PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited Q2 2023 financials show total assets increased to **$1.13 billion**, with net income surging to **$168.9 million** due to a **$155.3 million** tax benefit [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1.13 billion** by June 30, 2023, driven by deferred tax assets, while liabilities decreased, boosting equity | Balance Sheet Item | June 30, 2023 ($ thousands) | December 31, 2022 ($ thousands) | | :--- | :--- | :--- | | **Total Current Assets** | 536,465 | 527,214 | | Deferred tax assets | 140,405 | 3,031 | | **Total Assets** | **1,127,116** | **1,012,594** | | **Total Current Liabilities** | 101,444 | 126,709 | | **Total Liabilities** | **181,558** | **233,297** | | **Total Stockholders' Equity** | **945,558** | **779,297** | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2023 revenue slightly decreased to **$119.8 million**, but a **$155.3 million** tax benefit led to a net income of **$168.9 million** | Metric ($ thousands, except per share) | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | 119,832 | 121,132 | 233,594 | 220,182 | | Product Revenue | 54,978 | 53,302 | 118,753 | 101,271 | | Royalties | 40,672 | 48,038 | 68,841 | 78,502 | | **Operating Income** | 11,695 | 35,560 | 13,637 | 43,881 | | Provision for (benefit from) income taxes | (155,325) | 2,930 | (155,124) | 3,444 | | **Net Income (Loss)** | **168,880** | **35,020** | **172,161** | **(31,198)** | | **Diluted EPS** | **$1.51** | **$0.31** | **$1.55** | **($0.28)** | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to **$89.3 million** for H1 2023, with significant cash used in investing and financing activities | Cash Flow Activity ($ thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | 89,348 | 99,113 | | Net cash provided by (used in) investing activities | (34,982) | 167,389 | | Net cash used in financing activities | (58,296) | (201,886) | | **Net (decrease) increase in cash** | **(3,504)** | **63,562** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes highlight customer concentration, a **$149.4 million** tax benefit from valuation allowance release, and a **$9.5 million** restructuring charge - Customer 1 accounted for **64%** of total accounts receivable as of June 30, 2023[38](index=38&type=chunk) - Customer A and Customer B represented **38%** and **12%** of total revenue, respectively, for the three months ended June 30, 2023[39](index=39&type=chunk) - In Q2 2023, the company released the valuation allowance on the majority of its U.S. deferred tax assets, resulting in a **$149.4 million** discrete tax benefit[80](index=80&type=chunk) - A restructuring plan initiated in June 2023 resulted in charges of approximately **$9.5 million**, related to a reduction of 42 employees and write-downs of certain IP development costs and software licenses[95](index=95&type=chunk) - On July 19, 2023, the company entered into an agreement to sell its PHY IP business to Cadence Design Systems, Inc. for **$110 million** in cash[105](index=105&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2023 performance, noting product revenue growth, royalty decline, increased operating expenses, and strong liquidity [Business Overview](index=28&type=section&id=Business%20Overview) Rambus provides chips and silicon IP for data centers, focusing on high-performance memory subsystems and strategic semiconductor growth - Rambus is a leader in high-performance memory subsystems, providing chips and intellectual property (IP) to improve performance and security in data-intensive systems[110](index=110&type=chunk) - Strategic objectives include focusing the product portfolio on semiconductors, optimizing operational efficiency, and leveraging cash generation to reinvest for growth[111](index=111&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) Q2 2023 total revenue decreased slightly to **$119.8 million**, with product revenue growth offset by lower royalties and increased operating expenses | Revenue Stream ($ millions) | Q2 2023 | Q2 2022 | Change (%) | Six Months 2023 | Six Months 2022 | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Product revenue | 55.0 | 53.3 | 3.1% | 118.8 | 101.3 | 17.3% | | Royalties | 40.7 | 48.0 | (15.3)% | 68.8 | 78.5 | (12.3)% | | Contract and other revenue | 24.1 | 19.8 | 22.2% | 46.0 | 40.4 | 13.8% | | **Total revenue** | **119.8** | **121.1** | **(1.1)%** | **233.6** | **220.2** | **6.1%** | - The increase in product revenue for both the three and six-month periods was due to higher sales of memory interface chips[129](index=129&type=chunk) - The decrease in royalty revenue for both periods was primarily due to the timing and structure of license renewals[132](index=132&type=chunk) - In June 2023, the company initiated a restructuring plan, recording charges of approximately **$9.5 million** related to workforce reduction and write-downs[150](index=150&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$332.6 million** in cash and marketable securities, supported by **$89.3 million** in operating cash flow | Metric ($ millions) | As of June 30, 2023 | As of Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | 122.2 | 125.3 | | Marketable securities | 210.4 | 187.9 | | **Total** | **332.6** | **313.2** | - Net cash provided by operating activities was **$89.3 million** for the six months ended June 30, 2023, compared to **$99.1 million** for the same period in 2022[162](index=162&type=chunk)[169](index=169&type=chunk) - As of June 30, 2023, there was an outstanding authorization to repurchase approximately **9.7 million** shares under the 2020 Repurchase Program[168](index=168&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk on its **$246.8 million** investment portfolio and manages foreign currency exposure with forward contracts - The company is exposed to interest rate risk on its investment portfolio of **$246.8 million**; a **1.0%** increase in interest rates would lead to a fair value decline of approximately **$1.0 million**[184](index=184&type=chunk) - To manage foreign currency risk, the company uses forward contracts for certain euro-denominated assets; as of June 30, 2023, the outstanding contract had a notional value of **$11.0 million** (€10.0 million)[186](index=186&type=chunk) [Controls and Procedures](index=40&type=section&id=Controls%20and%20Procedures) Management confirmed effective disclosure controls and procedures as of June 30, 2023, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that as of June 30, 2023, the company's disclosure controls and procedures were effective[189](index=189&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter ended June 30, 2023[190](index=190&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=41&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material pending legal proceedings - Rambus is not currently a party to any material pending legal proceedings[192](index=192&type=chunk) [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) Key risks include cyclical industry operations, customer concentration, supply chain reliance, product defects, and intellectual property protection - Key business risks include operating in highly cyclical industries, concentration of revenue in a few customers, and potential costs from product defects[194](index=194&type=chunk) - The company relies on third parties for manufacturing, exposing it to supply chain risks, capacity constraints, and quality control issues[194](index=194&type=chunk)[232](index=232&type=chunk) - Cybersecurity breaches, protection of intellectual property, and potential litigation are identified as significant operational and legal risks[194](index=194&type=chunk)[241](index=241&type=chunk)[277](index=277&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[304](index=304&type=chunk) [Other Information](index=61&type=section&id=Item%205.%20Other%20Information) No Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers last quarter - No director or officer adopted or terminated a Rule 10b5-1 trading plan during the last fiscal quarter[307](index=307&type=chunk) [Exhibits](index=62&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed, including the Asset Purchase Agreement, corporate governance documents, and officer certifications - Key exhibits filed include the Asset Purchase Agreement with Cadence, amended Certificate of Incorporation and Bylaws, and officer certifications[309](index=309&type=chunk)

Safe Harbor for Forward-Looking Statements; Other Disclosures Such forward-looking statements are based on current expectations, estimates and projections, management's beliefs and certain assumptions. Actual results may differ materially. The Company's business generally is subject to a number of risks which are described more fully in the Company's periodic reports filed with the Securities and Exchange Commission. The Company undertakes no obligation to update forward-looking statements to reflect events ...

