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What changed in RAMBUS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of RAMBUS INC's 2022 and 2023 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 2023 report.

+370 added−333 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-24)

Top changes in RAMBUS INC's 2023 10-K

370 paragraphs added · 333 removed · 276 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

29 edited+6 added−3 removed34 unchanged
Biggest changeAs an industry pioneer with over 30 years of advanced semiconductor design experience, Rambus is ideally positioned to address the challenges of moving and protecting data. We are a leader in high-performance memory subsystems, providing chips, intellectual property (“IP”) and innovations that maximize the performance and security in data-intensive systems.
Biggest changeWe 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.
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 and OEMs worldwide through multiple channels, including our direct sales force and distributors.
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 provide our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth. We also offer employees benefits such as life and 4 health insurance, paid time off, paid parental leave, and retirement savings plans.
We provide our employees with competitive compensation, as well as opportunities for equity ownership and developmental programs that enable continued learning and growth. We also offer employees benefits such as life and health insurance, paid time off, paid parental leave and retirement savings plans.
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.
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.
Corporate and Available Information Rambus Inc. was founded in 1990 and reincorporated in Delaware in March 1997. Our principal executive offices are located at 4453 North First Street, Suite 100, San Jose, California. Our website is www.rambus.com .
Corporate and Available Information Rambus Inc. was founded in 1990 and reincorporated in Delaware in March 1997. Our principal executive offices are located at 4453 North First Street, Suite 100, San Jose, California, 95134. Our website is www.rambus.com .
Shinn began his legal career as a litigation attorney with a boutique intellectual property and securities litigation law firm in San Jose. Mr. Shinn is a member of the State Bar of California and received his J.D. from Santa Clara University and his bachelor’s degree in American and European History from Stanford University. 6 Table of Contents
Shinn began his legal career as a litigation attorney with a boutique intellectual property and securities litigation law firm in San Jose. Mr. Shinn is a member of the State Bar of California and received his J.D. from Santa Clara University and his bachelor’s degree in American and European History from Stanford University. 7 Table of Contents
Additionally, approximately 71% 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 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.
Information on customers that comprise 10% or more of our consolidated revenue and risks attendant to our foreign operations is set forth below in Item 1A, “Risk Factors.” 5 Our Executive Officers Information regarding our current executive officers and their ages and positions is contained in the table below.
Information on customers that comprise 10% or more of our consolidated revenue and risks attendant to our foreign operations is set forth below in Item 1A, “Risk Factors.” 6 Our Executive Officers Information regarding our current executive officers and their ages and positions is contained in the table below.
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 54 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. John Shinn 55 Senior Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer. Mr.
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 57 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 58 Senior Vice President, Chief Operating Officer. Mr. Fan has served as the Senior Vice President, Chief Operating Officer since August 2019.
Memory Interface Chips Made for high speed, 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) enable increased bandwidth and expanded capacity in enterprise and cloud servers. The Rambus portfolio includes DDR5 and DDR4 memory interface chipsets.
We operate direct sales offices 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.
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.
To foster our research and development efforts, we assembled a team of highly-skilled inventors, engineers and scientists whose activities are focused on continually developing new innovations within our chosen technology fields, and thereby securing the IP rights and legal protections for these ground-breaking inventions.
To foster our research and development efforts, we have assembled a team of highly skilled inventors, engineers and scientists whose activities are focused on continually developing new innovations within our chosen technology fields, and have thereby secured the IP rights and legal protections for these ground-breaking inventions.
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, 2022, 2021 and 2020, research and development expenses were $158.8 million, $135.7 million and $139.8 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, 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.
Leading semiconductor and electronic system companies such as AMD, Broadcom, Cisco, CXMT, IBM, Infineon, Kioxia, Marvell, MediaTek, Micron, Nanya, NVIDIA, Panasonic, Phison, Qualcomm, Samsung, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital, Winbond and Xilinx have licensed our patents for use in their own products.
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.
We offer one of the industry’s most comprehensive portfolios of security IP 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 SoC and FPGA designs.
Previously, he served as the Vice President of Finance for Rambus. Prior to joining Rambus, Mr. Lynch served as Vice President of Finance at Renesas Electronics, a leading global semiconductor company, where he was the head of U.S. finance. Mr. Lynch has extensive semiconductor experience, including financial leadership roles at Integrated Device Technology, Atmel, Knowles Corporation and National Semiconductor. Mr.
Lynch served as Vice President of Finance at Renesas Electronics, a leading global semiconductor company, where he was the head of U.S. finance. Mr. Lynch has extensive semiconductor experience, including financial leadership roles at Integrated Device Technology, Atmel, Knowles Corporation and National Semiconductor. Mr.
As in the past, litigation may be required to enforce and protect our IP rights, as well as the substantial investments undertaken to research and develop our innovations and technologies.
As in the past, litigation may be required to enforce and protect our IP rights, on top of the substantial investments undertaken to research and develop our innovations and technologies.
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, 2022, we had 765 employees, of which approximately 38% were in the United States and 62% 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. 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.
As of December 31, 2022, our technologies are covered by 2,392 U.S. and foreign patents, having expiration dates ranging from 2023 to 2041. Additionally, we have 615 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, 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.
Rambus Silicon IP is sold through our direct sales force operating out of offices in the United States, France, Japan, South Korea, Taiwan and China. 3 Table of Contents Patent Licenses Our patented inventions are foundational to the semiconductor industry and are licensed to leading semiconductor and system companies around the world.
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.
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. Keith Jones served as our interim Chief Financial Officer from November 2021 until August 2022. Name Age Position and Business Experience Luc Seraphin 59 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 60 President & Chief Executive Officer. Mr.
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 interconnect technologies, including physical interface (“PHY”) and digital controller IP, to offer industry-leading, integrated memory and interconnect subsystems.
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.
Seraphin also holds an MBA from the University of Hartford and has completed the senior executive program of Columbia University. Desmond Lynch 43 Chief Financial Officer. Mr. Lynch has served as Chief Financial Officer since August 2022, where he is responsible for the global finance organization, with responsibility for financial management, planning, tax, treasury, controls, and reporting.
Lynch has served as Chief Financial Officer since August 2022, where he is responsible for the global finance organization, with responsibility for financial management, planning, tax, treasury, controls and reporting. Previously, he served as the Vice President of Finance for Rambus. Prior to joining Rambus, Mr.
Silicon IP grew 30% as compared to 2021 driven by design wins at leading system on chip (“SoC”) customers. In addition, Rambus successfully closed and extended key patent licensing agreements, solidifying our foundation of sustained cash generation to fuel investment in our product and technology roadmaps and delivering consistent return of value to stockholders.
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.
License agreements are structured with fixed or variable, or a hybrid of fixed and variable royalty payments over certain periods ranging up to ten years.
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.
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.
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.
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. Driven by the continued growth of our memory interface chips, we produced record product revenue of $227.1 million in 2022, up 58% as compared to 2021.
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.
Item 1. Business Overview Rambus is an industry-leading provider of chips, silicon IP and innovations that address the fundamental challenges of accelerating data and enable critical performance improvements for data center and other growing markets.
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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The ongoing growth of the cloud, along with the widespread advancement of artificial intelligence (“AI”) and other data-intensive workloads, continue to drive an exponential increase in data usage and demands on data infrastructure. Creating fast and safe connections, both in and across systems, remains one of the most mission-critical design challenges limiting performance in advanced hardware for these markets.
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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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Whether in the cloud, at the edge or in your hand, real-time and immersive applications depend on data throughput and integrity. Rambus products and innovations deliver the increased bandwidth, capacity and security required to meet the world’s data needs and drive ever-greater end-user experiences. Rambus offers a balanced and diverse portfolio of solutions across chips, silicon IP and patent licensing.
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Throughout 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.
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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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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.
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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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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.
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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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

104 edited+34 added−14 removed200 unchanged
Biggest changeIf we are unsuccessful or delayed in qualifying any of our products with a customer, our business and operating results would suffer. • Products that fail to meet their specifications or are defective could impose significant costs on us. • 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. • Our future revenue depends in meaningful part 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. • Any failure in our delivery of high-quality technical support services may adversely affect our relationships with our customers and our financial results. • 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 the allocation of their services/capacity due to industry or other pressures could materially and adversely affect our business. • If the manufacturing process for our products is disrupted by operational issues, natural disasters, or other events, our business, results of operations, or financial condition could be materially adversely affected. • We rely on a number of third-party providers for data center hosting facilities, equipment, maintenance and other services, and the loss of, or problems with, one or more of these providers may impede our growth or cause us to lose customers. • Our business and operations could suffer in the event of physical and cybersecurity breaches and incidents. • Failures in our products and services or in the products of our customers, including those resulting from security vulnerabilities, defects, bugs or errors, could harm our business. • 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. 7 Table of Contents • 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. • 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. • The price of our common stock may continue to fluctuate. • Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses. • Our certificate of incorporation and bylaws, Delaware law and certain other agreements contain provisions that could discourage transactions resulting in a change in control, which may negatively affect the market price of our common stock. 8 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. • 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.
