergies, and we may not be successful in these efforts.
For example, for any pending or completed acquisitions, we may discover unidentified issues not discovered in due diligence, and we may be subject to regulatory approvals or liabilities that are not covered by indemnification protection or become subject to litigation.
Some of our agreements provide for indemnification, and some require us to provide technical support and information to a customer that is involved in litigation involving use of our technology. In addition, we may be exposed to indemnification obligations, risks and liabilities that were unknown at the time that we acquired assets or businesses for our operations.
In addition, we may be exposed to indemnification obligations, risks and liabilities that were unknown at the time that we acquired assets or businesses for our operations. Any of these indemnification and support obligations could result in substantial and material expenses.
Risks Associated with Litigation, Regulation and Our Intellectual Property We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption and other technology and those related to privacy and other consumer protection matters.
Any of these developments or changes in U.S. federal, state or international tax laws or tax rulings could adversely affect our effective tax rate and our operating results. 23 Table of Contents Risks Associated with Litigation, Regulation and Our Intellectual Property We are subject to various government restrictions and regulations, including on the sale of products and services that use encryption and other technology, those related to privacy, other consumer protection matters, other import/export controls and national security matters.
The loss of any of our key personnel, or our inability to attract, integrate and retain qualified employees who join us organically and through acquisitions, could require us to dedicate significant financial and other resources to such personnel matters, disrupt our operations and seriously harm our operations and business.
The loss of any of our key personnel, or our inability to attract, integrate and retain qualified employees who join us organically and through acquisitions, could require us to dedicate significant financial and other resources to such personnel matters, disrupt our operations and seriously harm our operations and business. 21 Table of Contents Our operations are subject to risks of natural disasters, acts of war, terrorism, widespread illness or security breaches or incidents at our domestic and international locations, any one of which could result in a business stoppage and negatively affect our operating results.
Volatility in the trading price of our common stock could also result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources. Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.
Investors in our common stock may not realize any return on their investment in us and may lose some or all of their investment. Volatility in the trading price of our common stock could also result in the filing of securities class action litigation matters, which could result in substantial costs and the diversion of management time and resources.
Additionally, climate change concerns and the potential resulting environmental impact may result in new environmental, health and safety laws and regulations that may affect us, our suppliers and our customers.
Our failure to comply with export and use regulations concerning encryption technology could subject us to sanctions and penalties, including fines, and suspension or revocation of export or import privileges. Additionally, climate change concerns and the potential resulting environmental impact may result in new environmental, health and safety laws and regulations that may affect us, our suppliers and our customers.
In addition, the United States and other countries have imposed export controls that prohibit the export of encryption and other technology to certain countries, entities and individuals. Our failure to comply with export and use regulations concerning encryption technology could subject us to sanctions and penalties, including fines, and suspension or revocation of export or import privileges.
Government restrictions, or changes to the products or services of our customers to comply with such restrictions, could delay or prevent the acceptance and use of such customers’ products and services. In addition, the United States and other countries have imposed export controls that prohibit the export of encryption and other technology to certain countries, entities and individuals.
Participation in standards setting organizations may subject us to IP licensing requirements or limitations that could adversely affect our business and prospects.
We generally attempt to limit the maximum amount of indemnification or liability that we could be exposed to under our contracts, however, this is not always possible. Participation in standards setting organizations may subject us to IP licensing requirements or limitations that could adversely affect our business and prospects.
Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur.
Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors in turn could further reduce our revenue, subject us to liability and cause us to issue credits or cause us to lose customers, any of which could materially adversely affect our business.
The GDPR and CCPA, new and evolving laws such as the CPRA and other future changes in laws or regulations relating to cross-border data transfer, data localization and other aspects of privacy, data protection and information security may require us to modify our existing practices with respect to the collection, use, disclosure and other processing of data.
Existing and potential future laws and regulations relating to these matters may require us to modify our practices with respect to the collection, use, disclosure and other processing of data.
Various target markets for our products, such as AI, may develop slower than anticipated or could utilize competing technologies. The markets for some of these products depend in part upon the continued development and deployment of various other technologies, which may or may not address the needs of the users of these products.
The markets for some of these products depend in part upon the continued development and deployment of various other technologies, which may or may not address the needs of the users of these products. We cannot predict the size or growth rate of these markets or the market share we will achieve or maintain in these markets in the future.
We cannot be sure that such licenses would be available on terms acceptable to us, if at all. If a successful claim is made against us and we are unable to develop or license alternative technology, our business, financial condition, operating results and cash flows could be materially adversely affected.
If a successful claim is made against us and we are unable to develop or license alternative technology, our business, financial condition, operating results and cash flows could be materially adversely affected. 26 Table of Contents Any dispute regarding our products or services may require us to indemnify certain customers, the cost of which could severely hamper our business operations and financial condition.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe processes by which our Chief Information Security Officer and our Security Team are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents include the following: regular penetration testing, independent security posture assessments, phishing tests (with trainings for the failed users), general cybersecurity and phishing training for all Rambus personnel and tabletop exercises to simulate threats and identify gaps. 30 Table of Contents In the event of a cybersecurity incident, our Chief Information Security Officer and our Security Team are equipped with a well-defined incident response plan to guide response actions.