Rambus Inc. (NASDAQ:RMBS) Q2 2023 Earnings Conference Call July 31, 2023 5:00 PM ET Company Participants Desmond Lynch - SVP & CFO Luc Seraphin - President & CEO Conference Call Participants Kevin Cassidy - Rosenblatt Securities Mehdi Hosseini - Susquehanna Financial Group Gary Mobley - Wells Fargo Securities Operator Welcome to the Rambus Second Quarter and FY '23 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a ...

[Note Regarding Forward-Looking Statements](index=5&type=section&id=Note%20Regarding%20Forward-Looking%20Statements) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The company's total assets decreased from $1,012.6 million at December 31, 2022, to $962.6 million at March 31, 2023, primarily due to a reduction in cash and cash equivalents and unbilled receivables. Total liabilities also decreased from $233.3 million to $200.9 million, mainly driven by the settlement of convertible notes | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total Assets | $1,012,594 | $962,630 | $(49,964) | | Total Liabilities | $233,297 | $200,901 | $(32,396) | | Total Stockholders' Equity | $779,297 | $761,729 | $(17,568) | | Cash and cash equivalents | $125,334 | $99,876 | $(25,458) | | Unbilled receivables (current) | $125,698 | $100,435 | $(25,263) | | Convertible notes (current) | $10,378 | $— | $(10,378) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the three months ended March 31, 2023, Rambus reported a net income of $3.3 million, a significant improvement from a net loss of $66.2 million in the prior-year period. This turnaround was primarily driven by a substantial reduction in the loss on extinguishment of debt and loss on fair value adjustment of derivatives, coupled with increased product revenue | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (in thousands) | YoY Change | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | :--------- | | Total Revenue | $113,762 | $99,050 | $14,712 | 14.9% | | Product Revenue | $63,775 | $47,969 | $15,806 | 33.0% | | Royalties | $28,169 | $30,464 | $(2,295) | (7.5)% | | Contract and other revenue | $21,818 | $20,617 | $1,201 | 5.8% | | Gross Profit | $82,086 | $76,651 | $5,435 | 7.1% | | Operating Income | $1,942 | $8,321 | $(6,379) | (76.7)% | | Net Income (Loss) | $3,281 | $(66,218) | $69,499 | N/A | | Basic EPS | $0.03 | $(0.60) | $0.63 | N/A | | Diluted EPS | $0.03 | $(0.60) | $0.63 | N/A | [Condensed Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Rambus reported total comprehensive income of $4.7 million for the three months ended March 31, 2023, a significant improvement from a comprehensive loss of $69.1 million in the same period last year, primarily driven by the shift from net loss to net income and an unrealized gain on marketable securities | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net income (loss) | $3,281 | $(66,218) | $69,499 | | Foreign currency translation adjustment | $205 | $(293) | $498 | | Unrealized gain (loss) on marketable securities, net of tax | $1,223 | $(2,568) | $3,791 | | Total comprehensive income (loss) | $4,709 | $(69,079) | $73,788 | [Condensed Consolidated Statements of Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased by $17.6 million from December 31, 2022, to March 31, 2023, primarily due to the issuance of common stock for employee plans and acquisition earn-outs, offset by net income and unrealized gains on marketable securities | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Total Stockholders' Equity | $779,297 | $761,729 | $(17,568) | | Net income | $— | $3,281 | $3,281 | | Issuance of common stock upon exercise of options, equity stock and employee stock purchase plan, net of withholding taxes | $— | $(29,905) | $(29,905) | | Stock-based compensation | $— | $13,063 | $13,063 | | Issuance of common stock in connection with the payment of year 1 earn-out related to the PLDA Group acquisition | $— | $5,022 | $5,022 | | Retirement of warrants | $— | $(10,457) | $(10,457) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2023, net cash provided by operating activities was $38.9 million, a decrease from $42.6 million in the prior year. Investing activities shifted from providing $204.8 million in 2022 to using $10.7 million in 2023, largely due to changes in marketable securities transactions. Financing activities used $54.2 million, a significant reduction from $175.9 million used in 2022, primarily due to lower payments for convertible notes and warrants | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash provided by operating activities | $38,906 | $42,614 | $(3,708) | | Net cash provided by (used in) investing activities | $(10,705) | $204,756 | $(215,461) | | Net cash used in financing activities | $(54,210) | $(175,907) | $121,697 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(25,818) | $71,239 | $(97,057) | | Cash, cash equivalents and restricted cash at end of period | $99,876 | $179,503 | $(79,627) | [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the company's accounting policies and specific financial statement line items, including revenue recognition, earnings per share, intangible assets, goodwill, segment information, marketable securities, fair value measurements, leases, convertible notes, commitments, equity incentive plans, income taxes, litigation, and derivative instruments, offering crucial context for the condensed financial statements [Note 1. Basis of Presentation](index=13&type=section&id=Note%201.%20Basis%20of%20Presentation) The unaudited condensed consolidated financial statements include Rambus Inc. and its wholly-owned subsidiaries, prepared in accordance with SEC interim financial reporting rules, and should be read with the 2022 Form 10-K - Financial statements are unaudited, include wholly-owned subsidiaries, and are prepared per SEC interim rules, requiring review with the **2022** Form **10-K**[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk) [Note 2. Revenue Recognition](index=13&type=section&id=Note%202.%20Revenue%20Recognition) Rambus's contract balances show unbilled receivables decreased by $37.9 million and deferred revenue decreased by $2.8 million from December 31, 2022, to March 31, 2023. The company recognized $11.6 million of revenue from contract balances as of December 31, 2022, and has approximately $24.8 million in remaining performance obligations expected to be recognized over the next two years | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Unbilled receivables | $112,983 | $150,920 | $(37,937) | | Deferred revenue | $22,661 | $25,421 | $(2,760) | - Recognized **$11.6 million** revenue from contract balances as of Dec **31**, **2022**, during Q1 **2023**[30](index=30&type=chunk) - Remaining performance obligations totaled approximately **$24.8 million** as of March **31**, **2023**, expected to be recognized over the next **2 years**[31](index=31&type=chunk) [Note 3. Earnings (Loss) Per Share](index=13&type=section&id=Note%203.