The loss of, or restrictions on our ability to sell to, one or more of our major customers, or any significant reduction in orders from, or a shift in product mix by, customers could have a material adverse effect on our on our operating results and financial condition.
The loss of, or restrictions on our ability to sell to, one or more of our major customers or any significant reduction in orders from, or a shift in product mix by customers, could have a material adverse effect on our operating results and financial condition.
The GDPR and CCPA, and 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.
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.
Our data, corporate systems, third-party systems and security measures and those of our customers 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 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.
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 target 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 or our target’s 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; • 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.
Our research and development and product programs are in highly competitive fields in which numerous third parties have issued patents and patent applications with claims closely related to the subject matter of our programs. We and/or our customers, also may be named as a defendant in lawsuits claiming that our technology infringes upon the IP rights of third parties.
Our research and development and product programs are in highly competitive fields in which numerous third parties have issued patents and patent applications with claims closely related to the subject matter of our programs. We and/or our customers may be named as a defendant in lawsuits claiming that our technology infringes upon the IP rights of third parties.
Further, third parties have sought and may seek review and reconsideration of the patentability of inventions claimed in certain of our patents by the U.S. Patent and Trademark Office (“USPTO”) and/or the European Patent Office (the “EPO”). Any re-examination or inter parties review proceedings may be initiated by the USPTO’s Patent Trial and Appeal Board (“PTAB”).
Further, third parties have sought and may seek review and reconsideration of the patentability of inventions claimed in certain of our patents by the U.S. Patent and Trademark Office (“USPTO”) and/or the European Patent Office (the “EPO”). Any re-examination or inter partes review proceedings may be initiated by the USPTO’s Patent Trial and Appeal Board (“PTAB”).
Risks Associated with Our Supply and Third Party Manufacturing We rely on third parties for a variety of services, including manufacturing, and these third parties’ failure to perform these services adequately or change the allocation of their services/capacity due to industry or other pressures could materially and adversely affect our business.
Risks Associated with Our Supply and Third-Party Manufacturing 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.
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 protect and 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.
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.
While we continually work with our suppliers to mitigate the impact of the supply constraints to our customer deliveries, in the event of a shortage or supply interruption from suppliers of related components, we may not be able to develop alternate sources quickly, cost-effectively, or at all.
While we continually work with our suppliers to mitigate the impact of the supply constraints to our customer deliveries, in the event of a shortage or supply interruption from suppliers of our components, we may not be able to develop alternate sources quickly, cost-effectively or at all.
To the extent that customer sales are not denominated in U.S. dollars, any royalties which are based on a percentage of the customers’ sales that we receive as a result of such sales could be subject to fluctuations in currency exchange rates.
To the extent that customer sales are not denominated in U.S. dollars, any royalties that are based on a percentage of the customers’ sales and which we receive as a result of such sales could be subject to fluctuations in currency exchange rates.
We and certain of our current and former officers and directors, as well as our current auditors, have been subject to several stockholder derivative actions, securities fraud class actions and/or individual lawsuits filed in federal court.
We and certain of our current and former officers and directors, as well as our current independent auditors, have been subject to several stockholder derivative actions, securities fraud class actions and/or individual lawsuits filed in federal court.
We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenues, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our offerings and business reputation and on positive recommendations from our existing customers.
We may be unable to respond quickly enough to accommodate short-term increases in customer demand for support services. Increased customer demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our offerings and business reputation and on positive recommendations from our existing customers.
In particular, DRAM manufacturers, which such customers make up a significant part of our revenue, are prone to significant business cycles and have suffered material losses and other adverse effects to their businesses, leading to industry consolidation from time-to-time that may result in loss of revenues under our existing license agreements or loss of target customers.
In particular, DRAM manufacturers, which make up a significant part of our revenue, are prone to significant business cycles and have suffered material losses and other adverse effects to their businesses, leading to industry consolidation from time-to-time that may result in loss of revenue under our existing license agreements or loss of target customers.
The Revenue Standard materially impacted the timing of revenue recognition for our fixed-fee IP licensing arrangements (including certain fixed-fee agreements that license our existing IP portfolio, as well as IP added to our portfolio during the license term) as a majority of such revenue would be recognized at inception of the license term (as opposed to over time as is the case under prior U.S.
The Revenue Standard materially impacted the timing of revenue recognition for our fixed-fee IP licensing arrangements (including certain fixed-fee agreements that license our existing IP portfolio, as well as IP added to our portfolio during the license term) as a majority of such revenue would be recognized at inception of the license term (as opposed to over time as was the case under prior U.S.
All of these factors may adversely affect the demand for our products and technologies and may cause us to experience substantial fluctuations in our operating results and financial condition. We face competition from semiconductor and digital electronics products and systems companies, and other semiconductor IP companies that provide security and memory interface cores that are available to the market.
All of these factors may adversely affect the demand for our products and technologies and may cause us to experience substantial fluctuations in our operating results and financial condition. We face competition from semiconductor and digital electronics products and systems companies, and other semiconductor IP companies that provide security and interface IP that are available to the market.
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.
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.
If we are unsuccessful in entering into license agreements with new customers or renewing license agreements with existing customers, on favorable terms or at all, or if they are terminated, our results of operations may decline significantly. Some of our revenue is subject to the pricing policies of our customers over which we have no control.
If we are unsuccessful in entering into license agreements with new customers or renewing license agreements with existing customers, on favorable terms or at all, or if these agreements are terminated, our results of operations may decline significantly. Some of our revenue is subject to the pricing policies of our customers over which we have no control.
If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those products to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer. Products that fail to meet their specifications or are defective could impose significant costs on us.
If we are unsuccessful or delayed in qualifying any of our products with a customer, sales of those products to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer. Products that fail to meet their specifications or are defective could impose significant costs on us or result in loss of business.
In addition, parties making these claims may be able to obtain injunctive or other equitable relief affecting our ability to license the products that incorporate the challenged IP. As a result of such claims, we may be required to obtain licenses from third parties, develop alternative technology or redesign our products.
In addition, parties making these claims may be able to obtain injunctive or other equitable relief affecting our ability to commercialize the products that incorporate the challenged IP. As a result of such claims, we may be required to obtain licenses from third parties, develop alternative technology or redesign our products.
Our certificate of incorporation, our bylaws and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock.
Our amended and restated certificate of incorporation, our amended and restated bylaws and Delaware law contain provisions that might enable our management to discourage, delay or prevent a change in control. In addition, these provisions could limit the price that investors would be willing to pay in the future for shares of our common stock.
We cannot be assured that our customer’s products will be commercially successful over time or at all as a result of factors beyond our control. If products incorporating our technologies are not commercially successful or experience rapid decline, our revenue and business will suffer.
We cannot be assured that our customers’ products will be commercially successful over time or at all as a result of factors beyond our control. If products incorporating our technologies are not commercially successful or experience rapid decline, our revenue and business will suffer.
We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline. We provide guidance regarding our expected financial and business performance including our anticipated future revenues, operating expenses and other financial and operation metrics.
We may fail to meet our publicly announced guidance or other expectations about our business, which would likely cause our stock price to decline. We provide guidance regarding our expected financial and business performance including our anticipated future revenue, operating expenses and other financial and operation metrics.
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 liquid for several years after the date of the investment, if at all.
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.
In the event these and other third parties we rely on fail to provide their services adequately, including as a result of errors in their systems, industry pressures or events beyond their control, or refuse 14 Table of Contents to provide these services on terms acceptable to us, and we are not able to find suitable alternatives, our business may be materially and adversely affected.
In the event these and other third parties we rely on fail to provide their services adequately, including as a result of errors in their systems, industry pressures or events beyond their control, or refuse to provide these services on terms acceptable to us, and we are not able to find suitable alternatives, our business may be materially and adversely affected.
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.
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.
We could be liable for direct and consequential damages and expenses including attorneys’ fees. A future obligation to indemnify our customers and/or suppliers may harm our business, financial condition and operating results. 23 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.
We could be liable for direct and consequential damages and expenses including attorneys’ fees. A future obligation to indemnify our customers and/or suppliers may harm our business, financial condition and operating results. If we are unable to protect our inventions successfully through the issuance and enforcement of patents, our operating results could be adversely affected.
Any future agreement may trigger our obligation to offer comparable terms or modifications to agreements with our existing customers, which may be 9 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 10 Table of Contents less favorable to us than the existing license terms.
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. 19 Table of Contents 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. New epidemics, pandemics or outbreaks of novel diseases may arise at any time.
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.
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.
Technological advances could render our products and technologies less competitive or obsolete, and we may not be able to respond 10 Table of Contents effectively to the technological requirements of evolving markets.
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.
If there are any lapses of service or damage to a facility, we could experience lengthy interruptions in our service, as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery 15 Table of Contents arrangements, our business could be harmed.
If there are any lapses of service or damage to a facility, we could experience lengthy interruptions in our service, as well as delays and additional expenses in arranging new facilities and services. Even with current and planned disaster recovery arrangements, our business could be harmed.
From time to time, we enter into license agreements that automatically convert from royalty generating arrangements to fully paid-up licenses under which the customer is no longer required to make payments for the licensed technology or IP upon expiration or upon reaching certain milestones.
