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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________
FORM 10-Q
_______________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 000-22339
_______________________________
RAMBUS INC.
(Exact name of registrant as specified in its charter)
_______________________________
| | | | | | | | |
Delaware | | 94-3112828 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
| | | | | | | | | | | | | | |
4453 North First Street | | |
Suite 100 | | |
San Jose | , | California | | 95134 |
(Address of principal executive offices) | | (ZIP Code) |
Registrant’s telephone number, including area code:
(408) 462-8000
________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered |
Common Stock, $.001 Par Value | RMBS | The NASDAQ Stock Market LLC |
| | (The NASDAQ Global Select Market) |
Securities registered pursuant to Section 12(g) of the Act:
None
________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
| | | | |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | | |
Emerging growth company | ☐ | | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No ☒
The number of shares outstanding of the registrant’s Common Stock, par value $.001 per share, was 107,482,010 as of September 30, 2022.
RAMBUS INC.
TABLE OF CONTENTS
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include, without limitation, predictions regarding the following aspects of our future:
•Success in the markets of our products and services or our customers’ products;
•Sources of competition;
•Research and development costs and improvements in technology;
•Sources, amounts and concentration of revenue, including royalties;
•Variation in patent and technology royalties in future periods;
•Success in signing and renewing license agreements;
•Success in adding and maintaining new customers;
•Levels of variation in our customers’ reported shipment volumes;
•Variation in contract and other revenue, based on varying revenue recognized from contract and other revenue;
•Implications of a short-term increase in our research and development expenses;
•Variation in our sales, general and administrative expenses;
•Terms of our licenses and amounts owed under license agreements;
•Technology product development;
•Dispositions, acquisitions, mergers or strategic transactions and our related integration efforts;
•Impairment of goodwill and long-lived assets;
•Pricing policies of our customers;
•Changes in our strategy and business model, including the expansion of our portfolio of inventions, products, software, services and solutions to address additional markets in memory, chip and security;
•Deterioration of financial health of commercial counterparties and their ability to meet their obligations to us;
•Effects of security breaches or failures in our or our customers’ products and services on our business;
•Engineering, sales and general and administration expenses;
•Contract revenue;
•Operating results;
•Continued product revenue growth, specifically in connection with the growth in sales of our memory interface chips;
•International licenses, operations and expansion;
•Effects of changes in the economy and credit market on our industry and business;
•Impact of the ongoing COVID-19 pandemic, including its most recent variants, as well as other diseases, on our business operations and financial results;
•Ability to identify, attract, motivate and retain qualified personnel, especially in light of a hyper-competitive compensation environment;
•Effects of government regulations on our industry and business;
•Manufacturing, shipping and supply partners, supply chain availability and/or sale and distribution channels;
•Growth in our business;
•Methods, estimates and judgments in accounting policies;
•Adoption of new accounting pronouncements;
•Effective tax rates, including as a result of recent U.S. tax legislation;
•Restructurings and plans of termination;
•Realization of deferred tax assets/release of deferred tax valuation allowance;
•Trading price of our common stock;
•Internal control environment;
•The level and terms of our outstanding debt and the repayment or financing of such debt;
•Protection of intellectual property (“IP”);
•Any changes in laws, agency actions and judicial rulings that may impact the ability to enforce our IP rights;
•Indemnification and technical support obligations;
•Equity repurchase programs;
•Issuances of debt or equity securities, which could involve restrictive covenants or be dilutive to our existing stockholders;
•Effects of fluctuations in interest rates and currency exchange rates;
•Effects of a rising rate of inflation;
•Effects of U.S. government restrictions on exports with China;
•Effects of changes in macroeconomic conditions, increased risk of recession, and geopolitical issues;
•Management of supply chain risks; and
•Outcome and effect of potential future IP litigation and other significant litigation.
You can identify these and other forward-looking statements by the use of words such as “may,” “future,” “shall,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential,” “continue,” “projecting” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.
Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under Part II, Item 1A, “Risk Factors.” All forward-looking statements included in this document are based on our assessment of information available to us at this time. We assume no obligation to update any forward-looking statements.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
RAMBUS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| | | | | | | | | | | | | | |
(In thousands, except shares and par value) | | September 30, 2022 | | December 31, 2021 |
ASSETS | | | | |
Current assets: | | | | |
Cash and cash equivalents | | $ | 141,559 | | | $ | 107,891 | |
Marketable securities | | 123,289 | | | 377,718 | |
Accounts receivable | | 38,547 | | | 44,065 | |
Unbilled receivables | | 142,037 | | | 135,608 | |
Inventories | | 14,161 | | | 8,482 | |
| | | | |
Prepaids and other current assets | | 14,584 | | | 10,600 | |
| | | | |
Total current assets | | 474,177 | | | 684,364 | |
Intangible assets, net | | 54,856 | | | 58,420 | |
Goodwill | | 292,038 | | | 278,810 | |
Property, plant and equipment, net | | 78,563 | | | 56,035 | |
Operating lease right-of-use assets | | 25,232 | | | 23,712 | |
Deferred tax assets | | 2,803 | | | 4,047 | |
Unbilled receivables | | 37,914 | | | 123,018 | |
Other assets | | 3,473 | | | 4,240 | |
Total assets | | $ | 969,056 | | | $ | 1,232,646 | |
LIABILITIES & STOCKHOLDERS’ EQUITY | | | | |
Current liabilities: | | | | |
Accounts payable | | $ | 20,405 | | | $ | 11,279 | |
Accrued salaries and benefits | | 16,654 | | | 20,945 | |
| | | | |
Convertible notes | | 10,368 | | | 163,687 | |
Deferred revenue | | 23,460 | | | 24,755 | |
| | | | |
Income taxes payable | | 20,024 | | | 20,607 | |
Operating lease liabilities | | 5,435 | | | 5,992 | |
| | | | |
Other current liabilities | | 20,085 | | | 20,002 | |
Total current liabilities | | 116,431 | | | 267,267 | |
| | | | |
| | | | |
Long-term operating lease liabilities | | 30,093 | | | 29,099 | |
Long-term income taxes payable | | 7,818 | | | 21,424 | |
Deferred tax liabilities | | 25,746 | | | 23,985 | |
Other long-term liabilities | | 39,084 | | | 28,475 | |
Total liabilities | | 219,172 | | | 370,250 | |
Commitments and contingencies (Notes 9, 11 and 15) | | | | |
Stockholders’ equity: | | | | |
Convertible preferred stock, $0.001 par value: | | | | |
Authorized: 5,000,000 shares; Issued and outstanding: no shares at September 30, 2022 and December 31, 2021 | | — | | | — | |
Common stock, $0.001 par value: | | | | |
Authorized: 500,000,000 shares; Issued and outstanding: 107,482,010 shares at September 30, 2022 and 109,292,235 shares at December 31, 2021 | | 107 | | | 109 | |
Additional paid-in capital | | 1,265,943 | | | 1,298,966 | |
Accumulated deficit | | (509,398) | | | (435,227) | |
Accumulated other comprehensive loss | | (6,768) | | | (1,452) | |
Total stockholders’ equity | | 749,884 | | | 862,396 | |
Total liabilities and stockholders’ equity | | $ | 969,056 | | | $ | 1,232,646 | |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
RAMBUS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
(In thousands, except per share amounts) | | 2022 | | 2021 | | 2022 | | 2021 |
Revenue: | | | | | | | | |
Product revenue | | $ | 58,619 | | | $ | 36,710 | | | $ | 159,890 | | | $ | 98,661 | |
Royalties | | 29,878 | | | 33,044 | | | 108,380 | | | 103,813 | |
Contract and other revenue | | 23,747 | | | 11,528 | | | 64,156 | | | 34,049 | |
Total revenue | | 112,244 | | | 81,282 | | | 332,426 | | | 236,523 | |
Cost of revenue: | | | | | | | | |
Cost of product revenue | | 21,953 | | | 13,157 | | | 60,767 | | | 35,989 | |
Cost of contract and other revenue | | 1,455 | | | 1,456 | | | 3,053 | | | 4,029 | |
Amortization of acquired intangible assets | | 3,576 | | | 3,813 | | | 10,375 | | | 12,638 | |
Total cost of revenue | | 26,984 | | | 18,426 | | | 74,195 | | | 52,656 | |
Gross profit | | 85,260 | | | 62,856 | | | 258,231 | | | 183,867 | |
Operating expenses: | | | | | | | | |
Research and development | | 39,295 | | | 35,592 | | | 118,648 | | | 99,415 | |