%20Earnings%20(Loss)%20Per%20Share) Rambus reported basic and diluted EPS of $0.03 for Q1 2023, a significant improvement from a loss of $0.60 per share in Q1 2022. The diluted share count for Q1 2023 was 111.2 million, including 2.9 million potentially dilutive common shares, while no dilutive securities were included in Q1 2022 due to the net loss | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net income (loss) | $3,281 | $(66,218) | | Weighted-average shares outstanding - basic | 108,277 | 109,889 | | Effect of potentially dilutive common shares | 2,876 | — | | Weighted-average shares outstanding - diluted | 111,153 | 109,889 | | Basic net income (loss) per share | $0.03 | $(0.60) | | Diluted net income (loss) per share | $0.03 | $(0.60) | - Potentially dilutive securities totaling **3.4 million shares** were excluded from diluted EPS calculation in Q1 **2022** due to anti-dilutive impact from net loss[33](index=33&type=chunk) [Note 4. Intangible Assets and Goodwill](index=14&type=section&id=Note%204.%20Intangible%20Assets%20and%20Goodwill) Goodwill remained stable at $292.0 million from December 31, 2022, to March 31, 2023. Net intangible assets decreased from $50.9 million to $46.9 million during the same period, primarily due to amortization of existing technology and customer contracts. Amortization expense for intangible assets was $3.9 million in Q1 2023, up slightly from $3.8 million in Q1 2022 | Metric | Dec 31, 2022 (in thousands) | Mar 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Total goodwill | $292,040 | $292,040 | $0 | | Total intangible assets, net | $50,880 | $46,936 | $(3,944) | - Amortization expense for intangible assets was **$3.9 million** for Q1 **2023**, compared to **$3.8 million** for Q1 **2022**[35](index=35&type=chunk) | Years Ending December 31: | Amount (in thousands) | | :------------------------ | :-------------------- | | **2023** (remaining nine months) | $11,490 | | **2024** | $12,722 | | **2025** | $6,683 | | **2026** | $4,365 | | **2027** | $476 | | Thereafter | $— | | Total amortizable purchased intangible assets | $35,736 | | IPR&D | $11,200 | | Total intangible assets | $46,936 | [Note 5. Segments and Major Customers](index=15&type=section&id=Note%205.%20Segments%20and%20Major%20Customers) Rambus operates as a single segment within the semiconductor space. Revenue concentration remains high, with the top five customers accounting for 61% of total revenue in Q1 2023 (up from 59% in Q1 2022). International customers contributed 44% of total revenue in both Q1 2023 and Q1 2022, with significant revenue from the USA, South Korea, and Asia-Other - Rambus operates as a single operating and reportable segment within the semiconductor space[38](index=38&type=chunk) | Customer | Mar 31, 2023 (% of total accounts receivable) | Dec 31, 2022 (% of total accounts receivable) | | :--------- | :------------------------------------------ | :------------------------------------------ | | Customer 1 | **25%** | **16%** | | Customer 2 | **11%** | **23%** | | Customer 3 | <**10%** | **14%** | | Customer | Mar 31, 2023 (% of total revenue) | Mar 31, 2022 (% of total revenue) | | :--------- | :-------------------------------- | :-------------------------------- | | Customer A | **19%** | **25%** | | Customer B | **16%** | <**10%** | | Customer C | **11%** | <**10%** | | Customer D | **11%** | **14%** | | Geographic Region | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :---------------- | :--------------------------------------- | :--------------------------------------- | | USA | $63,656 | $55,684 | | South Korea | $14,144 | $1,465 | | Asia-Other | $12,704 | $17,792 | | Singapore | $11,328 | $14,045 | | Taiwan | $6,509 | $4,960 | | Japan | $2,415 | $3,535 | | Europe | $1,753 | $1,564 | | Canada | $1,253 | $5 | | Total | $113,762 | $99,050 | [Note 6. Marketable Securities](index=17&type=section&id=Note%206.%20Marketable%20Securities) Rambus's total cash, cash equivalents, and marketable securities decreased from $313.2 million at December 31, 2022, to $292.1 million at March 31, 2023. The portfolio is primarily invested in money market funds, time deposits, U.S. government bonds, and corporate notes, with a weighted average return of 3.80% for money market funds and 6.98% for time deposits as of March 31, 2023. Gross unrealized losses were $2.4 million at March 31, 2023, deemed not material, and the company intends to hold these investments to maturity | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Total cash, cash equivalents and marketable securities | $292,137 | $313,226 | $(21,089) | | Money market funds (Fair Value) | $13,089 | $15,763 | $(2,674) | | Time deposits (Fair Value) | $9,646 | $— | $9,646 | | U.S. Government bonds and notes (Fair Value) | $96,250 | $96,371 | $(121) | | Corporate notes, bonds and commercial paper (Fair Value) | $90,360 | $106,355 | $(15,995) | | Investment Type | Weighted Average Rate of Return (Mar 31, 2023) | | :------------------------------------ | :--------------------------------------------- | | Money market funds | **3.80%** | | Time deposits | **6.98%** | | U.S. Government bonds and notes | **2.37%** | | Corporate notes, bonds and commercial paper | **2.31%** | - Gross unrealized losses on marketable securities were **$2.4 million** at March **31**, **2023**, and **$3.6 million** at December **31**, **2022**, which were not considered material[45](index=45&type=chunk) - The company intends to hold debt investments with unrealized losses for a sufficient period to allow for recovery of principal amounts[45](index=45&type=chunk) [Note 7. Fair Value of Financial Instruments](index=19&type=section&id=Note%207.%20Fair%20Value%20of%20Financial%20Instruments) Rambus's assets carried at fair value, primarily marketable securities, totaled $209.3 million at March 31, 2023, with the majority classified as Level 2 inputs. Liabilities carried at fair value, specifically the earn-out consideration for the PLDA acquisition, increased from $14.8 million at December 31, 2022, to $21.7 million at March 31, 2023, due to a $6.9 million remeasurement adjustment recorded as an expense | Financial Instrument | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------- | | Total assets carried at fair value | $209,345 | $218,489 | $(9,144) | | Earn-out consideration related to PLDA acquisition (Level 3 liability) | $21,700 | $14,800 | $6,900 | - The fair value of the earn-out liability for the PLDA acquisition is remeasured quarterly, resulting in an additional expense of **$6.9 million** in Q1 **2023** (vs. **$1.2 million** in Q1 **2022**)[48](index=48&type=chunk) - The **1.375% Convertible Senior Notes due 2023** were settled in Q1 **2023**, with a fair value of **$19.6 million** at December **31**, **2022**[51](index=51&type=chunk) [Note 8. Leases](index=20&type=section&id=Note%208.%20Leases) Rambus leases office space under operating leases with remaining terms generally between one and eight years. As of March 31, 2023, the weighted-average remaining lease term was 7.0 years, and the weighted-average discount rate was 5.4%. Operating lease costs were $1.9 million for both Q1 2023 and Q1 2022 - Weighted-average remaining lease term for operating leases was **7.0 years** as of March **31**, **2023**[54](index=54&type=chunk) - Weighted-average discount rate for operating leases was **5.4%** as of March **31**, **2023**[54](index=54&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :-------------------- | :--------------------------------------- | :--------------------------------------- | | Operating lease costs | $1,900 | $1,900 | | Cash paid for operating lease liabilities | $2,200 | $2,300 | [Note 9. Convertible Notes](index=21&type=section&id=Note%209.