Biggest changeThe processes by which our Chief Information Security Officer and our Security Team are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity incidents include the following: regular penetration testing, independent third-party risk and security posture assessments, phishing tests (with trainings for the failed users), general cybersecurity and phishing training for all Rambus personnel and tabletop exercises to simulate threats and identify gaps. 30 Table of Contents In the event of a cybersecurity incident, our Chief Information Security Officer and our Security Team are equipped with a well-defined incident response plan to guide response actions.

Item 2. Properties

Properties — owned and leased real estate

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Properties As of December 31, 2023, we occupied offices in the leased facilities described below: Number of Offices Under Lease Location Primary Use 3 United States San Jose, CA (Corporate Headquarters) Executive and administrative offices, research and development, sales and marketing and service functions Agoura Hills, CA Research and development Hillsboro, OR Research and development 1 Sofia, Bulgaria Research and development 1 Montreal, Canada Research and development 1 Shanghai, China Sales and marketing 1 Espoo, Finland Research and development 1 Aix-en-Provence, France Research and development 1 Bangalore, India Administrative offices, research and development and service functions 1 Vught, The Netherlands Research and development 1 Taipei, Taiwan Research and development
Added
Item 2. Properties We lease our corporate headquarters in San Jose, California, occupying approximately 89,000 square feet, which includes executive, administrative, research and development, sales and marketing and service personnel. We also lease approximately 89,000 square feet of office space in India, which includes administrative, research and development and service personnel.
Added
Furthermore, we lease offices in other locations, including Canada, China, Finland, France, South Korea, the Netherlands, and the United States, which include research and development and sales and marketing personnel. We believe our current office space meets our operational needs. We anticipate that suitable replacement or additional space will be accessible on commercially reasonable terms when required.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−25 removed2 unchanged
Biggest changeFiscal years ending: Base Period 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Rambus Inc. $ 100.00 $ 179.60 $ 227.64 $ 383.18 $ 467.01 $ 889.83 NASDAQ Composite $ 100.00 $ 136.69 $ 198.10 $ 242.03 $ 163.28 $ 236.17 RDG Semiconductor Composite $ 100.00 $ 149.26 $ 216.77 $ 327.60 $ 204.55 $ 413.65 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Biggest changeFiscal years ending: Base Period 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 Rambus Inc. $ 100.00 $ 126.75 $ 213.36 $ 260.04 $ 495.46 $ 383.74 NASDAQ Composite $ 100.00 $ 144.92 $ 177.06 $ 119.45 $ 172.77 $ 223.87 RDG Semiconductor Composite $ 100.00 $ 145.23 $ 219.49 $ 137.05 $ 277.14 $ 491.01 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Share Repurchase Programs On October 29, 2020, our board of directors (the “Board”) approved a new share repurchase program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2020 Repurchase Program”).
Share Repurchase Programs On October 29, 2020, our board of directors (the “Board”) approved the 2020 Repurchase Program authorizing the repurchase of up to an aggregate of 20.0 million shares (the “2020 Repurchase Program”).
Information regarding our securities authorized for issuance under equity compensation plans will be included in Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this report on Form 10-K. 32 Table of Contents As of January 31, 2024, there were 454 holders of record of our common stock.
Information regarding our securities authorized for issuance under equity compensation plans will be included in Item 12, “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this report on Form 10-K. 32 Table of Contents As of January 31, 2025, there were 443 holders of record of our common stock.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2018 to December 31, 2023.
The graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from December 31, 2019 to December 31, 2024.
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.
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 were no share repurchases of our common stock during the fourth quarter of 2024.
Removed
As part of the broader share repurchase program authorized by our Board on October 29, 2020, we entered into an accelerated share repurchase program with Deutsche Bank AG, London Branch as counterparty, through its agent Deutsche Bank Securities Inc. (“Deutsche Bank”) on November 11, 2020 (the “2020 ASR Program”), which was completed in the second quarter of 2021.
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Unregistered Sales of Equity Securities and Use of Proceeds None. Recent Sales of Unregistered Equity Securities None. Item 6. Reserved
Removed
In the second quarter of 2021, we entered into another accelerated share repurchase program with Deutsche Bank on June 15, 2021 (the “2021 ASR Program”), which was completed in the fourth quarter of 2021.
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In the third quarter of 2022, we entered into an accelerated share repurchase program with Wells Fargo Bank, National Association (“Wells Fargo”) on September 9, 2022 (the “2022 ASR Program”), which was completed in the fourth quarter of 2022.
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In the third quarter of 2023, we entered into an accelerated share repurchase program with Royal Bank of Canada (“RBC”) on August 10, 2023 (the “2023 ASR Program”), which was also completed in the third quarter of 2023. On November 2, 2023, we entered into a share repurchase plan (the “Buying Plan”) with RBC Capital Markets, LLC (“RBCCM”).
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The Buying Plan was part of the 2020 Repurchase Program. During the fourth quarter of 2023, an immaterial amount of shares was repurchased, retired, and recorded as a reduction to stockholders’ equity.
Removed
After giving effect to the 2020, 2021, 2022 and 2023 ASR programs and the Buying Plan, detailed in the table below, there remained an outstanding authorization to repurchase approximately 7.9 million shares of our outstanding common stock under the 2020 Repurchase Program. We record stock repurchases as a reduction to stockholders’ equity.
Removed
We record a portion of the purchase price of the repurchased shares as an increase to accumulated deficit when the price of the shares repurchased exceeds the average original proceeds per share received from the issuance of common stock.