Sales, general and administrative | | 26,198 | | | 22,210 | | | 79,409 | | | 67,956 | |
| | | | | | | | |
Amortization of acquired intangible assets | | 433 | | | 359 | | | 1,259 | | | 817 | |
Restructuring charges | | — | | | — | | | — | | | 368 | |
Change in fair value of earn-out liability | | 2,411 | | | — | | | (1,889) | | | — | |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Total operating expenses | | 68,337 | | | 58,161 | | | 197,427 | | | 168,556 | |
Operating income | | 16,923 | | | 4,695 | | | 60,804 | | | 15,311 | |
Interest income and other income (expense), net | | 2,838 | | | 2,726 | | | 6,936 | | | 8,088 | |
Gain on fair value of equity security | | 3,547 | | | — | | | 3,547 | | | — | |
Loss on extinguishment of debt | | (17,129) | | | — | | | (83,626) | | | — | |
Loss on fair value adjustment of derivatives, net | | (2,302) | | | — | | | (10,585) | | | — | |
Interest expense | | (437) | | | (2,672) | | | (1,390) | | | (7,969) | |
Interest and other income (expense), net | | (13,483) | | | 54 | | | (85,118) | | | 119 | |
Income (loss) before income taxes | | 3,440 | | | 4,749 | | | (24,314) | | | 15,430 | |
Provision for income taxes | | 2,501 | | | 1,073 | | | 5,945 | | | 3,201 | |
Net income (loss) | | $ | 939 | | | $ | 3,676 | | | $ | (30,259) | | | $ | 12,229 | |
Net income (loss) per share: | | | | | | | | |
Basic | | $ | 0.01 | | | $ | 0.03 | | | $ | (0.27) | | | $ | 0.11 | |
Diluted | | $ | 0.01 | | | $ | 0.03 | | | $ | (0.27) | | | $ | 0.11 | |
Weighted-average shares used in per share calculation: | | | | | | | | |
Basic | | 109,968 | | | 108,989 | | | 110,102 | | | 111,103 | |
Diluted | | 111,962 | | | 113,661 | | | 110,102 | | | 114,954 | |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
RAMBUS INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
(In thousands) | | 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) | | $ | 939 | | | $ | 3,676 | | | $ | (30,259) | | | $ | 12,229 | |
Other comprehensive income (loss): | | | | | | | | |
Foreign currency translation adjustment | | (1,018) | | | (217) | | | (1,987) | | | (234) | |
Unrealized loss on marketable securities, net of tax | | (12) | | | — | | | (3,329) | | | (85) | |
Total comprehensive income (loss) | | $ | (91) | | | $ | 3,459 | | | $ | (35,575) | | | $ | 11,910 | |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
RAMBUS INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | For the Three Months Ended September 30, 2022 |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | |
(In thousands) | | Shares | | Amount | | | | | Total |
Balances at June 30, 2022 | | 110,528 | | | $ | 111 | | | $ | 1,283,789 | | | $ | (440,004) | | | $ | (5,738) | | | $ | 838,158 | |
Net income | | — | | | — | | | — | | | 939 | | | — | | | 939 | |
Foreign currency translation adjustment | | — | | | — | | | — | | | — | | | (1,018) | | | (1,018) | |
Unrealized loss on marketable securities, net of tax | | — | | | — | | | — | | | — | | | (12) | | | (12) | |
Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan | | 86 | | | — | | | (980) | | | — | | | — | | | (980) | |
| | | | | | | | | | | | |
Repurchase and retirement of common stock under repurchase program | | (3,132) | | | (4) | | | (30,075) | | | (70,333) | | | — | | | (100,412) | |
Stock-based compensation | | — | | | — | | | 8,872 | | | — | | | — | | | 8,872 | |
Retirement of convertible senior note hedges | | — | | | — | | | 16,404 | | | — | | | — | | | 16,404 | |
Retirement of warrants | | — | | | — | | | (12,067) | | | — | | | — | | | (12,067) | |
| | | | | | | | | | | | |
Balances at September 30, 2022 | | 107,482 | | | $ | 107 | | | $ | 1,265,943 | | | $ | (509,398) | | | $ | (6,768) | | | $ | 749,884 | |
| | | | | | | | | | | | |
| | For the Three Months Ended September 30, 2021 |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Gain (Loss) | | |
(In thousands) | | Shares | | Amount | | | | | Total |
Balances at June 30, 2021 | | 108,897 | | | $ | 109 | | | $ | 1,257,075 | | | $ | (426,413) | | | $ | (183) | | | $ | 830,588 | |