%20Convertible%20Notes) The remaining $10.4 million aggregate principal amount of the 2023 Convertible Senior Notes was settled upon maturity in Q1 2023, with $10.4 million paid in cash and approximately 0.3 million shares issued for the conversion spread. This settlement also involved the retirement of remaining convertible senior note hedges and warrants, resulting in a $0.2 million loss on fair value adjustment of derivatives | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------- | :-------------------------- | :-------------------------- | | **2023** Notes | $— | $10,381 | | Total convertible notes | $— | $10,378 | - Settled remaining **$10.4 million** aggregate principal of **2023** Notes in Q1 **2023**, paying cash and issuing **0.3 million shares** for conversion spread[56](index=56&type=chunk) - Retirement of remaining warrants resulted in a **$0.2 million** loss on fair value adjustment of derivatives in Q1 **2023**[57](index=57&type=chunk) | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Total interest expense on convertible notes | $15 | $421 | [Note 10. Commitments and Contingencies](index=21&type=section&id=Note%2010.%20Commitments%20and%20Contingencies) As of March 31, 2023, Rambus had total material contractual obligations of $48.7 million, primarily for software licenses ($39.4 million) and acquisition retention bonuses ($5.4 million). The company also has approximately $21.1 million in unrecognized tax benefits not reflected in the table, with an inability to reasonably estimate the settlement outcome within the next 12 months | Contractual Obligation | Total (in thousands) | Remainder of 2023 (in thousands) | 2024 (in thousands) | 2025 (in thousands) | | :-------------------------- | :------------------- | :------------------------------- | :------------------ | :------------------ | | Other contractual obligations | $3,960 | $3,360 | $600 | $— | | Software licenses | $39,370 | $14,835 | $16,452 | $8,083 | | Acquisition retention bonuses | $5,364 | $2,507 | $2,507 | $350 | | Total | $48,694 | $20,702 | $19,559 | $8,433 | - Unrecognized tax benefits totaled approximately **$21.1 million** as of March **31**, **2023**, not included in the contractual obligations table, with an uncertain settlement timeline[59](index=59&type=chunk)[60](index=60&type=chunk) - The company indemnifies customers for IP infringement, generally limiting liability to fees received, with fair value deemed immaterial[61](index=61&type=chunk) [Note 11. Equity Incentive Plans and Stock-Based Compensation](index=22&type=section&id=Note%2011.%20Equity%20Incentive%20Plans%20and%20Stock-Based%20Compensation) Stockholders approved an additional 5.2 million shares for the 2015 Equity Incentive Plan in April 2023, bringing total available shares for grant to 5.9 million as of March 31, 2023. Stock-based compensation expense for Q1 2023 was $13.1 million, up from $7.8 million in Q1 2022, primarily driven by nonvested equity stock units - Stockholders approved an additional **5.2 million shares** for the **2015** Equity Incentive Plan on April **27**, **2023**[62](index=62&type=chunk) | Metric | Mar 31, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :------------------------------------ | :-------------------------- | :-------------------------- | | Total shares available for grant | 5,956 | 7,656 | | Metric | 3 Months Ended Mar 31, 2023 (in thousands) | 3 Months Ended Mar 31, 2022 (in thousands) | | :------------------------------------ | :--------------------------------------- | :--------------------------------------- | | Stock-based compensation expense | $13,063 | $7,778 | - Granted **1.1 million** nonvested equity stock units in Q1 **2023** (valued at **$52.7 million**) compared to **1.6 million** in Q1 **2022** (valued at **$44.6 million**)[71](index=71&type=chunk) - Unrecognized stock-based compensation for nonvested equity stock grants was **$98.5 million** at March **31**, **2023**, to be recognized over **2.6 years**[73](index=73&type=chunk) [Note 12. Stockholders' Equity](index=24&type=section&id=Note%2012.%20Stockholders'%20Equity) Rambus had an outstanding authorization to repurchase approximately 9.7 million shares under its 2020 Repurchase Program as of March 31, 2023. No shares were repurchased in Q1 2023 under this program. The 2022 ASR Program, which involved a $100 million pre-payment and resulted in the retirement of 3.2 million shares, was completed in Q4 2022 - As of March **31**, **2023**, approximately **9.7 million shares** remained authorized for repurchase under the **2020** Repurchase Program[76](index=76&type=chunk) - No shares were repurchased under the **2020** Repurchase Program during the three months ended March **31**, **2023**[74](index=74&type=chunk) - The **2022** ASR Program, which involved a **$100 million** pre-payment and resulted in the retirement of **3.2 million shares**, was completed in Q4 **2022**[75](index=75&type=chunk) [Note 13. Income Taxes](index=24&type=section&id=Note%2013.%20Income%20Taxes) Rambus recorded a provision for income taxes of $0.2 million in Q1 2023, down from $0.5 million in Q1 2022, with effective tax rates of 5.8% and (0.8)% respectively. The company maintains a full valuation allowance on its U.S. federal and California deferred tax assets due to a cumulative loss position, but anticipates a reasonable possibility of reversal in 2023 if profitability improvements are sustained. Unrecognized tax benefits totaled $169.9 million as of March 31, 2023, including $148.8 million related to refundable withholding taxes in South Korea | Metric | 3 Months Ended Mar 31, 2023 (in millions) | 3 Months Ended Mar 31, 2022 (in millions) | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | | Provision for income taxes | **$0.2** | **$0.5** | | Effective tax rate | **5.8%** | (**0.8%**) | - Maintains a full valuation allowance on U.S. federal and California deferred tax assets due to cumulative loss position, but a reversal is possible in **2023** if operating results improve[80](index=80&type=chunk)[141](index=141&type=chunk) - Unrecognized tax benefits totaled **$169.9 million** as of March **31**, **2023**, including **$148.8 million** related to refundable withholding taxes in South Korea[83](index=83&type=chunk) [Note 14. Litigation and Asserted Claims](index=26&type=section&id=Note%2014.%20Litigation%20and%20Asserted%20Claims) Rambus is not currently a party to any material pending legal proceedings and believes the outcome of ordinary course matters will not materially adversely affect its financial position. However, litigation can still impact the company due to defense costs and diversion of management resources - Not currently a party to any material pending legal proceeding[86](index=86&type=chunk)[175](index=175&type=chunk) - Believes ordinary course litigation will not materially adversely affect business, but acknowledges potential for defense costs and resource diversion[86](index=86&type=chunk)[175](index=175&type=chunk) [Note 15. Derivative Instruments and Hedging Activities](index=27&type=section&id=Note%2015.