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Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Number of Shares that May Yet be Purchased Under the Program Cumulative shares repurchased as of December 31, 2022 (1) (2) (3) 10,261,922 $ 24.36 10,261,922 9,738,078 August 1, 2023 - September 30, 2023 (4) 1,854,832 $ 53.91 1,854,832 7,883,246 November 2, 2023 - December 31, 2023 (5) 3,665 $ 54.57 3,665 7,879,581 Cumulative shares repurchased as of December 31, 2023 12,120,419 12,120,419 _________________________________________ (1) In November 2020, we entered into the 2020 ASR Program with Deutsche Bank to repurchase an aggregate of $50.0 million of our common stock.
Removed
We made an upfront payment of $50.0 million pursuant to the accelerated share repurchase program and received an initial delivery of 2.6 million shares which were retired and recorded as a $40.0 million reduction to stockholders’ equity.
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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.
Removed
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.
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The total shares of our common stock received and retired under the terms of the accelerated share repurchase program were 2.7 million, with an average price paid per share of $18.63. (2) In June 2021, we entered into the 2021 ASR Program with Deutsche Bank to repurchase an aggregate of $100.0 million of our common stock.
Removed
We made an upfront payment of $100.0 million pursuant to the accelerated share repurchase program and received an initial delivery of 3.9 million shares which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
Removed
The remaining $20.0 million of the initial payment was recorded as a reduction to stockholders’ 33 Table of Contents equity as an unsettled forward contract indexed to our stock.
Removed
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.
Removed
The total shares of our common stock received and retired under the terms of the accelerated share repurchase program were 4.4 million, with an average price paid per share of $22.82. (3) In September 2022, we entered into the 2022 ASR Program with Wells Fargo to repurchase an aggregate of $100.0 million of our common stock.
Removed
We made an upfront payment of $100.0 million pursuant to the accelerated share repurchase program and received an initial delivery of approximately 3.1 million shares, which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
Removed
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.
Removed
During the fourth quarter of 2022, 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.
Removed
The total shares of our common stock received and retired under the terms of the accelerated share repurchase program were 3.2 million, with an average price paid per share of $31.30. (4) In August 2023, we entered into the 2023 ASR Program with RBC to repurchase an aggregate of $100.0 million of our common stock.
Removed
We made an upfront payment of $100.0 million pursuant to the accelerated share repurchase program and received an initial delivery of approximately 1.6 million shares, which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
Removed
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.
Removed
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 accelerated share repurchase program.
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The total shares of our common stock received and retired under the terms of the accelerated share repurchase program were 1.8 million, with an average price paid per share of $53.91. (5) In November 2023, we entered into the Buying Plan with RBCCM. The Buying Plan was part of the 2020 Repurchase Program.
Removed
During the fourth quarter of 2023, an immaterial amount of shares were repurchased, retired, and recorded as a reduction to stockholders’ equity. Refer to Note 15, “Stockholders’ Equity,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information. Unregistered Sales of Equity Securities and Use of Proceeds None. Recent Sales of Unregistered Equity Securities None. Item 6.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCash 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. 44 Table of Contents 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.
Biggest changeCash 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. 43 Table of Contents Contractual Obligations As of December 31, 2024, our material contractual obligations were as follows: (In thousands) Total 2025 2026 2027 2028 2029 Contractual obligations (1) (2) Software licenses (3) $ 12,034 $ 9,675 $ 1,484 $ 875 $ — $ — Other contractual obligations 268 131 137 — — — Acquisition retention bonuses (4) 260 260 — — — — Total $ 12,562 $ 10,066 $ 1,621 $ 875 $ — $ — ______________________________________ (1) The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately $132.2 million, including $22.8 million recorded as a reduction of long-term deferred tax assets and $109.4 million in long-term income taxes payable, as of December 31, 2024.
Operating Activities 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.
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.
Financing Activities 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 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.
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.
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.
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. • We recognize license renewal revenue commencing with the start of the renewal period.
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 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.
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 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 .
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 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.
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.
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 our common stock, which were retired, as the final settlement of the 2023 ASR Program.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. 46 Revenue Recognition Overview We recognize revenue upon transfer of control of promised goods and services in an amount that reflects the consideration we expect to receive in exchange for those goods and services.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition Overview We recognize revenue upon transfer of control of promised goods and services in an amount that reflects the consideration we expect to receive in exchange for those goods and services.
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. During the years ended December 31, 2023 and 2022, we repurchased shares of our common stock under the 2020 Repurchase Program as discussed in the “Share Repurchase Program” section below.
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. During the years ended December 31, 2024, 2023 and 2022, we repurchased shares of our common stock under the 2020 Repurchase Program as discussed in the “Share Repurchase Program” section below.
On November 2, 2023, we entered into the “Buying Plan with RBCCM. The Buying Plan was part of the 2020 Repurchase Program. Under the Buying Plan, RBCCM shall commence purchases for a 12-month period starting on November 2, 2023 and ending on November 1, 2024, unless terminated sooner pursuant to the Buying Plan (the “Repurchase Period”).
On November 2, 2023, we entered into the Buying Plan with RBCCM. The Buying Plan was part of the 2020 Repurchase Program. Under the Buying Plan, RBCCM shall commence purchases for a 12-month period starting on November 2, 2023 and ending on November 1, 2024, unless terminated sooner pursuant to the Buying Plan (the “Repurchase Period”).