Net income | | — | | | — | | | — | | | 3,676 | | | — | | | 3,676 | |
Foreign currency translation adjustment | | — | | | — | | | — | | | — | | | (217) | | | (217) | |
| | | | | | | | | | | | |
Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan | | 168 | | | — | | | (651) | | | — | | | — | | | (651) | |
Issuance of common stock due to PLDA Group (“PLDA”) acquisition | | 300 | | | — | | | 6,978 | | | — | | | — | | | 6,978 | |
Repurchase and retirement of common stock under repurchase program | | — | | | — | | | (13) | | | — | | | — | | | (13) | |
Stock-based compensation | | — | | | — | | | 7,482 | | | — | | | — | | | 7,482 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Balances at September 30, 2021 | | 109,365 | | | $ | 109 | | | $ | 1,270,871 | | | $ | (422,737) | | | $ | (400) | | | $ | 847,843 | |
| | | | | | | | | | | | |
| | For the Nine Months Ended September 30, 2022 |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | |
(In thousands) | | Shares | | Amount | | | | | Total |
Balances at December 31, 2021 | | 109,292 | | | $ | 109 | | | $ | 1,298,966 | | | $ | (435,227) | | | $ | (1,452) | | | $ | 862,396 | |
Net loss | | — | | | — | | | — | | | (30,259) | | | — | | | (30,259) | |
Foreign currency translation adjustment | | — | | | — | | | — | | | — | | | (1,987) | | | (1,987) | |
Unrealized loss on marketable securities, net of tax | | — | | | — | | | — | | | — | | | (3,329) | | | (3,329) | |
Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan | | 1,322 | | | 2 | | | (13,681) | | | — | | | — | | | (13,679) | |
Repurchase and retirement of common stock under repurchase program | | (3,132) | | | (4) | | | (30,075) | | | (70,333) | | | — | | | (100,412) | |
Stock-based compensation | | — | | | — | | | 25,286 | | | — | | | — | | | 25,286 | |
Retirement of convertible senior note hedges | | — | | | — | | | 78,415 | | | — | | | — | | | 78,415 | |
Retirement of warrants | | — | | | — | | | (58,423) | | | — | | | — | | | (58,423) | |
Cumulative effect adjustment from adoption of ASU 2020-06 | | — | | | — | | | (34,545) | | | 26,421 | | | — | | | (8,124) | |
Balances at September 30, 2022 | | 107,482 | | | $ | 107 | | | $ | 1,265,943 | | | $ | (509,398) | | | $ | (6,768) | | | $ | 749,884 | |
| | | | | | | | | | | | |
| | For the Nine Months Ended September 30, 2021 |
| | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | |
(In thousands) | | Shares | | Amount | | | | | Total |
Balances at December 31, 2020 | | 111,698 | | | $ | 112 | | | $ | 1,270,426 | | | $ | (357,751) | | | $ | (81) | | | $ | 912,706 | |
Net income | | — | | | — | | | — | | | 12,229 | | | — | | | 12,229 | |
Foreign currency translation adjustment | | — | | | — | | | — | | | — | | | (234) | | | (234) | |
Unrealized loss on marketable securities, net of tax | | — | | | — | | | — | | | — | | | (85) | | | (85) | |
Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan | | 1,382 | | | 1 | | | (4,952) | | | — | | | — | | | (4,951) | |
Issuance of common stock due to PLDA acquisition | | 300 | | | — | | | 6,978 | | | — | | | — | | | 6,978 | |
Repurchase and retirement of common stock under repurchase program | | (4,015) | | | (4) | | | (22,862) | | | (77,215) | | | — | | | (100,081) | |
Stock-based compensation | | — | | | — | | | 21,281 | | | — | | | — | | | 21,281 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Balances at September 30, 2021 | | 109,365 | | | $ | 109 | | | $ | 1,270,871 | | | $ | (422,737) | | | $ | (400) | | | $ | 847,843 | |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
RAMBUS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | | | | |
| | Nine Months Ended |
| | September 30, |
(In thousands) | | 2022 | | 2021 |
Cash flows from operating activities: | | | | |
Net income (loss) | | $ | (30,259) | | | $ | 12,229 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | |
Stock-based compensation | | 25,286 | | | 21,281 | |
Depreciation | | 23,107 | | | 19,623 | |
Amortization of intangible assets | | 11,634 | | | 13,456 | |