%20Derivative%20Instruments%20and%20Hedging%20Activities) Rambus initiated a Hedging Program in Q1 2023 using short-duration foreign currency forward contracts to manage exposure to euro-denominated monetary assets. These contracts are not designated as hedging instruments, and any fair value changes are recorded in interest income and other income (expense), net, but were deemed immaterial for Q1 2023 - Began using foreign currency forward contracts in Q1 **2023** to manage exposure to euro-denominated monetary assets[88](index=88&type=chunk)[169](index=169&type=chunk) - Contracts have a short duration (approx. one month) and their fair value changes are recorded in interest income and other income (expense), net, but were immaterial for Q1 **2023**[89](index=89&type=chunk)[91](index=91&type=chunk)[170](index=170&type=chunk) - Total notional value of outstanding contracts was **$9.7 million (€9.1 million)** as of March **31**, **2023**[91](index=91&type=chunk)[170](index=170&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) [Business Overview](index=28&type=section&id=Item%202.%20Business%20Overview) Rambus is a leading provider of chips, silicon IP, and innovations for data center and other growing markets, focusing on accelerating and protecting data. The company leverages over 30 years of semiconductor design experience to deliver high-performance memory subsystems, addressing increased bandwidth, capacity, and security needs driven by cloud growth and AI - Rambus is an industry-leading provider of chips, silicon IP, and innovations for accelerating data and enabling performance improvements in data center and growing markets[95](index=95&type=chunk) - Focuses on high-performance memory subsystems, maximizing performance and security in data-intensive systems, driven by cloud growth and AI[95](index=95&type=chunk)[96](index=96&type=chunk) - Strategic objectives include focusing product portfolio on semiconductors, optimizing operational efficiency, and leveraging cash generation for growth[97](index=97&type=chunk) [Executive Summary](index=28&type=section&id=Item%202.%20Executive%20Summary) Rambus achieved strong Q1 2023 results with $113.8 million in revenue, $80.1 million in operating expenses, and $38.9 million in net cash from operations, driven by demand for memory interface chips and Silicon IP, and stable royalties. The company also extended its patent license agreement with SK hynix by 10 years | Metric | Q1 2023 (in millions) | | :-------------------------- | :-------------------- | | Revenue | **$113.8** | | Operating expenses | **$80.1** | | Net cash provided by operating activities | **$38.9** | - Extended comprehensive patent license agreement with SK hynix by **10 years** through **2034**[98](index=98&type=chunk) - Strong Q1 **2023** results driven by demand in memory interface chips and Silicon IP solutions, and stable royalties[98](index=98&type=chunk) [Operational Highlights](index=28&type=section&id=Item%202.%20Operational%20Highlights) Rambus's Q1 2023 revenue was $113.8 million, with product revenue increasing to 56% of total revenue (up from 48% in Q1 2022) due to memory interface chips. Royalty revenue decreased to 25% (from 31%), and contract and other revenue decreased to 19% (from 21%). Operating expenses increased, with R&D up $2.1 million and SG&A up $4.1 million, largely due to stock-based compensation and headcount. The company holds 2,389 U.S. and foreign patents and 613 pending applications [Revenue Sources](index=28&type=section&id=Item%202.%20Revenue%20Sources) Product revenue, primarily from memory interface chips, increased to 56% of total consolidated revenue in Q1 2023 (from 48% in Q1 2022). Royalty revenue, derived from patent licenses, decreased to 25% (from 31%), while contract and other revenue, mainly from Silicon IP, decreased to 19% (from 21%) | Revenue Source | Q1 2023 (% of total revenue) | Q1 2022 (% of total revenue) | | :-------------------------- | :--------------------------- | :--------------------------- | | Product revenue | **56%** | **48%** | | Royalties | **25%** | **31%** | | Contract and other revenue | **19%** | **21%** | - Product revenue growth primarily driven by memory interface chips sold to major DRAM manufacturers and cloud providers[99](index=99&type=chunk) - Royalty revenue derived from a broad worldwide portfolio of patented inventions, licensed to leading semiconductor and electronic system companies[101](index=101&type=chunk) - Contract and other revenue primarily consists of high-speed interface and security Silicon IP[102](index=102&type=chunk) [Costs and Expenses](index=29&type=section&id=Item%202.%20Costs%20and%20Expenses) Cost of product revenue increased by $8.0 million in Q1 2023 due to higher sales volumes of memory interface chips. Cost of contract and other revenue increased by $1.1 million due to higher engineering services. R&D expenses rose by $2.1 million, mainly from stock-based compensation and headcount. SG&A expenses increased by $4.1 million, also driven by stock-based compensation and headcount - Cost of product revenue increased by approximately **$8.0 million** in Q1 **2023** YoY, primarily due to increased sales volumes of memory interface chips[103](index=103&type=chunk) - Cost of contract and other revenue increased by approximately **$1.1 million** in Q1 **2023** YoY, primarily due to higher engineering services[103](index=103&type=chunk) - Research and development expenses increased by approximately **$2.1 million** in Q1 **2023** YoY, driven by stock-based compensation (**$1.0M**) and headcount-related expenses (**$0.8M**)[104](index=104&type=chunk) - Sales, general and administrative expenses increased by approximately **$4.1 million** in Q1 **2023** YoY, primarily due to increased stock-based compensation (**$4.2M**) and headcount-related expenses (**$0.8M**)[105](index=105&type=chunk) [Intellectual Property](index=29&type=section&id=Item%202.%20Intellectual%20Property) As of March 31, 2023, Rambus held 2,389 U.S. and foreign patents and had 613 patent applications pending, covering its semiconductor, security, and other technologies. The company actively files for patent protection to support its business strategy and believes its innovations offer performance, risk, and cost benefits to customers - As of March **31**, **2023**, Rambus held **2,389 U.S. and foreign patents**[106](index=106&type=chunk) - As of March **31**, **2023**, Rambus had **613 patent applications pending**[106](index=106&type=chunk) - Patents and applications cover semiconductor, security, and other technologies, aiming to provide improved performance, lower risk, and greater cost-effectiveness for customers[106](index=106&type=chunk) [Trends](index=29&type=section&id=Item%202.%20Trends) Rambus faces high revenue concentration, with its top five customers accounting for 61% of Q1 2023 revenue (up from 59% in Q1 2022). International revenue remained significant at 44% of total revenue for both Q1 2023 and Q1 2022. The company's future revenue is influenced by technology adoption, license renewals (e.g., SK hynix extension), and strategic acquisitions/divestitures - Top five customers represented approximately **61%** of revenue for Q1 **2023**, up from **59%** for Q1 **2022**[108](index=108&type=chunk) - Revenue from international customers accounted for approximately **44%** of total revenue for both Q1 **2023** and Q1 **2022**[110](index=110&type=chunk) - Renewed or extended several license agreements, including SK hynix, during Q1 **2023**[111](index=111&type=chunk) - Continuously evaluates businesses and technologies for potential acquisitions (e.g., Hardent in **2022**, AnalogX and PLDA in **2021**) and divestitures[112](index=112&type=chunk) [Results of Operations](index=31&type=section&id=Item%202.