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 47 customization. For the over time model, we recognize revenue over time by measuring the progress toward complete satisfaction of that performance obligation.
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 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.
Additionally, the majority of our cash and cash equivalents is in the United States. Our cash needs for the year ended December 31, 2023 were funded primarily from cash collected from our customers. We do not anticipate any liquidity constraints as a result of either the current credit environment or investment fair value fluctuations.
Additionally, the majority of our cash and cash equivalents is in the United States. Our cash needs for the year ended December 31, 2024 were funded primarily from cash collected from our customers. We do not anticipate any liquidity constraints as a result of either the current credit environment or investment fair value fluctuations.
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. We made an investment in a non-marketable equity security of a private company in 2018.
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.
Restructuring and Other Charges Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Restructuring and other charges $ 9.4 $ — $ 0.4 100.0% 100.0% In June 2023, we initiated a restructuring program to reduce overall expenses to improve future profitability by reducing our overall spending (the “2023 Restructuring Plan”).
Restructuring and Other Charges Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Restructuring and other charges $ — $ 9.4 $ — (100.0)% 100.0% In June 2023, we initiated a restructuring program to reduce overall expenses to improve future profitability by reducing our overall spending (the “2023 Restructuring Plan”).
(2) For our lease commitments as of December 31, 2023, refer to Note 10, “Leases,” of Notes to Consolidated Financial Statements of this Form 10-K. (3) We have commitments with various software vendors for agreements generally having terms longer than one year.
(2) For our lease commitments as of December 31, 2024, refer to Note 10, “Leases,” of Notes to Consolidated Financial Statements of this Form 10-K. (3) We have commitments with various software vendors for agreements generally having terms longer than one year.
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.
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 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 could not exceed $25.0 million in a quarter.
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.
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.
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 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.
Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from six months to ten years. 48 Table of Contents Acquired indefinite-lived intangible assets related to our IPR&D are capitalized and subject to impairment testing until completion or abandonment of the projects.
Identifiable definite-lived intangible assets are being amortized over the period of estimated benefit using the straight-line method and estimated useful lives ranging from six months to ten years. Acquired indefinite-lived intangible assets related to our IPR&D are capitalized and subject to impairment testing until completion or abandonment of the projects.
We perform our impairment analysis of goodwill on an annual basis during the fourth quarter of the year unless conditions arise that warrant a more frequent evaluation. When goodwill is assessed for impairment, we have the option to perform an assessment of qualitative factors of impairment (optional assessment) prior to necessitating a quantitative impairment test.
We perform our impairment analysis of goodwill on an annual basis during the fourth quarter of the year unless conditions arise that warrant a more frequent evaluation. 46 Table of Contents When goodwill is assessed for impairment, we have the option to perform an assessment of qualitative factors of impairment (optional assessment) prior to necessitating a quantitative impairment test.
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. The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions.
These 47 Table of Contents 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.
Royalties Royalty revenue, which includes patent and technology license royalties, increased approximately $10.3 million for the year ended December 31, 2023 as compared to 2022. Royalty revenue increased approximately $3.1 million for the year ended December 31, 2022 as compared to 2021. The increases were primarily due to the timing and structure of license renewals for both periods.
Royalties Royalty revenue, which includes patent and technology license royalties, increased approximately $76.1 million for the year ended December 31, 2024 as compared to 2023. Royalty revenue increased approximately $10.3 million for the year ended December 31, 2023 as compared to 2022. The increases were primarily due to the timing and structure of license renewals for both periods.
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 35 Table of Contents any given period.
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.
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. deferred tax assets, as well as tax benefits from excess stock-based compensation deductions. For the year ended December 31, 2023, we paid withholding taxes of $22.9 million.
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. deferred tax assets, as well as tax benefits from excess stock-based compensation deductions.
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 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.
Interest and Other Income (Expense), Net Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Interest income and other income (expense), net $ 11.3 $ 7.8 $ 9.7 45.8 % (20.0) % Gain on fair value of equity security — 3.5 — (100.0) % 100.0 % Loss on extinguishment of debt — (83.6) — (100.0) % 100.0 % Loss on fair value adjustment of derivatives, net (0.2) (10.6) — (97.7) % 100.0 % Gain on sale of non-marketable equity security 23.9 — — 100.0 % — % Interest expense (1.5) (1.9) (10.7) (20.5) % (82.5) % Interest and other income (expense), net $ 33.5 $ (84.8) $ (1.0) (139.5)% NM* _____________________________________ * NM — percentage is not meaningful 41 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.
Interest and Other Income (Expense), Net Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change 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 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) % Gain on sale of non-marketable equity security — 23.9 — (100.0) % 100.0 % Interest expense (1.4) (1.5) (1.9) (5.0) % (20.5) % Interest and other income (expense), net $ 17.1 $ 33.5 $ (84.8) (49.2)% (139.5)% _____________________________________ * NM — percentage is not meaningful 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.
Our revenue from companies headquartered outside of the United States accounted for 62% of total revenue in 2023 as compared to 39% in 2022 and 36% in 2021. We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future.
Our revenue from companies headquartered outside of the United States accounted for 64% of total revenue in 2024 as compared to 62% in 2023 and 39% in 2022. We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future.
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.
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 years ended December 31, 2024 and 2023.