From time to time, we enter into license agreements that automatically convert from royalty generating arrangements to fully paid-up licenses under which the customer is no longer required to make payments for all or certain components of the licensed technology or IP upon expiration or upon reaching certain milestones.
If we fail to meet our guidance or if we find it necessary to 12 Table of Contents revise such guidance, even if such failure or revision is seemingly insignificant, investors and analysts may lose confidence in us and the market value of our common stock could be materially adversely affected.
If we fail to meet our guidance or if we find it necessary to revise such guidance, even if such failure or revision is seemingly insignificant, investors and analysts may lose confidence in us and the market value of our common stock could be materially adversely affected.
Our future revenue depends in meaningful part 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.
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.
Contract revenue accounting may result in deferral of the service fees to the completion of the contract, or may result in the recognition of service fees over the period in which services are performed on a percentage-of-completion basis.
Contract revenue accounting may result in deferral of the service fees until the completion of the contract or may result in the recognition of service fees over the period in which services are performed on a percentage-of-completion basis.
Any downturn in economic conditions or other business factors could threaten the financial health of our counterparties, including companies with which we have entered into licensing and/or settlement agreements, and their ability to fulfill their financial and other obligations to us.
Any downturn in economic conditions or other business factors could threaten the financial health of our counterparties, including companies with which we have entered into licensing, asset/product sale and/or settlement agreements, and their ability to fulfill their financial and other obligations to us.
Third parties may claim that our current or future products or services infringe upon 24 Table of Contents their IP rights. Any such claim, with or without merit, could be time consuming, divert management’s attention from our business operations and result in significant expenses. We cannot assure you that we would be successful in defending against any such claims.
Third parties may claim that our current or future products or services infringe upon their IP rights. Defense of any such claim, with or without merit, could be time consuming, divert management’s attention from our business operations and result in significant expenses. We cannot assure you that we would be successful in defending against any such claims.
If there are further changes in management, such changes could be disruptive and could negatively affect our sales, operations, culture, future recruiting efforts and strategic direction.
If there are unexpected changes in management, such changes could be disruptive and could negatively affect our sales, operations, culture, future recruiting efforts and strategic direction.
Some of these factors include: • any progress, or lack of progress, real or perceived, in the development of products that incorporate our innovations and technology companies’ acceptance of our products, including the results of our efforts to expand into new target markets; • our signing or not signing new licenses or renewing existing licenses, and the loss of strategic relationships with any customer; • announcements of technological innovations or new products by us, our customers or our competitors; • changes in our strategies, including changes in our licensing focus and/or acquisitions or dispositions of companies or businesses with business models or target markets different from our core; • changes in macroeconomic conditions, increased risk of recession, and geopolitical issues; • positive or negative reports by securities analysts as to our expected financial results and business developments; • developments with respect to patents or proprietary rights and other events or factors; • new litigation and the unpredictability of litigation results or settlements; • repurchases of our common stock on the open market; • issuance of additional securities by us, including in acquisitions, or large cash payments, including in acquisitions; and • changes in accounting pronouncements.
Some of these factors include: • any progress, or lack of progress, real or perceived, in the development of products that incorporate our innovations and technology companies’ acceptance of our products, including the results of our efforts to expand into new target markets; • our signing or not signing new licenses or renewing existing licenses, and the loss of strategic relationships with any customer; • announcements of technological innovations or new products by us, our customers or our competitors; • changes in our strategies, including changes in our licensing focus and/or acquisitions or dispositions of companies or businesses with business models or target markets different from our core; • changes in macroeconomic conditions, increased risk of recession and geopolitical issues, including the effects of tensions between China and Taiwan, and potentially in Israel and the Middle East; • positive or negative reports by securities analysts as to our expected financial results and business developments; • developments with respect to patents or proprietary rights and other events or factors; • new litigation and the unpredictability of litigation results or settlements; • repurchases of our common stock on the open market; • issuance of additional securities by us, including in acquisitions, or large cash payments, including in acquisitions; and • changes in accounting pronouncements.
Inflationary pressures and shortages have increased, and may continue to increase, costs for materials, supplies, and labor and could cause our expenses to increase at a rate faster than our product pricing to recover such increases which may result in a material adverse effect on our business, financial condition or results of operations.
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.
Although we intend to protect our rights vigorously, if we fail to do so, our business will suffer. Effective protection of trademarks, copyrights, domain names, patent rights, and other IP rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights.
Although we intend to protect our rights vigorously, if we fail or are otherwise unable to do so, our business will suffer. Effective protection of trademarks, copyrights, domain names, patent rights and other IP rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights.
Our top five customers for each reporting period represented approximately 58%, 56% and 46% of our revenue for the years ended December 31, 2022, 2021 and 2020, 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%, 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 ability to secure and renew the licenses from which our revenues are derived depends on our customers adopting our technology and using it in the products they sell. If customers do not upgrade or enhance their product offerings to include such technologies, our revenue and operating results may be adversely affected.
Our ability to secure and renew the licenses from which that revenue is derived depends on our customers adopting our technology and using it in the products they sell. If customers do not upgrade or enhance their product offerings to include such technologies, our revenue and operating results may be adversely affected.
Our international operations and revenue are subject to a variety of risks which 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 issues, including changes in diplomatic and trade relationships, in particular with China; and • cultural differences in the conduct of business both with customers and in conducting business in our international facilities and international sales offices. 13 Table of Contents We and our customers are subject to many of the risks described above with respect to companies which are located in different countries.
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.
In addition, our patents will continue to expire according to their terms, with expected expiration dates ranging from 2023 to 2041. 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 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.
If we cannot find another source of royalties to replace the royalties from these license agreements converting to fully paid-up licenses, our results of operations following such conversion could be adversely affected. 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.
If we cannot find another source of royalties to replace the royalties from those license agreements that convert to fully paid-up licenses, our results of operations following such conversion could be adversely affected. 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.
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.
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.
While our business model continues to transform towards greater reliance on product revenue, a large portion of our revenue consists of fees paid for access to our patented technologies, existing technology and other development and support services 11 Table of Contents we provide to our customers.
While our business model continues to transform towards greater reliance on product revenue, a large portion of our revenue still consists of fees paid for access to our patented technologies, existing technology and other development and support services we provide to our customers.
Some of our products and services contain software licensed from third parties. Some of these licenses may not be available to us in the future on terms that are acceptable to us or allow our products to remain competitive.
Some of our products and services contain or function with software and/or IP blocks licensed from third parties. Some of these licenses may not be available to us in the future on terms that are acceptable to us or allow our products to remain competitive.
For the years ended December 31, 2022, 2021 and 2020, revenues received from our international customers constituted approximately 39%, 36% and 44%, 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, 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.
Acts of terrorism, climate-change related risk, widespread illness, or global pandemics, including the COVID-19 pandemic, war and any event that causes failures or interruption in our network infrastructure and technology systems could have a negative effect at our international and domestic facilities and could harm our business, financial condition, and operating results.
Acts of terrorism, climate-change related risk, widespread illness or global pandemics, international conflict, war and any event that causes failures or interruption in our network infrastructure and technology systems could have a negative effect at our international and domestic facilities and could harm our business, financial condition and operating results.
Our acquisitions or strategic investments may not 17 Table of Contents provide the advantages that we anticipated or generate the financial returns we expect, including if we are unable to close any pending acquisitions.
Our acquisitions or strategic investments may not provide the advantages that we anticipated or generate the financial returns we expect, including if we are unable to close any pending acquisitions.
Any dispute regarding our IP may require us to indemnify certain customers, the cost of which could severely hamper our business operations and financial condition. In any potential dispute involving our patents or other IP, our customers could also become the target of litigation.
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. In any potential dispute involving our products, our customers could also become the target of litigation.
For example, in 2019, we acquired Northwest Logic, Inc. (“Northwest Logic”) and the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure. Further, we acquired AnalogX Inc. (“AnalogX”) in July 2021, PLDA Group (“PLDA”) in August 2021, and Hardent, Inc. (“Hardent”) in May 2022.
For example, in 2019, we acquired Northwest Logic, Inc. and the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure. Further, we acquired AnalogX Inc. in July 2021, PLDA Group in August 2021 and Hardent, Inc. in May 2022.
Our operations and performance depend significantly on worldwide economic conditions. Current and future uncertainty in the worldwide economy, due to inflation, geopolitics, major central bank policies including interest rate increases, 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 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.
Pursuant to such provisions: • our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock, which means that a stockholder rights plan could be implemented by our board; • our board of directors is staggered into two classes, only one of which is elected at each annual meeting; • stockholder action by written consent is prohibited; • nominations for election to our board of directors and the submission of matters to be acted upon by stockholders at a meeting are subject to advance notice requirements; • certain provisions in our bylaws and certificate of incorporation such as notice to stockholders, the ability to call a stockholder meeting, advance notice requirements and action of stockholders by written consent may only be amended with the approval of stockholders holding 66 2/3% of our outstanding voting stock; • our stockholders have no authority to call special meetings of stockholders; and • our board of directors is expressly authorized to make, alter or repeal our bylaws.