%20Results%20of%20Operations) This section provides a detailed comparative analysis of Rambus's revenue, cost of revenue, gross profit, and operating expenses for the three months ended March 31, 2023, and 2022, highlighting key drivers of changes in financial performance [Product Revenue](index=31&type=section&id=Item%202.%20Product%20Revenue) Product revenue increased by $15.8 million (33.0%) to $63.8 million in Q1 2023 compared to Q1 2022, primarily driven by continued market share gains of memory interface chips. The company anticipates continued growth in product revenue for the remainder of 2023 | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Product revenue | **$63.8** | **$48.0** | **$15.8** | **33.0%** | - Increase primarily due to continued market share gains of memory interface chips[115](index=115&type=chunk) - Expects product revenue to continue increasing for the remainder of **2023** compared to **2022**, mainly from memory interface chips[116](index=116&type=chunk) [Royalties](index=32&type=section&id=Item%202.%20Royalties) Royalty revenue decreased by $2.2 million (7.5%) to $28.2 million in Q1 2023 compared to Q1 2022, primarily due to the timing and structure of license renewals. Future royalties are expected to fluctuate based on new customer additions, renewals, and customer shipment volumes | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Royalties | **$28.2** | **$30.4** | **$(2.2)** | (**7.5%**) | - Decrease primarily due to the timing and structure of license renewals[117](index=117&type=chunk) - Expects patent royalties to vary based on success in adding new customers, renewing/extending agreements, and customer shipment volumes/prices[118](index=118&type=chunk) [Contract and Other Revenue](index=32&type=section&id=Item%202.%20Contract%20and%20Other%20Revenue) Contract and other revenue increased by $1.2 million (5.8%) to $21.8 million in Q1 2023 compared to Q1 2022, primarily due to higher revenue from Silicon IP offerings. This revenue is expected to fluctuate based on technology development contractual requirements and new contracts | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Contract and other revenue | **$21.8** | **$20.6** | **$1.2** | **5.8%** | - Increase primarily due to higher revenue associated with Silicon IP offerings[119](index=119&type=chunk) - Expects contract and other revenue to fluctuate based on technology development contractual requirements, work performed, and new contracts[120](index=120&type=chunk) [Cost of Product Revenue](index=32&type=section&id=Item%202.%20Cost%20of%20Product%20Revenue) Cost of product revenue increased by $8.0 million (43.6%) to $26.4 million in Q1 2023 compared to Q1 2022, primarily due to higher sales volumes of memory interface chips. The company expects these costs to remain higher in the near term due to anticipated increased product sales | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Cost of product revenue | **$26.4** | **$18.4** | **$8.0** | **43.6%** | - Increase primarily due to increases in sales volumes of memory interface chips[121](index=121&type=chunk) - Expects costs of product revenue to continue to be higher in the near term due to anticipated higher sales[122](index=122&type=chunk) [Cost of Contract and Other Revenue](index=32&type=section&id=Item%202.%20Cost%20of%20Contract%20and%20Other%20Revenue) Cost of contract and other revenue increased by $1.1 million (171.0%) to $1.7 million in Q1 2023 compared to Q1 2022, primarily due to higher engineering services supporting contracts. These costs are expected to vary with recognized contract and other revenue | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Cost of contract and other revenue | **$1.7** | **$0.6** | **$1.1** | **171.0%** | - Increase primarily due to higher engineering services associated with contracts[123](index=123&type=chunk) - Expects costs of contract and other revenue to vary from period to period based on recognized revenue[124](index=124&type=chunk) [Research and Development Expenses](index=32&type=section&id=Item%202.%20Research%20and%20Development%20Expenses) Total R&D expenses increased by $2.1 million (5.2%) to $41.9 million in Q1 2023 compared to Q1 2022. This increase was primarily driven by higher stock-based compensation ($1.0 million), headcount-related expenses ($0.8 million), and engineering development tool costs ($0.6 million), partially offset by decreased allocated engineering costs. The company expects R&D expenses to be higher in the near term due to continued investments in product innovation | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total research and development expenses | **$41.9** | **$39.8** | **$2.1** | **5.2%** | | Stock-based compensation | **$4.2** | **$3.2** | **$1.0** | **33.0%** | - Increase primarily due to stock-based compensation (**$1.0M**), headcount-related expenses (**$0.8M**), and engineering development tool costs (**$0.6M**), offset by decreased allocated engineering costs (**$1.1M**)[126](index=126&type=chunk) - Expects R&D expenses to be higher in the near term due to continued investments in semiconductor, security, and other technologies[127](index=127&type=chunk) [Sales, General and Administrative Expenses](index=34&type=section&id=Item%202.%20Sales,%20General%20and%20Administrative%20Expenses) Total SG&A expenses increased by $4.1 million (15.1%) to $31.0 million in Q1 2023 compared to Q1 2022, mainly due to increased stock-based compensation ($4.2 million) and headcount-related expenses ($0.8 million), partially offset by decreased acquisition-related costs. The company expects SG&A expenses to remain relatively flat in the near term | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total sales, general and administrative expenses | **$31.0** | **$26.9** | **$4.1** | **15.1%** | | Stock-based compensation | **$8.7** | **$4.5** | **$4.2** | **94.7%** | - Increase primarily due to increased stock-based compensation (**$4.2M**) and headcount-related expenses (**$0.8M**), offset by decreased acquisition-related costs (**$0.9M**)[129](index=129&type=chunk) - Expects SG&A expenses to remain relatively flat in the near term[130](index=130&type=chunk) [Amortization of Acquired Intangible Assets](index=34&type=section&id=Item%202.%20Amortization%20of%20Acquired%20Intangible%20Assets) Total amortization of acquired intangible assets remained relatively flat at $3.9 million in Q1 2023 compared to $3.8 million in Q1 2022 | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | :--------- | | Total amortization of acquired intangible assets | **$3.9** | **$3.8** | **$0.1** | **4.1%** | [Change in Fair Value of Earn-Out Liability](index=35&type=section&id=Item%202.