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 43 Table of Contents date applicable to the 2020 Repurchase Program.
Share repurchases under the 2020 Repurchase Program may be made through the open market, established plans or privately negotiated transactions in accordance with all applicable securities laws, rules and regulations. There is no expiration date applicable to the 2020 Repurchase Program.
Change in Fair Value of Earn-Out Liability Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Change in fair value of earn-out liability $ 9.2 $ 3.1 $ 5.3 196.8 % (41.3)% 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.
Change in Fair Value of Earn-Out Liability Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change 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 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.
Revenue from royalties accounted for 32%, 31% and 42% of our consolidated revenue for the years ended December 31, 2023, 2022 and 2021, respectively. Contract and other revenue consists primarily of Silicon IP, which is comprised of our high-speed interface and security IP.
Revenue from royalties accounted for 41%, 32% and 31% of our consolidated revenue for the years ended December 31, 2024, 2023 and 2022, respectively. Contract and other revenue consists primarily of Silicon IP, which is comprised of our high-speed interface and security IP.
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.
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 41 Table of Contents threshold criteria.
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.
Executive Summary 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.
We record 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, 2023, the cumulative price of $94.7 million was recorded as an increase to accumulated deficit.
We record 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, 2024, the cumulative price of $47.9 million was recorded as an increase to accumulated deficit.
As of December 31, 2023, our Consolidated Balance Sheet included net deferred tax assets, before valuation allowance, of approximately $148.5 million, which consists of net operating loss carryovers, tax credit carryovers, capitalized research, amortization, employee stock-based compensation expenses, certain liabilities and certain assets.
As of December 31, 2024, our Consolidated Balance Sheet included net deferred tax assets, before valuation allowance, of approximately $160.1 million, which consists of net operating loss carryovers, tax credit carryovers, capitalized research, amortization, employee stock-based compensation expenses, certain liabilities and certain assets.
We expect to continue to evaluate and potentially enter into strategic acquisitions or divestitures which will impact our business and operating results. 36 Table of Contents Results of Operations The following table sets forth, for the periods indicated, the percentage of total revenue represented by certain items reflected in our consolidated statements of operations: Years Ended December 31, 2023 2022 2021 Revenue: Product revenue 48.7 % 50.0 % 43.9 % Royalties 32.6 % 30.7 % 41.6 % Contract and other revenue 18.7 % 19.3 % 14.5 % Total revenue 100.0 % 100.0 % 100.0 % Cost of revenue: Cost of product revenue 18.3 % 19.6 % 15.0 % Cost of contract and other revenue 1.2 % 1.0 % 1.5 % Amortization of acquired intangible assets 2.9 % 3.1 % 4.9 % Total cost of revenue 22.4 % 23.7 % 21.4 % Gross profit 77.6 % 76.3 % 78.6 % Operating expenses: Research and development 34.0 % 34.9 % 41.3 % Sales, general and administrative 23.5 % 23.4 % 27.8 % Amortization of acquired intangible assets 0.3 % 0.4 % 0.4 % Restructuring and other charges 2.0 % — % 0.1 % Gain on divestiture (19.7) % — % — % Impairment of assets 2.2 % — % — % Change in fair value of earn-out liability 2.0 % 0.7 % 1.6 % Total operating expenses 44.3 % 59.4 % 71.2 % Operating income 33.3 % 16.9 % 7.4 % Interest income and other income (expense), net 2.5 % 1.7 % 3.0 % Gain on fair value of equity security — % 0.8 % — % Loss on extinguishment of debt — % (18.4) % — % Loss on fair value adjustment of derivatives, net (0.1) % (2.3) % — % Gain on sale of non-marketable equity security 5.2 % — % — % Interest expense (0.3) % (0.4) % (3.3) % Interest and other income (expense), net 7.3 % (18.6) % (0.3) % Income (loss) before income taxes 40.6 % (1.7) % 7.1 % Provision for (benefit from) income taxes (31.8) % 1.4 % 1.5 % Net income (loss) 72.4 % (3.1) % 5.6 % Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Total Revenue: Product revenue $ 224.6 $ 227.1 $ 143.9 (1.1) % 57.8 % Royalties 150.1 139.8 136.7 7.4 % 2.3 % Contract and other revenue 86.4 87.9 47.7 (1.7) % 84.4 % Total revenue $ 461.1 $ 454.8 $ 328.3 1.4 % 38.5 % 37 Table of Contents Product Revenue Product revenue consists of revenue from the sale of memory and security products.