Pursuant to such provisions: • our board of directors is authorized, without prior stockholder approval, to create and issue preferred stock, commonly referred to as “blank check” preferred stock, with rights senior to those of common stock, which means that a stockholder rights plan could be implemented by our board; • our board of directors is staggered into two classes, only one of which is elected at each annual meeting; • stockholder action by written consent is prohibited; 28 Table of Contents • nominations for election to our board of directors and the submission of matters to be acted upon by stockholders at a meeting are subject to advance notice requirements, including compliance with the “universal proxy rules” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings; • certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws, such as notice to stockholders, the ability to call a stockholder meeting, advance notice requirements and action of stockholders by written consent may only be amended with the approval of stockholders holding 66 2/3% of our outstanding voting stock; • our stockholders have no authority to call special meetings of stockholders; and • our board of directors is expressly authorized to make, alter or repeal our bylaws.
While we would seek to ensure the accuracy of such representations and warranties and fulfillment of any ongoing obligations, we may not be completely successful and consequently may be subject to claims by a purchaser of such assets.
While we would seek to ensure the accuracy of such representations and warranties and fulfillment of any ongoing obligations, we may not be completely successful and consequently may be subject to claims by a purchaser of such assets or related erosion of revenue or loss of customers.
If we conduct royalty audits in the future, such audits may trigger disagreements over contract terms with our customers and such disagreements could hamper customer relations, divert the efforts and attention of our management from normal operations and impact our business operations and financial condition.
If we conduct royalty audits in the future, such audits may trigger disagreements over contract terms with our customers and such disagreements could hamper customer relations, divert the efforts and attention of our management from normal operations and impact our business operations and financial condition. Our business and operating results could be harmed if we undertake any restructuring activities.
Any of these indemnification and support obligations could result in substantial and material expenses.
Any of these indemnification 26 Table of Contents and support obligations could result in substantial and material expenses.
In addition, if the effective price of licensed products sold by our foreign customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed products could fall, which in turn would reduce our royalties. We do not use financial instruments to hedge foreign exchange rate risk.
In addition, if the effective price of licensed products sold by our foreign customers were to increase as a result of fluctuations in the exchange rate of the relevant currencies, demand for licensed products could fall, which in turn would reduce our royalties.
In addition, qualifying a new manufacturer and commencing production can be an expensive and lengthy process. If our third-party manufacturers or suppliers are unable to provide us with adequate supplies of high-quality products for any other reason, we could experience a delay in our order fulfillment, and our business, operating results and financial condition would be adversely affected.
If our third-party manufacturers or suppliers are unable to provide us with adequate supplies of high-quality products for any other reason, we could experience a delay in our order fulfillment, and our business, operating results and financial condition would be adversely affected.
We cannot guarantee that we will be successful in keeping pace with all, or any, of the customer trends. Any investments made to enhance or develop new technologies that are not successful could have an adverse effect on our operating results and financial condition.
A transition by our customers to different business models could also result in reduced revenue. We cannot guarantee that we will be successful in keeping pace with all, or any, of the customer trends. Any investments made to enhance or develop new technologies that are not successful could have an adverse effect on our operating results and financial condition.
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.
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.
Under revenue recognition standard (“ASC 606”) adopted during the first quarter of 2018, our revenue varies greatly from quarter to quarter. As a result of the foregoing items, our actual results may differ substantially from analyst estimates or our forecasts in any given quarter. Also, a portion of our revenue comes from development and support services provided to our customers.
Under the revenue recognition standard (“ASC 606”) adopted during the first quarter of 2018, our revenue may vary greatly from quarter to quarter. As a result of the foregoing items, our actual results may differ substantially from analyst estimates or our forecasts in any given quarter.
Depending upon the nature of the services, a portion of the related revenue may be recognized ratably over the support period, or may be recognized according to contract revenue accounting.
Also, a portion of our revenue comes from development and support services provided to our customers. Depending upon the nature of the services, a portion of the related revenue may be recognized ratably over the support period or may be recognized according to contract revenue accounting.
In addition, the U.S. government recently announced new 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. The Company currently has not been materially adversely impacted by these new restrictions.
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.
Certain software that we use in 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.
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.
If we fail to limit to whom we license our patents, or fail to limit the terms of any such licenses, we may be required to license our patents or other IP to others in the future, which could limit the effectiveness of our patents against competitors. 25 Table of Contents Risks Associated with Capitalization Matters and Indebtedness The price of our common stock may continue to fluctuate.
As a result of such obligations, we may be required to license our patents or other IP to others in the future, which could limit the value of the patents and effectiveness of our patents against competitors. 27 Table of Contents Risks Associated with Capitalization Matters The price of our common stock may continue to fluctuate.
The CPRA significantly modifies the CCPA, effective as of January 1, 2023. Other states, including Virginia, Colorado, Utah, and Connecticut, have passed similar laws that share similarities with the CCPA, CPRA and legislation proposed in other states. The U.S. federal government also is contemplating federal privacy legislation.
The CPRA significantly modifies the CCPA, effective as of January 1, 2023. Numerous other states have passed laws that share similarities with the CCPA and CPRA, and other states are considering such legislation. The U.S. federal government also is contemplating federal privacy legislation.
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.
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.
Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel, which are primarily located in the San Francisco Bay Area in the United States, Canada, the Netherlands, France, Bulgaria, Taiwan and India. The San Francisco Bay Area is in close proximity to known earthquake fault zones and sites of recent historic wildfires.
Our business operations depend on our ability to maintain and protect our facilities, computer systems and personnel, which are primarily located in the San Francisco Bay Area in the United States, Bulgaria, Canada, France, India, the Netherlands, South Korea, and Taiwan.
The United States has recently experienced historically high levels of inflation. If the inflation rate continues to increase, such as a result of increases in the costs of labor and supplies, it will affect our expenses, such as employee compensation and research and development charges. Research and development expenses account for a significant portion of our operating expenses.
The United States has recently experienced historically high levels of inflation. While inflation rates have moderated in recent quarters, if the inflation rate increases again as a result of increases in the costs of labor and supplies, it will affect our expenses, such as employee compensation and research and development charges.
We are 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. Our business and operating results could be harmed if we undertake any restructuring activities.
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.
Trade-related government actions, whether implemented by the United States, China, European Union or other countries, that impose barriers or restrictions that would impact our ability to sell or ship products to certain customers may have a negative impact on our financial condition and results of operations.
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.
Any of these negative outcomes could result in substantial costs and diversion of resources, distract management and technical personnel, adversely impact our sales and reputation and seriously harm our business or operating results. 16 Table of Contents Although we maintain insurance coverage that may cover certain liabilities in connection with some security breaches and other security incidents, we cannot be certain our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms (if at all) or that any insurer will not deny coverage as to any future claim.
Although we maintain insurance coverage that may cover certain liabilities in connection with some security breaches and other security incidents, we cannot be certain our insurance coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms (if at all) or that any insurer will not deny coverage as to any future claim.
The markets for some of these products depend in part upon the continued development and deployment of wireless and other technologies, which may or may not address the needs of the users of these products.
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.
We are subject to a variety of laws and regulations in the United States, the European Union and other countries that involve, for example, user privacy, data protection and security, content and consumer protection. For example, in 2016, a new EU data protection regime, the General Data Protection Regulation (“GDPR”) was adopted, with it fully effective on May 25, 2018.
We are subject to a variety of laws and regulations in the United States, the European Union and other countries that involve, for example, user privacy, data protection and security, content and consumer protection.
If we were to receive an unfavorable ruling on a matter, our business, operating results or financial condition could be materially harmed. 22 Table of Contents We have in the past, and may in the future, become engaged in litigation stemming from our efforts to protect and enforce our patents and IP and make other claims, which could adversely affect our IP rights, distract our management and cause substantial expenses and declines in our revenue and stock price.
We have in the past, and may in the future, become engaged in litigation stemming from our efforts to protect and enforce our patents and IP and make other claims, which could adversely affect our IP rights, distract our management and cause substantial expenses and declines in our revenue and stock price.
Any losses or impairment charges that we incur related to acquisitions, strategic investments or sales of assets will have a negative impact on our financial results and the market value of our common stock, and we may continue to incur new or additional losses related to acquisitions or strategic investments. 18 Table of Contents We may have to incur debt or issue equity securities to pay for any future acquisitions, which debt could involve restrictive covenants or which equity security issuance could be dilutive to our existing stockholders.
Any losses or impairment charges that we incur related to acquisitions, strategic investments or sales of assets will have a negative impact on our financial results and the market value of our common stock, and we may continue to incur new or additional losses related to acquisitions or strategic investments.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeProperties As of December 31, 2022, we occupied offices in the leased facilities described below: Number of Offices Under Lease Location Primary Use 4 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 Chapel Hill, NC Research and development Hillsboro, OR Research and development 2 Bulgaria Plovdiv Research and development Sofia Research and development 4 Canada Montreal Research and development Toronto—University Ave Research and development Toronto—Yonge Street Research and development Vancouver Research and development 1 Espoo, Finland Research and development 1 France Aix-en-Provence Research and development Marseille Research and development 1 Bangalore, India Administrative offices, research and development and service functions 2 The Netherlands Rotterdam Research and development Vught Research and development 1 Seoul, South Korea Sales 1 Taipei, Taiwan Research and development
Biggest changeProperties 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

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management attention and resources and other factors. Item 4. Mine Safety Disclosures Not applicable. 28 PART II
Biggest changeRegardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management attention and resources and other factors. Item 4. Mine Safety Disclosures Not applicable. 31 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

15 edited+5 added−1 removed12 unchanged
Biggest changeThe 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. 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.