%20Change%20in%20Fair%20Value%20of%20Earn-Out%20Liability) The change in fair value of the earn-out liability related to the PLDA acquisition resulted in an additional expense of $6.9 million in Q1 2023, significantly higher than the $1.2 million expense in Q1 2022, reflecting remeasurement adjustments for the remaining earn-out period | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | | Change in fair value of earn-out liability | **$6.9** | **$1.2** | **$5.7** | - Additional expense of **$6.9 million** in Q1 **2023** (vs. **$1.2 million** in Q1 **2022**) due to remeasurement adjustment for PLDA acquisition earn-out liability[133](index=133&type=chunk) [Interest and Other Income (Expense), Net](index=35&type=section&id=Item%202.%20Interest%20and%20Other%20Income%20(Expense),%20Net) Rambus reported net interest and other income of $1.5 million in Q1 2023, a significant improvement from a net expense of $74.0 million in Q1 2022. This change was primarily due to the absence of a $66.5 million loss on extinguishment of debt and an $8.3 million loss on fair value adjustment of derivatives in Q1 2023, which were present in Q1 2022 related to convertible notes | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Interest income and other income (expense), net | **$2.2** | **$1.4** | **$0.8** | | Loss on extinguishment of debt | $— | **$(66.5)** | **$66.5** | | Loss on fair value adjustment of derivatives, net | **$(0.2)** | **$(8.3)** | **$8.1** | | Interest expense | **$(0.4)** | **$(0.6)** | **$0.2** | | Interest and other income (expense), net | **$1.5** | **$(74.0)** | **$75.5** | - Q1 **2023** results reflect the absence of a **$66.5 million** loss on extinguishment of debt and an **$8.3 million** loss on fair value adjustment of derivatives, which occurred in Q1 **2022** due to convertible notes repurchases and settlements[136](index=136&type=chunk) - Interest expense decreased due to the full payment of the **2023** Notes upon maturity in Q1 **2023**[137](index=137&type=chunk) [Provision for Income Taxes](index=35&type=section&id=Item%202.%20Provision%20for%20Income%20Taxes) The provision for income taxes decreased to $0.2 million in Q1 2023 from $0.5 million in Q1 2022, with effective tax rates of 5.8% and (0.8)% respectively. The provision is influenced by valuation allowances on U.S. deferred tax assets, foreign withholding taxes, and statutory tax expenses in foreign jurisdictions | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | YoY Change | | :-------------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | :--------- | | Provision for income taxes | **$0.2** | **$0.5** | **$(0.3)** | (**60.9%**) | | Effective tax rate | **5.8%** | (**0.8%**) | N/A | N/A | - Provision driven by valuation allowance on U.S. deferred tax assets, foreign withholding taxes, and foreign statutory tax expense[139](index=139&type=chunk) - Paid **$5.4 million** in withholding taxes in Q1 **2023**, compared to **$5.0 million** in Q1 **2022**[140](index=140&type=chunk) - Maintains a full valuation allowance on U.S. federal and California deferred tax assets due to cumulative loss position, but a reversal is possible in **2023** if operating results improve[141](index=141&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Item%202.%20Liquidity%20and%20Capital%20Resources) Rambus anticipates existing cash, cash equivalents, and marketable securities, along with cash flows from operations, will be sufficient to meet cash needs for at least the next 12 months. The company's liquidity is not constrained by the current credit environment or investment fair value fluctuations, and it continues to monitor credit risk [Liquidity](index=36&type=section&id=Item%202.%20Liquidity) Rambus expects its current cash, cash equivalents, marketable securities, and operating cash flows to cover its cash needs for at least the next 12 months, with the majority of cash held in the U.S. The company does not foresee liquidity constraints from credit markets or investment fluctuations and actively monitors credit risk - Anticipates existing cash, cash equivalents, marketable securities, and cash flows from operations will be adequate for at least the next **12 months**[145](index=145&type=chunk) - Majority of cash and cash equivalents are in the United States[145](index=145&type=chunk) - No anticipated liquidity constraints from current credit environment or investment fair value fluctuations; intent and ability to hold debt investments with unrealized losses for recovery[146](index=146&type=chunk) - As of March **31**, **2023**, there was an outstanding authorization to repurchase approximately **9.7 million shares** under the **2020** Repurchase Program[150](index=150&type=chunk) [Operating Activities](index=37&type=section&id=Item%202.%20Operating%20Activities) Net cash provided by operating activities was $38.9 million in Q1 2023, a decrease from $42.6 million in Q1 2022. This was primarily driven by cash from customer licensing, product sales, and engineering services, with changes in operating assets and liabilities including decreases in unbilled receivables and increases in inventories | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | | Net cash provided by operating activities | **$38.9** | **$42.6** | **$(3.7)** | - Cash generated primarily from customer licensing, product sales, and engineering services fees[151](index=151&type=chunk)[152](index=152&type=chunk) - Changes in operating assets and liabilities in Q1 **2023** included decreases in unbilled receivables, accounts payable, accrued salaries and benefits, deferred revenue, and other liabilities, offset by increases in inventories, accounts receivable, and prepaids and other current assets[151](index=151&type=chunk) [Investing Activities](index=37&type=section&id=Item%202.%20Investing%20Activities) Cash used in investing activities was $10.7 million in Q1 2023, a significant shift from $204.8 million provided in Q1 2022. This change was mainly due to higher purchases of marketable securities ($45.6 million) and property, plant, and equipment ($7.7 million), partially offset by proceeds from sales and maturities of marketable securities | Metric | Q1 2023 (in millions) | Q1 2022 (in millions) | Change (in millions) | | :-------------------------- | :-------------------- | :-------------------- | :------------------- | | Net cash provided by (used in) investing activities | **$(10.7)** | **$204.8** | **$(215.5)** | - Q1 **2023** cash usage included **$45.6 million** for marketable securities purchases and **$7.7 million** for property, plant, and equipment[153](index=153&type=chunk) - Q1 **2022** cash provided included **$204.1 million** from sales and **$44.8 million** from