We expect to continue to evaluate and potentially enter into strategic acquisitions or divestitures which will impact our business and operating results. 35 Table of Contents Results of Operations The following table sets forth, for the periods indicated, the percentage of total revenue represented by certain items reflected in our consolidated statements of operations: Years Ended December 31, 2024 2023 2022 Revenue: Product revenue 44.4 % 48.7 % 50.0 % Royalties 40.6 % 32.6 % 30.7 % Contract and other revenue 15.0 % 18.7 % 19.3 % Total revenue 100.0 % 100.0 % 100.0 % Cost of revenue: Cost of product revenue 17.2 % 18.3 % 19.6 % Cost of contract and other revenue 0.5 % 1.2 % 1.0 % Amortization of acquired intangible assets 2.0 % 2.9 % 3.1 % Total cost of revenue 19.7 % 22.4 % 23.7 % Gross profit 80.3 % 77.6 % 76.3 % Operating expenses: Research and development 29.3 % 34.0 % 34.9 % Sales, general and administrative 18.7 % 23.5 % 23.4 % Amortization of acquired intangible assets 0.1 % 0.3 % 0.4 % Restructuring and other charges — % 2.0 % — % Gain on divestiture — % (19.7) % — % Impairment of assets 0.2 % 2.2 % — % Change in fair value of earn-out liability (0.9) % 2.0 % 0.7 % Total operating expenses 47.4 % 44.3 % 59.4 % Operating income 32.9 % 33.3 % 16.9 % Interest income and other income (expense), net 3.3 % 2.5 % 1.7 % Gain on fair value of equity security — % — % 0.8 % Loss on extinguishment of debt — % — % (18.4) % Loss on fair value adjustment of derivatives, net — % (0.1) % (2.3) % Gain on sale of non-marketable equity security — % 5.2 % — % Interest expense (0.3) % (0.3) % (0.4) % Interest and other income (expense), net 3.0 % 7.3 % (18.6) % Income (loss) before income taxes 35.9 % 40.6 % (1.7) % Provision for (benefit from) income taxes 3.6 % (31.8) % 1.4 % Net income (loss) 32.3 % 72.4 % (3.1) % Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Total Revenue: Product revenue $ 246.8 $ 224.6 $ 227.1 9.9 % (1.1) % Royalties 226.2 150.1 139.8 50.7 % 7.4 % Contract and other revenue 83.6 86.4 87.9 (3.2) % (1.7) % Total revenue $ 556.6 $ 461.1 $ 454.8 20.7 % 1.4 % 36 Table of Contents Product Revenue Product revenue consists of revenue from the sale of memory and security products.
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.
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.
Cost of Contract and Other Revenue Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Cost of contract and other revenue $ 5.4 $ 4.7 $ 4.7 15.7 % (1.9) % 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 Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Cost of contract and other revenue $ 3.0 $ 5.4 $ 4.7 (44.0) % 15.7 % 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.
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.
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.
Sales, General and Administrative Expenses Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Sales, general and administrative expenses: Sales, general and administrative expenses, excluding stock-based compensation $ 78.6 $ 85.2 $ 74.5 (7.8) % 14.3 % Stock-based compensation 29.5 21.5 16.5 37.3 % 30.3 % Total sales, general and administrative expenses $ 108.1 $ 106.7 $ 91.0 1.3 % 17.2 % Sales, general and administrative expenses include expenses and costs associated with trade shows, public relations, advertising, litigation, general legal, insurance and other sales, marketing and administrative efforts.
Sales, General and Administrative Expenses Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Sales, general and administrative expenses: Sales, general and administrative expenses, excluding stock-based compensation $ 76.1 $ 78.6 $ 85.2 (3.2) % (7.8) % Stock-based compensation 28.0 29.5 21.5 (5.3) % 37.3 % Total sales, general and administrative expenses $ 104.1 $ 108.1 $ 106.7 (3.7) % 1.3 % Sales, general and administrative expenses include expenses and costs associated with trade shows, public relations, advertising, litigation, general legal, insurance and other sales, marketing and administrative efforts.
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 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, 2024, including Kioxia, Marvell, Micron and Nanya.
Amortization of Acquired Intangible Assets Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Amortization of acquired intangible assets: Amortization of acquired intangible assets included in total cost of revenue $ 13.5 $ 13.9 $ 16.2 (2.9) % (14.2) % Amortization of acquired intangible assets included in total operating expenses 1.2 1.7 1.2 (27.3) % 36.5 % Total amortization of acquired intangible assets $ 14.7 $ 15.6 $ 17.4 (5.6) % (10.6) % Amortization expense is related to various acquired IP.
Amortization of Acquired Intangible Assets Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Amortization of acquired intangible assets: Amortization of acquired intangible assets included in total cost of revenue $ 11.2 $ 13.5 $ 13.9 (17.2) % (2.9) % Amortization of acquired intangible assets included in total operating expenses 0.5 1.2 1.7 (58.4) % (27.3) % Total amortization of acquired intangible assets $ 11.7 $ 14.7 $ 15.6 (20.6) % (5.6) % Amortization expense is related to various acquired IP.
Liquidity and Capital Resources (In millions) December 31, 2023 December 31, 2022 Cash and cash equivalents $ 94.8 $ 125.3 Marketable securities 331.0 187.9 Total cash, cash equivalents and marketable securities $ 425.8 $ 313.2 Years Ended December 31, (In millions) 2023 2022 2021 Net cash provided by operating activities $ 195.8 $ 230.4 $ 209.2 Net cash provided by (used in) investing activities $ (57.4) $ 152.0 $ (115.7) Net cash used in financing activities $ (169.6) $ (362.9) $ (114.2) Liquidity We currently anticipate that existing cash, cash equivalents and marketable securities balances and cash flows from operations will be adequate to meet our cash needs for at least the next 12 months.
Liquidity and Capital Resources (In millions) December 31, 2024 December 31, 2023 Cash and cash equivalents $ 99.8 $ 94.8 Marketable securities 382.0 331.0 Total cash, cash equivalents and marketable securities $ 481.8 $ 425.8 Years Ended December 31, (In millions) 2024 2023 2022 Net cash provided by operating activities $ 230.6 $ 195.8 $ 230.4 Net cash provided by (used in) investing activities $ (56.7) $ (57.4) $ 152.0 Net cash used in financing activities $ (168.0) $ (169.6) $ (362.9) Liquidity We currently anticipate that existing cash, cash equivalents and marketable securities balances and cash flows from operations will be adequate to meet our cash needs for at least the next 12 months.