Non-cash interest expense and amortization of convertible debt issuance costs | | 197 | | | 5,702 | |
Loss on extinguishment of debt | | 83,626 | | | — | |
Loss on fair value adjustment of derivatives, net | | 10,585 | | | — | |
| | | | |
| | | | |
Deferred income taxes | | 1,680 | | | 1,939 | |
| | | | |
Gain on fair value of equity security | | (3,547) | | | — | |
Loss on equity investment | | 862 | | | 717 | |
Realized loss from sale of marketable securities | | 1,138 | | | — | |
| | | | |
Change in fair value of earn-out liability | | (1,889) | | | — | |
Gain on disposal of property, plant and equipment | | (10) | | | (48) | |
| | | | |
Change in operating assets and liabilities, net of effects of acquisition: | | | | |
Accounts receivable | | 6,689 | | | (16,258) | |
Unbilled receivables | | 78,914 | | | 87,335 | |
Prepaids and other current assets | | 1,186 | | | 5,910 | |
Inventories | | (5,679) | | | 6,506 | |
Accounts payable | | 8,682 | | | 1,007 | |
Accrued salaries and benefits and other liabilities | | (10,811) | | | (7,626) | |
Income taxes payable | | (15,352) | | | (21,414) | |
Deferred revenue | | (1,709) | | | 9,670 | |
Operating lease liabilities | | (5,226) | | | (2,980) | |
Net cash provided by operating activities | | 179,104 | | | 137,049 | |
Cash flows from investing activities: | | | | |
Purchases of property, plant, and equipment | | (12,650) | | | (7,527) | |
Acquisition of intangible assets | | (3,000) | | | — | |
Purchases of marketable securities | | (80,969) | | | (419,073) | |
Maturities of marketable securities | | 53,358 | | | 297,759 | |
| | | | |
Proceeds from sales of marketable securities | | 276,687 | | | 227,045 | |
| | | | |
| | | | |
| | | | |
| | | | |
Acquisition of business, net of cash acquired | | (15,932) | | | (97,115) | |
Net cash provided by investing activities | | 217,494 | | | 1,089 | |
Cash flows from financing activities: | | | | |
Proceeds received from issuance of common stock under employee stock plans | | 3,775 | | | 5,002 | |
Payments of taxes on restricted stock units | | (17,454) | | | (9,953) | |
Payments under installment payment arrangements | | (10,472) | | | (9,826) | |
Repurchase of convertible senior notes | | (258,060) | | | — | |
Proceeds from retirement of convertible senior note hedges | | 91,729 | | | — | |
Payments for retirement of warrants | | (69,528) | | | — | |
| | | | |
| | | | |
Repurchase and retirement of common stock, including prepayment under accelerated share repurchase program | | (100,412) | | | (100,081) | |
Net cash used in financing activities | | (360,422) | | | (114,858) | |
Effect of exchange rate changes on cash and cash equivalents | | (2,519) | | | (362) | |
Net increase in cash, cash equivalents and restricted cash | | 33,657 | | | 22,918 | |
Cash, cash equivalents and restricted cash at beginning of period | | 108,264 | | | 129,324 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 141,921 | | | $ | 152,242 | |
| | | | |
Non-cash operating, investing and financing activities: | | | | |
Property, plant and equipment received and accrued in accounts payable and other liabilities | | $ | 32,540 | | | $ | 11,809 | |
Operating lease right-of-use assets obtained in exchange for operating lease obligations | | $ | 5,663 | | | $ | — | |
Common stock issued pursuant to acquisition | | $ | — | | | $ | 6,978 | |
| | | | |
Reconciliation of the cash, cash equivalents and restricted cash balances as of September 30, 2022 and December 31, 2021: | | | | |
| | September 30, 2022 | | December 31, 2021 |
Cash and cash equivalents | | $ | 141,559 | | | $ | 107,891 | |
Restricted cash | | 362 | | | 373 | |
Cash, cash equivalents and restricted cash | | $ | 141,921 | | | $ | 108,264 | |
| | | | |
Refer to Notes to Unaudited Condensed Consolidated Financial Statements
RAMBUS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include the accounts of Rambus Inc. (“Rambus” or the “Company”) and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in the accompanying unaudited condensed consolidated financial statements.