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $113.8 million, at the high end of expectations, with product revenue of $63.8 million, up 33% year-over-year [100][21][5] - Cash from operations for the quarter was $38.9 million, with total operating costs of $86.3 million [22][9] - Non-GAAP earnings per share for Q2 is expected to range between $0.20 and $0.26, with a projected share count of 112 million [11] Business Line Data and Key Metrics Changes - Product revenue primarily from memory interface chips was $63.8 million, while contract and other revenue was $21.8 million [21] - The company expects a slight improvement in product gross margins in Q2, driven by a favorable product mix, with Q1 product gross margins at approximately 59% [32][33] - Silicon IP gross margins were just over 90% in Q1, expected to remain around that level going forward [34] Market Data and Key Metrics Changes - The transition from DDR4 to DDR5 is projected for the first half of 2024, with initial orders for DDR5 expected to start shipping in late Q2 [18][54] - The company anticipates a stronger second half of the year as DDR5 demand ramps up and DDR4 inventories normalize [97][48] Company Strategy and Development Direction - The company is focused on advancing data center memory performance to meet the growing demands of generative AI and other advanced workloads [6] - A strategic licensing agreement with SK Hynix was extended for an additional 10 years, effective Q3 2024, which is expected to enhance revenue recognition under ASC 606 [8][51] - The company is making investments in differentiated, high-quality products to address performance bottlenecks between processing and memory [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and ability to drive long-term profitable growth despite a challenging macroeconomic environment [20][19] - The company expects the second half of the year to show growth compared to the first half, driven by the ramp of DDR5 [48][18] - Management noted that while the transition to DDR5 will be lumpy, they are encouraged by initial orders and the overall market dynamics [54][24] Other Important Information - The company ended Q1 with cash, cash equivalents, and marketable securities totaling $292.1 million, a decrease due to convertible note repayment [101] - The company continues to maintain a disciplined approach to ASP management and product cost reductions [33] Q&A Session Summary Question: Can you provide insights on product revenue for the second half of the year? - Management indicated that product revenue was $64 million in Q1, a 33% increase year-over-year, and expects a resurgence in DDR5-related revenue in the second half [24] Question: What is the outlook for gross margins outside of licensing and royalty? - Management expects product gross margins to improve slightly in Q2, with a long-term target of 60% to 65% [31][33] Question: Can you discuss the licensing activity for CXL? - Management noted that CXL has been a strong driver for Silicon IP growth, despite current macroeconomic headwinds [61] Question: What is the expected pricing trend for DDR5 compared to DDR4? - Management confirmed that DDR5 is expected to carry a price premium over DDR4 initially, with potential erosion over time as volumes grow [67] Question: When will the company ship its PMIC devices? - Management stated that they are developing their own PMIC devices and expect to hit the market next year [69] Question: How does the company benefit from generative AI applications? - Management highlighted that generative AI applications are driving demand for high bandwidth memory and are expected to positively impact both IP and product revenue [88]

This presentation contains forward-looking statements, including those relating to the Company's expectations regarding business opportunities, the Company's ability to deliver long-term, profitable growth, industry growth rates, timing of expected product launches, demand for existing and newly-acquired technologies, product and investment strategies, the Company's outlook and financial guidance for recent and upcoming quarters and related drivers, and the effects of ASC 606 on reported revenue, among othe ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________________ FORM 10-K ________________________________________ (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 __________________________ ...

Safe Harbor for Forward-Looking Statements; Other Disclosures Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers in ASC 606. The adoption of ASC 606 materially impacted the timing of revenue recognition for the Company's fixed-fee intellectual property licensing arrangements. The adoption of ASC 606 did not have a material impact on the Company's other revenue streams, net cash provided by operating activities, or its underlying fina ...

Financial Data and Key Metrics Changes - For the full year 2022, the company's product gross margins were around 61%, aligning with the long-term target of 60% to 65% [1] - In Q4, product gross margins were below the target range due to product mix, with expectations for improvement in Q1 2023 [2][6] - The company generated a record $230 million in cash from operations in 2022, up from $209 million in 2021 [32][44] - Q4 revenue was $122.4 million, with product revenue of $67.2 million, marking a record for the company [45] Business Line Data and Key Metrics Changes - Memory interface chips delivered Q4 product revenue of $67 million, up 15% quarter-over-quarter, and $227 million for the full year, representing 58% year-over-year growth [34][39] - The silicon IP business achieved over 30% revenue growth year-over-year, with expectations for lower growth in 2023 due to macroeconomic conditions [39][68] Market Data and Key Metrics Changes - The transition to DDR5 is expected to create softness in the first half of 2023, with a stronger second half anticipated as next-generation memory ramps up [36][37] - The industry is projected to see a crossover from DDR4 to DDR5 in the first half of 2024 [37] Company Strategy and Development Direction - The company aims to maintain its leadership position in key programs while managing operating expenses prudently amid macro challenges [12][58] - Focused investments in technology and talent are critical for growth initiatives, with a commitment to delivering high-quality products [33][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued growth despite current macroeconomic challenges and the transition from DDR4 to DDR5 [40][41] - The company is well-positioned for growth in 2023, particularly in the second half, as it navigates inventory adjustments and customer transitions [36][67] Other Important Information - The company executed a $100 million accelerated share repurchase program in 2022, retiring 3.2 million shares [44] - Total operating costs for Q4 were $85.4 million, with operating expenses at $55.8 million [47] Q&A Session Summary Question: Clarification on product mix affecting gross margins - Management confirmed that the product mix, particularly between DDR4 and DDR5, impacted Q4 margins and expected similar trends in Q1 [6][8] Question: Expectations for product revenue growth in 2023 - Management indicated that Q1 is expected to be the trough quarter, with growth anticipated in the second half of the year [7][8] Question: Status of silicon IP business growth - The silicon IP business grew about 30% in 2022, with expectations for lower growth in 2023 due to the macroeconomic environment [68] Question: Update on DDR5 chipsets and pricing - Management noted that DDR5 pricing typically resets with new generation launches, with expectations for margin improvement throughout the year [15][16] Question: Status of companion chips and market share - Companion chips are in qualification with customers, expected to start production towards the end of the year, with good revenue prospects anticipated [17][72]

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 na ...