Cash provided by operating activities of $230.4 million for the year ended December 31, 2022 was primarily a t tributable to the cash generated from customer licensing, product sales and engineering services fees.
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.
Additionally, from time to time, we enter into agreements to sell certain patent assets under agreements which may also include subsequent profit-sharing. The sale of these patents, as well as the subsequent profit-sharing, are included as part of our royalty revenue.
The vast majority of our patents originate from our internal research and development efforts. Additionally, from time to time, we enter into agreements to sell certain patent assets under agreements which may also include subsequent profit-sharing. The sale of these patents, as well as the subsequent profit-sharing, are included as part of our royalty revenue.
There is no expiration date applicable to the 2020 Repurchase Program. The 2020 Repurchase Program replaced the previous program approved by the Board in January 2015 and canceled the remaining shares outstanding as part of the previous authorization. On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank.
There is no expiration date applicable to the 2020 Repurchase Program. The 2020 Repurchase Program replaced the previous program approved by the Board in January 2015 and canceled the remaining shares outstanding as part of the previous authorization. On September 9, 2022, we entered into the 2022 ASR Program with Wells Fargo.
Impairment of Assets Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Impairment of assets $ 10.0 $ — $ — 100.0 % —% 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.
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.
For the year ended December 31, 2022, we paid withholding taxes of $21.1 million. 42 Table of Contents We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.
For the year ended December 31, 2023, we paid withholding taxes of $22.9 million. We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.
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 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.
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 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.
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.
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.
As of December 31, 2023, there remained an outstanding authorization to repurchase approximately 7.9 million shares of our outstanding common stock under the 2020 Repurchase Program. We record share repurchases as a reduction to stockholders’ equity.
During the year ended December 31, 2024, there were no other repurchases of our common stock under the 2020 Repurchase Program. As of December 31, 2024, there remained an outstanding authorization to repurchase approximately 5.7 million shares of our outstanding common stock under the 2020 Repurchase Program. We record share repurchases as a reduction to stockholders’ equity.
As of December 31, 2023, we have a valuation allowance of $25.1 million, resulting in net deferred tax assets of $123.4 million. We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.
As of December 31, 2024, we have a valuation allowance of $26.8 million, resulting in net deferred tax assets of $133.3 million. We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative.
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.
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.
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. federal and other state deferred tax assets.
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. 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 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.
We have a high degree of revenue concentration. Our top five customers represented 62% of our revenue for both 2024 and 2023 and 58% in 2022.
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. federal and other state deferred tax assets.
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. We recognized a $177.9 million tax benefit during the year ended December 31, 2023 as a result of the valuation allowance release.
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 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. 40 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.
C hanges in operating assets and liabilities for the year ended December 31, 2023, primarily included a decrease in unbilled receivables and an increase in other current liabilities, offset by increases in income tax receivable, accounts receivable, inventories, prepaids and other assets, as well as decreases in income taxes payable, accounts payable, deferred revenue and accrued salaries and benefits.
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.
Cost of Product Revenue Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Cost of product revenue $ 84.5 $ 89.0 $ 49.4 (5.0) % 80.1 % Cost of product revenue includes costs attributable to the sale of memory and security products.
Cost of Product Revenue Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Cost of product revenue $ 95.9 $ 84.5 $ 89.0 13.5 % (5.0) % Cost of product revenue mainly includes costs attributable to the sale of memory products.
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.
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. We will continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, security and other technologies.
Highlights from our annual results for the year ended December 31, 2023 were as follows: • Revenue of $461.1 million; • Operating expenses of $204.1 million; • Diluted net income per share of $3.01; and • Net cash provided by operating activities of $195.8 million.
Highlights from our annual results for the year ended December 31, 2024 were as follows: • Revenue of $556.6 million; • Operating expenses of $263.5 million; • Diluted net income per share of $1.65; and • Net cash provided by operating activities of $230.6 million.
We recognized a $177.9 million tax benefit during the year ended December 31, 2023 as a result of the valuation allowance release. 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.
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.
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.
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.
Provision for (Benefit from) Income Taxes Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Provision for (benefit from) income taxes $ (146.7) $ 6.5 $ 5.0 NM* 31.0 % Effective tax rate (78.4) % (82.9) % 21.3 % _____________________________________ * NM — percentage is not meaningful 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. deferred tax assets, as well as state income taxes and the tax effect of stock-based compensation.
Provision for (Benefit from) Income Taxes Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Provision for (benefit from) income taxes $ 20.2 $ (146.7) $ 6.5 (113.8) % NM* Effective tax rate 10.1 % (78.4) % (82.9) % _____________________________________ * NM — percentage is not meaningful 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.
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.
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 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.
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.
Research and Development Expenses Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Research and development expenses Research and development expenses, excluding stock-based compensation $ 141.9 $ 145.3 $ 125.1 (2.3) % 16.2 % Stock-based compensation 14.9 13.5 10.6 10.3 % 27.2 % Total research and development expenses $ 156.8 $ 158.8 $ 135.7 (1.2) % 17.0 % Research and development expenses are those expenses incurred for the development of applicable technologies.