Biggest changeDuring 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.
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.
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.
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 a $80.0 million reduction to stockholders’ equity.
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.
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 a $80.0 million reduction to stockholders’ equity.
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.
Also 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.
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.
After giving effect to the 2020, 2021 and 2022 ASR programs, detailed in the table below, there remained an outstanding authorization to repurchase approximately 9.7 million shares of our outstanding common stock under the 2020 Repurchase Program. We record stock repurchases as a reduction to stockholders’ equity.
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.
Share Repurchase Programs On October 29, 2020, our 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 a new share 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. 29 Table of Contents As of January 31, 2023, there were 481 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, 2024, there were 454 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, 2017 to December 31, 2022.
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.
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, 2021 (1) (2) 7,066,820 $ 21.23 7,066,820 12,933,180 September 1, 2022 - September 30, 2022 (3) 3,132,341 $ 31.93 3,132,341 9,800,839 December 1, 2022 - December 31, 2022 (3) 62,761 $ 31.93 62,761 9,738,078 Cumulative shares repurchased as of December 31, 2022 10,261,922 10,261,922 _________________________________________ (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.
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.
(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.
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.
(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.
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.
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 30 Table of Contents share of $22.82. Refer to Note 15, “Stockholders’ Equity,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information.
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.
Fiscal years ending: Base Period 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Rambus Inc. $ 100.00 $ 53.94 $ 96.87 $ 122.78 $ 206.68 $ 251.90 NASDAQ Composite $ 100.00 $ 97.16 $ 132.81 $ 192.47 $ 235.15 $ 158.65 RDG Semiconductor Composite $ 100.00 $ 90.09 $ 134.47 $ 195.30 $ 295.15 $ 184.29 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Fiscal 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.
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. Refer to Note 15, “Stockholders’ Equity,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information.
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
Recent Sales of Unregistered Equity Securities None. Item 6. Reserved
Added
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”).
Added
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.
Added
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.
Added
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.
Added
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.

Item 7. Management's Discussion & Analysis

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

119 edited+47 added−36 removed49 unchanged
Biggest changeOur research and development expenses for 2022 increased approximately $23.1 million, primarily due to increased headcount-related expenses of $8.3 million, engineering development tool costs of $3.4 million, stock-based compensation expense of $2.9 million, consulting costs of $2.5 million, prototyping costs of $2.0 million, bonus accrual expense of $1.9 million, depreciation expense of $1.0 million and allocated information technology costs of $0.6 million, offset by a decrease in facilities costs of $1.3 million and retention bonus expense related to acquisitions of $0.7 million. 32 Table of Contents Sales, general and administrative expenses for 2022 increased approximately $15.7 million, primarily due to increased stock-based compensation expense of $5.0 million, headcount-related expenses of $3.4 million, facilities costs of $2.0 million, bonus accrual expense of $1.8 million, acquisition-related costs (including retention bonus expense) of $1.8 million, travel expenses of $0.9 million and general legal fees of $0.7 million, offset by decreases in legal and accounting costs of $3.0 million related to the shareholder activism activity and restatement matters in 2021 and allocated information technology costs of $0.6 million.
Biggest changeOur 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 licenses typically range in term up to ten years and 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.
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.
For the year ended December 31, 2022 as compared to 2021, total research and development expenses increased approximately $23.1 million, primarily due to increased headcount-related expenses of $8.3 million, engineering development tool costs of $3.4 million, stock-based compensation expense of $2.9 million, consulting costs of $2.5 million, prototyping costs of $2.0 million, bonus accrual expense of $1.9 million, depreciation expense of $1.0 million and allocated information technology costs of $0.6 million, offset by a decrease in facilities costs of $1.3 million and retention bonus expense related to acquisitions of $0.7 million.
Total research and development expenses increased approximately $23.1 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased headcount-related expenses of $8.3 million, engineering development tool costs of $3.4 million, stock-based compensation expense of $2.9 million, consulting costs of $2.5 million, prototyping costs of $2.0 million, bonus accrual expenses of $1.9 million, depreciation expense of $1.0 million and allocated information technology costs of $0.6 million, offset by a decrease in facilities costs of $1.3 million and retention bonus expense related to acquisitions of $0.7 million.
For the year ended December 31, 2022 as compared to 2021, total amortization of acquired intangible assets decreased approximately $1.8 million, 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 $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.
For the year ended December 31, 2022 as compared to 2021, interest expense decreased approximately $8.8 million, primarily due to the partial repurchases of the 2023 Notes in the first and third quarters of 2022 and the adoption of ASU 2020-06 on January 1, 2022.
Interest expense decreased approximately $8.8 million for the year ended December 31, 2022 as compared to 2021, primarily due to the partial repurchases of the 2023 Notes in the first and third quarters of 2022 and the adoption of ASU 2020-06 on January 1, 2022.
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.
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.
Operating Activities 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.
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.
Investing Activities 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 40 $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, 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 .
Trends There are a number of trends that may have a material impact on us in the future, including but not limited to, the evolution of memory and SerDes technology, adoption of security solutions, the use and adoption of our inventions or technologies generally, industry consolidation, and global economic conditions with the resulting impact on sales of consumer electronic systems.
Trends There are a number of trends that may have a material impact on us in the future, including but not limited to, the evolution of memory technology, adoption of security solutions, the use and adoption of our inventions or technologies generally, industry consolidation and global economic conditions with the resulting impact on sales of consumer electronic systems.
Under the 2022 ASR Program, we pre-paid to Wells Fargo the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 3.1 million shares of our common stock from Wells Fargo in the third quarter of 2022, which were retired and recorded as a $80.0 million reduction to stockholders’ equity.
Under the 2022 ASR Program, we pre-paid to Wells Fargo the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 3.1 million shares of our common stock from Wells Fargo in the third quarter of 2022, which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
We have established standalone selling prices for all of our distinct offerings - specifically, the same pricing methodology is consistently applied to all licensing arrangements; all services offerings are priced within tightly controlled bands and all contracts that include support and maintenance state a renewal rate or price that is systematically enforced.
We have established standalone selling prices for the majority of our distinct offerings - specifically, the same pricing methodology is consistently applied to all licensing arrangements; all services offerings are priced within tightly controlled bands and all contracts that include support and maintenance state a renewal rate or price that is systematically enforced.
As noted in Note 18, “Income Taxes,” of Notes to Consolidated Financial Statements of this Form 10-K, although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, we cannot reasonably estimate the outcome at this time.
As noted in Note 18, “Income Taxes,” of Notes to Consolidated Financial Statements of this Form 10-K, although it is possible that some of the unrecognized tax benefits could be settled within the next 12 months, we cannot reasonably estimate the timing of the outcome at this time.
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.
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.
Patent and technology licensing arrangements result in fixed payments received over time, with guaranteed minimum payments on occasion, variable payments calculated based on the licensee’s sale or use of the IP, or a mix of fixed and variable payments. • For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), we recognize revenue upon control over the underlying IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted lending rates ranging between 5% and 10%, with the related interest income being recognized over time on an effective rate basis.
Patent and technology licensing arrangements result in fixed payments received over time, with guaranteed minimum payments on occasion, variable payments calculated based on the licensee’s sale or use of the IP, or a mix of fixed and variable payments. • For fixed-fee arrangements (including arrangements that include minimum guaranteed amounts), we recognize revenue upon control over the underlying IP use right transferring to the licensee, net of the effect of significant financing components calculated using customer-specific, risk-adjusted lending rates typically ranging between 5% and 10%, with the related interest income recognized over time on an effective rate basis.
Product Revenue Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, and to distributors, net of accruals for price protection and rights of return on products unsold by the distributors. 43 To date, none of these accruals have been material.
Product Revenue Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, and to distributors, net of accruals for price protection and rights of return on products unsold by the distributors. To date, none of these accruals have been material.
The accounting guidance for share-based payments requires forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The accounting 49 guidance for share-based payments requires forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
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 on our Consolidated Statement of Operations of this 10-K.
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.
In addition, we are required to assess the realization of the deferred tax asset or liability to be included on the consolidated balance sheet as of the reporting dates.
In addition, we are required to assess the realization of the deferred tax asset or liability to be included in the Consolidated Balance Sheet as of the reporting dates.
Under the 2021 ASR Program, we pre-paid to Deutsche Bank the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 3.9 million shares of our common stock from Deutsche Bank in the second quarter of 2021, which were retired and recorded as a $80.0 million reduction to stockholders’ equity.
Under the 2021 ASR Program, we pre-paid to Deutsche Bank the $100.0 million purchase price for 45 our common stock and, in turn, we received an initial delivery of approximately 3.9 million shares of our common stock from Deutsche Bank in the second quarter of 2021, which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
Additionally, the majority of our cash and cash equivalents is in the United States. Our cash needs for the year ended December 31, 2022 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, 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.
