RAMBUS INC [RMBS] Filings

10-Q 1 rmbs-20220930.htm 10-Q rmbs-20220930

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

☐ 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


			PAGE
Note Regarding Forward-Looking Statements			4
PART I. FINANCIAL INFORMATION			6
Item 1. Financial Statements (Unaudited):			6
Condensed Consolidated Balance Sheets as of Sept ember 30, 2022 and December 31, 2021			6
Condensed Consolidated Statements of Operations for the three and nine months ended Sept ember 30, 2022 and 2021			7
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021			8
Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021			9
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021			10
Notes to Unaudited Condensed Consolidated Financial Statements			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Quantitative and Qualitative Disclosures About Market Risk			38
Item 4. Controls and Procedures			39
PART II. OTHER INFORMATION			40
Item 1. Legal Proceedings			40
Item 1A. Risk Factors			40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 3. Defaults Upon Senior Securities			60
Item 4. Mine Safety Disclosures			60
Item 5. Other Information			60
Item 6. Exhibits			60
Signature			61

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:


	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:


	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

_________________________________________

(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