In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring items) necessary to state fairly the financial position and results of operations for each interim period presented. Interim results are not necessarily indicative of results for a full year.
The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Certain information and Note disclosures included in the financial statements prepared in accordance with generally accepted accounting principles have been omitted in these interim statements pursuant to such SEC rules and regulations. The information included in this Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto in Form 10-K for the year ended December 31, 2021.
2. Recent Accounting Pronouncements
Recent Accounting Pronouncements Adopted
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (“ASU 2020-06”).” The amendments in this ASU simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, the guidance removes the liability and equity separation models for convertible instruments. Instead, entities will account for convertible debt instruments wholly as debt unless convertible instruments contain features that require bifurcation as a derivative or that result in substantial premiums accounted for as paid-in capital. The guidance also requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share. The guidance is effective for fiscal years beginning after December 15, 2021. The Company adopted this guidance on January 1, 2022 on a modified retrospective basis. Upon adoption, the Company reversed approximately $35.2 million of debt discount related to the Company’s 1.375% Convertible Senior Notes due 2023 (the “2023 Notes”) from additional paid-in capital, reversed approximately $8.3 million representing the unamortized debt discount from liabilities, and recorded the net impact of $26.9 million to accumulated deficit. The Company also removed approximately $0.7 million of debt issuance costs related to the 2023 Notes from additional paid-in capital and recorded approximately $0.5 million to accumulated deficit related to the amortization of debt issuance costs that were historically allocated to equity. The Company expects reported interest expense for its convertible notes to decrease this year and in the future.
In October 2021, the FASB issued ASU No. 2021-08, “Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The amendments in this ASU improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistencies related to recognition of an acquired contract liability, and to payment terms and their effect on subsequent revenue recognized by the acquirer. Among other changes, this ASU requires that an acquirer account for acquired revenue contracts in accordance with Topic 606 as if it had originated the contracts. If the acquirer is unable to assess or rely on how the acquiree applied Topic 606, the acquirer should consider the terms of the acquired contracts as of the contract inception or contract modification date in applying Topic 606 to determine what should be recorded at the acquisition date. The amendments also provide certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The guidance is effective for fiscal years beginning after December 15, 2022. The Company elected to early adopt this ASU on April 1, 2022. The adoption of this ASU did not have a material impact on the Company's condensed consolidated financial statements.
3. Revenue Recognition
Contract Balances
The contract assets are primarily related to the Company’s fixed fee IP licensing arrangements and rights to consideration for performance obligations delivered but not billed as of September 30, 2022.
The Company’s contract balances were as follows:
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| | As of |
(In thousands) | | September 30, 2022 | | December 31, 2021 |
Unbilled receivables | | $ | 179,951 | | | $ | 258,626 | |
Deferred revenue | | 25,066 | | | 26,198 | |
During the nine months ended September 30, 2022, the Company recognized $21.7 million of revenue that was included in the contract balances as of December 31, 2021. During the nine months ended September 30, 2021, the Company recognized $9.7 million of revenue that was included in the contract balances as of December 31, 2020.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Contracted but unsatisfied performance obligations were approximately $29.6 million as of September 30, 2022, which the Company primarily expects to recognize over the next 2 years.
4. Earnings (Loss) Per Share
Basic earnings (loss) per share is calculated by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing the earnings by the weighted-average number of common shares and potentially dilutive securities outstanding during the period. Potentially dilutive common shares consist of incremental common shares issuable upon exercise of stock options, employee stock purchases, restricted stock and restricted stock units and shares issuable upon the conversion of convertible notes. The dilutive effect of outstanding shares is reflected in diluted earnings per share by application of the treasury stock method. This method includes consideration of the amounts to be paid by the employees and the amount of unrecognized stock-based compensation related to future services. No potential dilutive common shares are included in the computation of any diluted per share amount when a net loss is reported.