C hanges in operating assets and liabilities for the year ended December 31, 2022, primarily included a decrease in unbilled receivables and an increase in accounts payable, offset by decreases in income taxes payable, operating lease liabilities and deferred revenue, as well as increases in accrued salaries and benefits and other liabilities, inventories, accounts receivable and prepaids and other current assets.
C hanges in operating assets and liabilities for the year ended December 31, 2022, primarily included a decrease in unbilled receivables and increases in accounts payable and accrued salaries and benefits and other liabilities , offset by decreases in income taxes payable, operating lease liabilities and deferred revenue, as well as increases in inventories, accounts receivable and prepaids and other current assets.
Stock-Based Compensation We maintain stock plans covering a broad range of potential equity grants including stock options, nonvested equity stock and equity stock units and performance-based instruments.
Stock-Based Compensation We maintain stock plans covering a broad range of equity grants including stock options, nonvested equity stock and equity stock units and performance-based instruments.
As of December 31, 2022, there remained an outstanding authorization to repurchase approximately 9.7 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, 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.
Key estimates used in recognizing revenue predominantly consist of the following: 44 • For contract revenue where we recognize revenue over time, the key factor reviewed by us to estimate costs to complete each contract is the estimated man-months necessary to complete the project. • For fixed-fee arrangements in which cash is being received over a period exceeding a year, we calculate a customer-specific lending rate using a Daily Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the arrangement, and take into consideration a licensee-specific risk profile determined based on a review of the licensee’s report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield Curve Rate considering the overall business risk, financing strength and risk indicators, as listed. • We recognize revenue on variable fee licensing arrangements on the basis of sales and usage which we are required to estimate prior to receiving the final related reports from our customers.
Key estimates used in recognizing revenue predominantly consist of the following: • For contract revenue where we recognize revenue over time, the key factor reviewed by us to estimate costs to complete each contract is the estimated man-months necessary to complete the project. • For fixed-fee arrangements in which cash is being received over a period exceeding one year, we calculate a customer-specific lending rate using a Daily Treasury Yield Curve Rate that changes depending on the date on which the licensing arrangement was entered into and the term (in years) of the arrangement, and take into consideration a licensee-specific risk profile determined based on a review of the licensee’s “Full Company View” Dun & Bradstreet report obtained on the date the licensing arrangement was signed by the parties, with a risk premium being added to the Daily Treasury Yield Curve Rate considering the overall business risk, financing strength and risk indicators, as listed. • We recognize revenue on variable fee licensing arrangements on the basis of sales and usage which we are required to estimate prior to receiving the final related reports from our customers.
Refer to Note 14, “ Equity Incentive Plans and Stock-Based Compensation,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information regarding the valuation of stock-based compensation.
Refer to Note 14, “Equity Incentive Plans and Stock-Based Compensation,” of Notes to Consolidated Financial Statements of this Form 10-K for additional information regarding the valuation of stock-based compensation.
The accounting guidance for share-based payments requires the measurement and recognition of compensation expense in our statement of operations for all share-based payment awards made to our employees, directors and consultants including employee stock options, nonvested equity stock and equity stock units, and employee stock purchase grants.
The accounting guidance for share-based payments requires the measurement and recognition of compensation expense in our Consolidated Statements of Operations for all share-based payment awards made to our employees, directors and consultants including employee stock options, nonvested equity stock and equity stock units, and employee stock purchase grants.
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.
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.
Leading semiconductor and electronic system companies such as AMD, Broadcom, Cisco, CXMT, IBM, Infineon, Kioxia, Marvell, MediaTek, Micron, Nanya, NVIDIA, Panasonic, Phison, Qualcomm, Samsung, SK hynix, Socionext, STMicroelectronics, Toshiba, Western Digital, Winbond and Xilinx have licensed our patents. The vast majority of our patents originate from our internal research and development efforts.
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.
Our revenue consists of product, royalty and contract and other revenue. Products primarily consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our direct sales force and distributors. Royalty revenue consists of patent and technology license royalties.
Products primarily consist of memory interface chips sold directly and indirectly to module manufacturers and OEMs worldwide through multiple channels, including our direct sales force and distributors. Royalty revenue consists of patent and technology license royalties.
Royalty Revenue Our patent and technology licensing arrangements generally range between one year and ten years in duration and generally grant the licensee the right to use our entire IP portfolio as it evolves over time.
Royalty Revenue Our patent and technology licensing arrangements generally range between one year and ten years in duration and generally grant the licensee the right to use applicable portions of our entire IP portfolio as it evolves over time.
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 50%, 44% and 46% of our consolidated revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
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.
Cost of Contract and Other Revenue Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Cost of contract and other revenue $ 4.7 $ 4.7 $ 5.6 (1.9) % (15.8) % 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, 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.
Our effective tax rate for the year ended December 31, 2021 differed from the U.S. statutory rate primarily due to the foreign-derived intangible income deduction and certain capitalized research expenditures, partially offset by the change in the valuation allowance against U.S. deferred tax assets.
Our effective tax rate for the year ended December 31, 2022, differed from the U.S. statutory rate primarily due to the foreign-derived intangible income deduction, acquisition indebtedness and certain capitalized research expenditures, partially offset by the change in the valuation allowance against our U.S. deferred tax assets.
Financing Activities Cash used in financing activit ies of $362.9 million for the year ended December 31, 2022 was primarily due to $258.1 million paid in connection with the partial repurchases of our 2023 Notes in the first and third quarters of 2022, an aggregate payment of $100.4 million as part of our 2022 ASR program (includes $0.4 million in fees related to the 2022 ASR program), $69.5 million paid in connection with the settlement of warrants associated with the partial repurchases of our 2023 Notes, $18.4 million in payments of taxes on restricted stock units and $14.4 million paid under installment payment arrangements to acquire fixed assets, offset by proceeds of $91.7 million from the settlement of senior convertible note hedges associated with the partial repurchases of our 2023 Notes and $6.1 million in proceeds from the issuance of common stock under equity incentive plans.
Cash used in financing activit ies of $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.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes that are included elsewhere in this report. Business Overview Rambus is an industry-leading provider of chips, silicon IP and innovations that address the fundamental challenges of accelerating data and enable critical performance improvements for data center and other growing markets.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes that are included elsewhere in this report. Business Overview We are an industry-leading provider of chips, silicon IP and innovations that address the fundamental challenges of accelerating data and enabling critical performance improvements for data center and other growing markets.
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 2022 acquisition of Hardent and the 2021 acquisitions of AnalogX and PLDA.
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.
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 43 Table of Contents date applicable to the 2020 Repurchase Program.
An initial software arrangement generally consists of a term-based or perpetual license, significant software customization services and support and maintenance services that include post-implementation customer support and the right to unspecified software updates and enhancements on a when and if available basis.
An initial software arrangement may consist of a term-based or perpetual license, significant software customization services and support and maintenance services that include post-implementation customer support and the right to unspecified software updates and enhancements on a when and if available basis.
We recognize license and customization services revenue at a point in time when final delivery is made or based on an over time model, depending on nature and amount of customization. For the over time model, we recognize revenue over time by measuring the progress toward complete satisfaction of that performance obligation. We measure progress using an input method.
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.
(2) For our lease commitments as of December 31, 2022, refer to Note 10, “Leases,” of Notes to Consolidated Financial Statements of this Form 10-K. 41 Table of Contents (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, 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.
Amortization of Acquired Intangible Assets Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Amortization of acquired intangible assets Amortization of acquired intangible assets included in total cost of revenue $ 13.9 $ 16.2 $ 17.4 (14.2) % (6.4) % Amortization of acquired intangible assets included in total operating expenses 1.7 1.2 1.0 36.5 % 15.6 % Total amortization of acquired intangible assets $ 15.6 $ 17.4 $ 18.4 (10.6) % (5.1) % Amortization expense is related to various acquired IP.
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.
We recorded a provision for income taxes of $6.5 million for the year ended December 31, 2022, which was primarily comprised of taxes on foreign earnings, withholding tax expense and tax expense from the amortization of indefinite-lived intangibles. For the year ended December 31, 2022, we paid withholding taxes of $21.1 million.
We recorded a provision for incomes taxes of $6.5 million for the year ended December 31, 2022, which was primarily comprised of taxes on foreign earnings, withholding tax expense and tax expense from the amortization of indefinite-lived intangibles.
Revenues from royalties accounted for 31%, 42% and 34% of our consolidated revenue for the years ended December 31, 2022, 2021 and 2020, 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 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.
As of December 31, 2022, our consolidated balance sheet included net deferred tax assets, before valuation allowance, of approximately $180.0 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, 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.
We have a high degree of revenue concentration. Our top five customers represented 58% of our revenue for 2022 as compared to 56% in 2021 and 46% in 2020.
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.
For additional information concerning international revenue, refer to Note 7, “Segments and Major Customers,” of Notes to Consolidated Financial Statements of this Form 10-K. The royalties we receive from our semiconductor customers are partly a function of the adoption of our technologies by system companies.