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. 37 Table of Contents Research and Development Expenses Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Research and development expenses Research and development expenses, excluding stock-based compensation $ 146.6 $ 141.9 $ 145.3 3.2 % (2.3) % Stock-based compensation 16.3 14.9 13.5 9.9 % 10.3 % Total research and development expenses $ 162.9 $ 156.8 $ 158.8 3.9 % (1.2) % Research and development expenses are those expenses incurred for the development of applicable technologies.
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. The vast majority of our patents originate from our internal research and development efforts.
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, 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.
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 recognize support and maintenance revenue over the time those services are provided. Significant Judgments 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.
Contract and other revenue accounted for 19%, 19% and 14% of our consolidated revenue for the years ended December 31, 2023, 2022 and 2021, 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.
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. 34 Table of Contents Costs and Expenses 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.
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 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.
Our memory interface chips are sold to major DRAM manufacturers, Micron, Samsung and SK hynix, as well as directly to system manufacturers and cloud providers, for integration into server memory modules. Product revenue accounted for 49%, 50% and 44% of our consolidated revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
Product revenue consists primarily of memory interface chips and is increasing in strategic significance. Our memory interface chips are sold to major DRAM manufacturers, Micron, Samsung and SK hynix, as well as directly to system manufacturers and cloud providers, for integration into server memory modules.
Refer to Note 17, “Restructuring and Other Charges,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information. 40 Table of Contents Gain on Divestiture Years Ended December 31, 2022 to 2023 2021 to 2022 (Dollars in millions) 2023 2022 2021 Change Change Gain on divestiture $ (90.8) $ — $ — (100.0) % —% In July 2023, we entered into an asset purchase agreement (the “Purchase Agreement”) with Cadence Design Systems, Inc.
Gain on Divestiture Years Ended December 31, 2023 to 2024 2022 to 2023 (Dollars in millions) 2024 2023 2022 Change Change Gain on divestiture $ — $ (90.8) $ — (100.0) % (100.0)% In July 2023, we entered into an asset purchase agreement (the “Purchase Agreement”) with Cadence Design Systems, Inc.
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. Royalties may be structured as fixed, variable or a hybrid of fixed and variable royalty payments.
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 duration up to ten years and may define the specific field of use where our customers may utilize our inventions in their products.
We have U.S. 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. federal taxable income in future periods. These credit carryforwards will expire if they are not used within certain time periods.
As a result, we continue to maintain a valuation allowance on only those deferred tax assets that we do not think will be realizable. We have U.S. 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. federal taxable income in future periods.
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, 39 Table of Contents 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.
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. 38 Table of Contents 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed7 unchanged
Biggest changeWe monitor our foreign currency exposure and, as disclosed below, we have entered into foreign currency forward contracts to partially mitigate the exposure in currencies where we believe this is appropriate. 50 We have on occasion, entered into foreign currency forward contracts (the “Contracts”) to manage our exposure related to certain foreign currency denominated monetary assets (the “Hedging Program”) and to minimize the related impact of foreign currency fluctuations on our earnings.
Biggest changeWe monitor our foreign currency exposure and, as disclosed below, we have entered into foreign currency forward contracts to partially mitigate the exposure in currencies where we believe this is appropriate.
We may make investments in time deposits, U.S. government-sponsored obligations and corporate bonds, commercial paper and notes with maturities up to 36 months. We bias our investment portfolio to shorter maturities. All of our investments are U.S. dollar denominated.
We may make investments in time deposits, U.S. government-sponsored obligations and corporate bonds, commercial paper and notes with maturities up to 36 months. We bias our investment portfolio to shorter maturities. The majority of our investments are U.S. dollar denominated.
If market interest rates were to increase immediately and uniformly by 1.0% from the levels as of December 31, 2023, the fair value of the portfolio would decline by approximately $1.9 million. Actual results may differ materially from this sensitivity analysis. We invoice the majority of our customers in U.S. dollars.
If market interest rates were to increase immediately and uniformly by 1.0% from the levels as of December 31, 2024, the fair value of the portfolio would decline by approximately $2.3 million. Actual results may differ materially from this sensitivity analysis. We invoice the majority of our customers in U.S. dollars.
Similarly, if the environment has been one of declining interest rates, we may experience a realized gain. As of December 31, 2023, we had an investment portfolio of fixed income marketable securities of $337.4 million, including cash equivalents.
Similarly, if the environment has been one of declining interest rates, we may experience a realized gain. As of December 31, 2024, we had an investment portfolio of fixed income marketable securities of $394.4 million, including cash equivalents and time deposits.
The hedged monetary assets primarily consisted of certain euro-denominated cash and accounts receivable balances. Contracts are typically entered into at the end of a month, with an approximately one month duration at inception. As of December 31, 2023, no Contracts were outstanding.
Contracts are typically entered into at the end of a month, with an approximately one month duration at inception. As of December 31, 2024, no Contracts were outstanding and we have entered into no such contracts during 2024. 48 Table of Contents
Added
We have on occasion, entered into foreign currency forward contracts (the “Contracts”) to manage our exposure related to certain foreign currency denominated monetary assets (the “Hedging Program”) and to minimize the related impact of foreign currency fluctuations on our earnings. The hedged monetary assets primarily consisted of certain euro-denominated cash and accounts receivable balances.

Other RMBS 10-K year-over-year comparisons