The following table sets forth the computation of basic and diluted net income (loss) per share:
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| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
(In thousands, except per share amounts) | | 2022 | | 2021 | | 2022 | | 2021 |
Net income (loss) per share: | | | | | | | | |
Numerator: | | | | | | | | |
Net income (loss) | | $ | 939 | | | $ | 3,676 | | | $ | (30,259) | | | $ | 12,229 | |
Denominator: | | | | | | | | |
Weighted-average shares outstanding - basic | | 109,968 | | 108,989 | | 110,102 | | 111,103 |
Effect of potential dilutive common shares | | 1,994 | | | 4,672 | | | — | | | 3,851 | |
Weighted-average shares outstanding - diluted | | 111,962 | | 113,661 | | 110,102 | | 114,954 |
Basic net income (loss) per share | | $ | 0.01 | | | $ | 0.03 | | | $ | (0.27) | | | $ | 0.11 | |
Diluted net income (loss) per share | | $ | 0.01 | | | $ | 0.03 | | | $ | (0.27) | | | $ | 0.11 | |
For the nine months ended September 30, 2022, an additional 2.4 million shares were excluded from the weighted-average dilutive shares because there was a net loss position for the period. During the three months ended September 30, 2022, the Company’s stock price exceeded the 2023 Notes’ conversion price of $18.93 per share, therefore approximately 0.1 million shares for the three months ended September 30, 2022 were included in the weighted-average dilutive shares. During the three and nine months ended September 30, 2021, the Company’s stock price exceeded the 2023 Notes’ conversion price of $18.93 per share, therefore approximately 1.8 million and 1.0 million shares for the three and nine months ended September 30, 2021, respectively, were included in the weighted-average dilutive shares.
As a result of the Company’s adoption of ASU No. 2020-06 on January 1, 2022, the dilutive impact of the 2023 Notes on the calculation of diluted net income (loss) per share is considered using the if-converted method. Furthermore, because the principal amount of the 2023 Notes must be settled in cash, the dilutive impact of applying the if-converted method is limited to the in-the-money portion, if any, of the 2023 Notes. For periods prior to the Company’s January 1, 2022 adoption of ASU No. 2020-06, the Company applied the treasury stock method to account for the dilutive impact of the 2023 Notes for diluted net income (loss) per share purposes. As noted in ASU No. 2020-06, for convertible instruments where the principal is required to be paid in cash, the results of applying the if-converted method are consistent with the results of applying the historical treasury stock method. Therefore, even though the Company is required to apply the if-converted method upon adoption of ASU No. 2020-06, there is no impact to its earnings per share calculation. Under the if-converted method, the cumulative dilutive effect of the 2023 Notes would be approximately 0.5 million shares. Refer to Note 10, “Convertible Notes,” for additional information.
5. Intangible Assets and Goodwill
Goodwill
The following tables present goodwill information for the nine months ended September 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | As of December 31, 2021 | | Addition to Goodwill (1) | | Adjustments to Goodwill (2) | | | | | | Effect of Exchange Rates (3) | | As of September 30, 2022 |
Total goodwill | | $ | 278,810 | | | $ | 12,069 | | | $ | 1,013 | | | | | | | $ | 146 | | | $ | 292,038 | |
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(1) In May 2022, the Company acquired Hardent, Inc. (“Hardent”), which resulted in the Company recognizing additional goodwill. Refer to Note 16, “Acquisition,” for additional information.
(2) The adjustments to goodwill primarily include a correction of an immaterial error related to an understatement in other current liabilities that originated from the acquisition of AnalogX in 2021 and working capital adjustments from the acquisition of Hardent.
(3) Effect of exchange rates relates to foreign currency translation adjustments for the period.
| | | | | | | | | | | | | | | | | | | | | | |
| | As of September 30, 2022 |
(In thousands) | | Gross Carrying Amount | | Accumulated Impairment Losses | | | | Net Carrying Amount |
Total goodwill | | $ | 313,808 | | | $ | (21,770) | | | | | $ | 292,038 | |
Intangible Assets, Net
The components of the Company’s intangible assets as of September 30, 2022 and December 31, 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | | As of September 30, 2022 |
(In thousands) | Useful Life | | Gross Carrying Amount (1) (2) | | Accumulated Amortization (1) (2) | | | | Net Carrying Amount |
Existing technology | 3 to |