Currently, our revenue from international customers is predominantly denominated in U.S. dollars. For additional information concerning international revenue, refer to Note 7, “Segments and Major Customers,” of Notes to Consolidated Financial Statements of this Form 10-K. The royalties we receive from our semiconductor customers are partly a function of the adoption of our technologies by system companies.
Where a licensee has the contractual right to terminate a fixed-fee arrangement for convenience without any substantive penalty payable upon such termination, we only recognize revenue on contracts in which the parties have present enforceable rights and obligations and that are due and payable. • For variable arrangements, we recognize revenue based on an estimate of the licensee’s sale or usage of the IP during the period of reference, typically quarterly, with a true-up recorded, if required, when we receive the actual royalty report from the licensee. • We recognize license renewal revenue at the beginning 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 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.
Research and Development Expenses Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Research and development expenses Research and development expenses $ 145.3 $ 125.1 $ 129.8 16.2 % (3.6) % Stock-based compensation 13.5 10.6 10.0 27.2 % 5.7 % Total research and development expenses $ 158.8 $ 135.7 $ 139.8 17.0 % (3.0) % Research and development expenses are those expenses incurred for the development of applicable technologies.
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.
Under the income approach, we measure fair value of the reporting unit based on a projected cash flow method using a discount rate determined by our management which is commensurate with the risk inherent in its current business model.
We measure fair value of the indefinite-lived intangible assets under the income approach based on a projected cash flow method using a discount rate determined by our management which is commensurate with the risk inherent in our current business model.
For the year ended December 31, 2022 as compared to 2021, total sales, general and administrative costs increased approximately $15.7 million, primarily due to increased stock-based compensation expense of $5.0 million, headcount-related expenses of $3.4 million, facilities costs of $2.0 million, bonus accrual expense of $1.8 million, acquisition-related costs (including retention bonus expense) of $1.8 million, travel expenses of $0.9 million and general legal fees of $0.7 million, offset by decreases in legal and accounting costs of $3.0 million related to the shareholder activism activity and restatement matters in 2021 and allocated information technology costs of $0.6 million. 36 Table of Contents For the year ended December 31, 2021 as compared to 2020, total sales, general and administrative costs increased approximately $4.6 million, primarily due to increased consulting, legal and accounting costs of $3.0 million related to the shareholder activism activity and restatement matters during the first quarter of 2021, acquisition-related costs (including retention bonus expense) of $1.8 million, allocated information technology costs of $0.8 million, stock-based compensation expense of $0.8 million and recruiting expenses of $0.6 million, offset by decreased facilities costs of $2.2 million, other consulting costs of $0.6 million and sales and marketing costs of $0.6 million.
Total sales, general and administrative costs increased approximately $15.7 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased stock-based compensation expense of $5.0 million, headcount-related expenses of $3.4 million, rent and facility expenses of $2.0 million, bonus accrual expense of $1.8 million, acquisition-related costs (including retention bonus expenses) of $1.8 million, travel expenses of $0.9 million and general legal fees of $0.7 million, 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.
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, 2022, including Samsung, MediaTek, Phison and Qualcomm.
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.
For the year ended December 31, 2021 as compared to 2020, total research and development expenses decreased approximately $4.1 million, primarily due to decreased engineering development tool costs of $3.6 million, headcount-related expenses of $1.7 million, retention bonus expense related to acquisitions of $1.1 million, allocated information technology costs of $0.8 million, facilities costs of $0.7 million and prototyping costs of $0.6 million, offset by an increase in engineering costs allocated to cost of revenue of $1.9 million, consulting costs of $1.8 million and stock-based compensation expense of $0.6 million.
Total research and development expenses decreased approximately $2.0 million for the year ended December 31, 2023 as compared to 2022, primarily due to decreases in consulting expenses of $3.4 million, retention bonus expense related to acquisitions of $1.6 million, an increase in engineering costs allocated to cost of revenue of $0.8 million, as well as decreases in prototyping costs of $0.8 million and bonus expense of $0.7 million, offset by an increase in headcount-related expenses of $1.8 million, stock-based compensation expense of $1.4 million, depreciation expense of $1.1 million and facilities costs of $0.9 million.
The 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 November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank.
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 39 Table of Contents years ended December 31, 2022 and 2021, we repurchased shares of our common stock under the 2020 Repurchase Program as discussed 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, 2023 and 2022, we repurchased shares of our common stock under the 2020 Repurchase Program as discussed in the “Share Repurchase Program” section below.
Liquidity and Capital Resources (In millions) December 31, 2022 December 31, 2021 Cash and cash equivalents $ 125.3 $ 107.9 Marketable securities 187.9 377.7 Total cash, cash equivalents, and marketable securities $ 313.2 $ 485.6 Years Ended December 31, (In millions) 2022 2021 2020 Net cash provided by operating activities $ 230.4 $ 209.2 $ 185.5 Net cash provided by (used in) investing activities $ 152.0 $ (115.7) $ (97.6) Net cash used in financing activities $ (362.9) $ (114.2) $ (61.2) 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, 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.
We expect to continue to evaluate and potentially enter into strategic acquisitions or divestitures which may adversely impact our business and operating results. 33 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 on our consolidated statements of operations: Years Ended December 31, 2022 2021 2020 Revenue: Product revenue 50.0 % 43.9 % 46.3 % Royalties 30.7 % 41.6 % 34.3 % Contract and other revenue 19.3 % 14.5 % 19.4 % Total revenue 100.0 % 100.0 % 100.0 % Cost of revenue: Cost of product revenue 19.6 % 15.0 % 15.3 % Cost of contract and other revenue 1.0 % 1.5 % 2.3 % Amortization of acquired intangible assets 3.1 % 4.9 % 7.1 % Total cost of revenue 23.7 % 21.4 % 24.7 % Gross profit 76.3 % 78.6 % 75.3 % Operating expenses: Research and development 34.9 % 41.3 % 56.8 % Sales, general and administrative 23.4 % 27.8 % 35.0 % Amortization of acquired intangible assets 0.4 % 0.4 % 0.4 % Restructuring and other charges — % 0.1 % 1.7 % Change in fair value of earn-out liability 0.7 % 1.6 % (0.7) % Total operating expenses 59.4 % 71.2 % 93.2 % Operating income (loss) 16.9 % 7.4 % (17.9) % Interest income and other income (expense), net 1.7 % 3.0 % 7.3 % Gain on fair value of equity security 0.8 % — % — % Loss on extinguishment of debt (18.4) % — % — % Loss on fair value adjustment of derivatives, net (2.3) % — % — % Interest expense (0.4) % (3.3) % (4.2) % Interest and other income (expense), net (18.6) % (0.3) % 3.1 % Income (loss) before income taxes (1.7) % 7.1 % (14.8) % Provision for income taxes 1.4 % 1.5 % 1.6 % Net income (loss) (3.1) % 5.6 % (16.4) % Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Total Revenue Product revenue $ 227.1 $ 143.9 $ 114.0 57.8 % 26.3 % Royalties 139.8 136.7 84.6 2.3 % 61.7 % Contract and other revenue 87.9 47.7 47.7 84.4 % (0.2) % Total revenue $ 454.8 $ 328.3 $ 246.3 38.5 % 33.3 % 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. 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.
As of December 31, 2022, approximately $15.6 million of the fair value of the software licenses was included in other current liabilities and $22.2 million was included in other long-term liabilities, in the accompanying Consolidated Balance Sheet of this Form 10-K.
As of December 31, 2023, approximately $14.6 million of the fair value of the software licenses was included in other current liabilities and $8.0 million was included in other long-term liabilities, in the accompanying Consolidated Balance Sheet of this Form 10-K.
Our revenue from companies headquartered outside of the United States accounted for 39% in 2022 as compared to 36% in 2021 and 44% in 2020. We expect that revenue derived from international customers will continue to represent a significant portion of our total revenue in the future. Currently, our revenue from international customers is denominated in U.S. dollars.
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.
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.
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. On August 10, 2023, we entered into the 2023 ASR Program with RBC.
Sales, General and Administrative Expenses Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Sales, general and administrative expenses Sales, general and administrative expenses $ 85.2 $ 74.5 $ 70.7 14.3 % 5.4 % Stock-based compensation 21.5 16.5 15.7 30.3 % 4.9 % Total sales, general and administrative expenses $ 106.7 $ 91.0 $ 86.4 17.2 % 5.3 % 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.
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.
For the year ended December 31, 2021, we paid withholding taxes of $20.4 million. 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, 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.
The $83.6 million loss on extinguishment of debt and the $10.6 million loss on fair value adjustment of derivatives, net, related to the repurchases of $162.1 million aggregate principal amount of our 1.375% Convertible Senior Notes due 2023 (the “2023 Notes”) during the first and third quarters of 2022 and the settlement of the related convertible senior note hedges and warrants in the same periods.
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.
Changes in operating assets and liabilities for the year ended December 31, 2020 primarily included decreases in unbilled receivables, accounts receivable, prepaids and other current assets, and an increase in accrued salaries and benefits, offset by a decrease in income taxes payable and an increase in inventories.
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.
Under the 2022 ASR Program, we pre-paid to Wells Fargo the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 3.1 million shares of our common stock from Wells Fargo in the third quarter of 2022, which were retired and recorded as a $80.0 million reduction to stockholders’ equity.
Under the 2023 ASR Program, we pre-paid to RBC the $100.0 million purchase price for our common stock and, in turn, we received an initial delivery of approximately 1.6 million shares of our common stock from RBC on August 11, 2023, which were retired and recorded as an $80.0 million reduction to stockholders’ equity.
Cost of Product Revenue Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Cost of product revenue $ 89.0 $ 49.4 $ 37.7 80.1 % 30.9 % Cost of product revenue are costs attributable to the sale of memory and security products.
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.
For the year ended December 31, 2021 as compared to 2020, interest expense remained relatively flat. Refer to Note 3, “Recent Accounting Pronouncements,” and Note 12, “Convertible Notes, ” of Notes to Consolidated Financial Statements of this Form 10-K for additional information on the adoption of ASU 2020-06 and the partial repurchases of the convertible notes, respectively.
Refer to Note 3, “Recent Accounting Pronouncements,” and Note 12, “Convertible Notes, ” of Notes to Consolidated Financial Statements of this Form 10-K for additional information on the adoption of ASU 2020-06 and the partial repurchases of the convertible notes, respectively.
Cash provided by operating activities of $185.5 million for the year ended December 31, 2020 was primarily attributable to the cash generated from customer licensing, product sales and engineering services fees.
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.
As of December 31, 2022, we have a valuation allowance of $201.9 million, resulting in net deferred tax liabilities of $21.9 million. 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 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 continually monitor the credit risk in our portfolio and mitigate our credit risk exposures in accordance with our policies. 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.
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.
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.
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.
(4) In connection with the acquisition of Northwest Logic in the third quarter of 2019, the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, in the fourth quarter of 2019, the acquisitions of AnalogX and PLDA in the third quarter of 2021, and the acquisition of Hardent in the second quarter of 2022, we are obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions, including the condition of employment.
(4) In connection with the acquisitions of Hardent in the second quarter of 2022 and PLDA in the third quarter of 2021, we are obligated to pay retention bonuses to certain employees subject to certain eligibility and acceleration provisions, including the condition of employment.
Highlights from our annual results for the year ended December 31, 2022 were as follows: • Revenue of $454.8 million; • Operating expenses of $270.3 million; • Diluted net loss per share of $0.13; and • Net cash provided by operating activities of $230.4 million.
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.
We also expect that our technology royalties will continue to vary from period to period based on our customers’ shipment volumes, sales prices and product mix. Contract and Other Revenue Contract and other revenue consists of revenue from technology development projects.
We also expect that our technology royalties will continue to vary from period to period based on our customers’ shipment volumes, sales prices and product mix. Contract and Other Revenue Contract and other revenue consists of revenue from technology development projects. Contract and other revenue decreased approximately $1.5 million for the year ended December 31, 2023 as compared to 2022.
Additionally, we have the intent and ability to hold our debt investments that have unrealized losses in accumulated other comprehensive gain (loss) for a sufficient period of time to allow for recovery of the principal amounts invested. Further, we have no significant exposure to European sovereign debt.
Additionally, we have the intent and ability to hold our debt investments that have unrealized losses in accumulated other comprehensive gain (loss) for a sufficient period of time to allow for recovery of the principal amounts invested. We continually monitor the credit risk in our portfolio and mitigate our credit risk exposures in accordance with our policies.
Royalties Royalty revenue, which includes patent and technology license royalties, increased approximately $3.1 million to $139.8 million for the year ended December 31, 2022 from $136.7 million for 2021. The increase was primarily due to the timing and structure of license renewals.
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.
Upon successful completion of each project, we make a separate determination of 45 Table of Contents the useful life of the acquired indefinite-lived intangible assets and the related amortization is recorded as an expense over the estimated useful life of the specific projects.
Upon successful completion of each project, we make a separate determination of the useful life of the acquired indefinite-lived intangible assets and the related amortization is recorded as an expense over the estimated useful life of the specific projects. Indefinite-lived intangible assets are subject to at least an annual assessment for impairment, applying a fair-value based test.
In the near term, we expect research and development expenses to be higher as we continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, security and other technologies.
We will continue to make investments in the infrastructure and technologies required to maintain our product innovation in semiconductor, security and other technologies.
Interest expense for all periods disclosed consists primarily of interest expense associated with the non-cash interest expense related to the amortization of the debt issuance costs on the 2023 Notes, as well as the coupon interest related to these notes.
Prior to the second quarter of 2023, interest expense consisted primarily of interest expense associated with long term software licenses, the non-cash interest expense related to the amortization of the debt issuance costs on the 2023 Notes, as well as the coupon interest related to these notes.
Contract and other revenue increased approximately $40.2 million to $87.9 million for the year ended December 31, 2022 from $47.7 million for 2021. The increase was primarily due to higher revenue associated with our Silicon IP offerings. Contract and other revenue remained flat at $47.7 million for the year ended December 31, 2021 as compared to 2020.
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.
Restructuring and Other Charges Years Ended December 31, 2021 to 2022 2020 to 2021 (Dollars in millions) 2022 2021 2020 Change Change Restructuring and other charges $ — $ 0.4 $ 4.1 100.0% NM* _____________________________________ * NM — percentage is not meaningful In November 2020, we initiated a restructuring plan to reduce overall expenses to improve future profitability by reducing spending on research and development efforts and sales, general and administrative programs (the “2020 Restructuring Plan”).
In November 2020, we initiated a restructuring plan to reduce overall expenses to improve future profitability by reducing spending on research and development efforts and sales, general and administrative programs (the “2020 Restructuring Plan”). During the year ended December 31, 2021, we recorded charges of approximately $0.4 million, related primarily to the reduction in workforce.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−3 removed3 unchanged
Biggest changeWe invest our cash equivalents and marketable securities in a variety of U.S. dollar financial instruments such as U.S. Treasuries, U.S. Government Agencies, commercial paper and corporate notes. Our policy specifically prohibits trading securities for the sole purposes of realizing trading profits. However, we may liquidate a portion of our portfolio if we experience unforeseen liquidity requirements.
Biggest changeOur policy specifically prohibits trading securities for the sole purpose of realizing trading profits, however, we may liquidate a portion of our portfolio if we experience unforeseen liquidity requirements. In such a case, if the environment has been one of rising interest rates, we may experience a realized loss.
We mitigate this risk by investing only in high quality, highly liquid instruments. Securities with original maturities of one year or less must be rated by two of the three industry standard rating agencies as follows: A1 by Standard & Poor’s, P1 by Moody’s and/or F-1 by Fitch.
We mitigate this risk by investing only in highly rated, liquid instruments. Securities with original maturities of one year or less must be rated by two of the three industry standard rating agencies as follows: A1 by Standard & Poor’s, P1 by Moody’s and/or F-1 by Fitch.
Although the fluctuation of currency exchange rates may impact our customers, and thus indirectly impact us, we do not attempt to hedge this indirect and speculative risk.
Although the fluctuation of currency exchange rates may impact our customers, and thus indirectly impact us, we do not attempt to hedge this indirect and speculative risk, other than as noted in the paragraph below.
If market interest rates were to increase immediately and uniformly by 1.0% from the levels as of December 31, 2022, the fair value of the portfolio would decline by approximately $1.1 million. Actual results may differ materially from this sensitivity analysis.
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.
In such a case, if the environment has been one of rising interest rates, we may experience a realized loss, similarly, if the environment has been one of declining interest rates, we may experience a realized gain. As of December 31, 2022, we had an investment portfolio of fixed income marketable securities of $218.5 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, 2023, we had an investment portfolio of fixed income marketable securities of $337.4 million, including cash equivalents.
Our overseas operations consist primarily of international business operations in France, the Netherlands and the United Kingdom, design centers in Canada, India, Bulgaria and Finland and small business development offices in Australia, China, Japan, South Korea and Taiwan. We monitor our foreign currency exposure; however, we believe our foreign currency exposure is not material as of December 31, 2022.
Our overseas operations consist primarily of international business operations in France, the Netherlands and the United Kingdom, design centers in Bulgaria, Canada, India, and Finland and small business development offices in China, South Korea and Taiwan.
We may make investments in U.S. Treasuries, U.S. Agencies and corporate bonds with maturities up to 36 months. However, the bias of our investment portfolio is shorter maturities. All investments must be U.S. dollar denominated. Additionally, we have no significant exposure to European sovereign debt.
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.
Removed
The fair value of our outstanding convertible notes is subject to interest rate risk, market risk and other factors due to the convertible feature. The fair value of the convertible notes will generally increase as interest rates fall and decrease as interest rates rise.
Added
We 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.
Removed
In addition, the fair value of the convertible notes will generally increase as our common stock price increases and will generally decrease as our common stock price declines in value.
Added
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.
Removed
The interest and market value changes affect the fair value of our convertible notes but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. All outstanding convertible notes were retired as of February 1, 2023. We invoice the majority of our customers in U.S. dollars.

Other RMBS 10-K year-over-year comparisons