This 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 as described in more detail under "Note Regarding
Forward-Looking Statements." Our forward-looking statements are based on current
expectations, forecasts and assumptions and are subject to risks, uncertainties
and changes in condition, significance, value and effect. As a result of the
factors described herein, and in the documents incorporated herein by reference,
including, in particular, those factors described under "Risk Factors," we
undertake no obligation to publicly disclose any revisions to these
forward-looking statements to reflect events or circumstances occurring
subsequent to filing this report with the Securities and Exchange Commission.
Rambus is a trademark of Rambus Inc. Other trademarks that may be mentioned in
this quarterly report on Form 10-Q are the property of their respective owners.
The following information has been adjusted to reflect the restatement of our
consolidated financial statements for the three and nine months ended
September 30, 2020 as described in Note 1, "Restatement of Condensed
Consolidated Financial Statements and Immaterial Correction of Prior-Period
Error," of Notes to Unaudited Condensed Consolidated Financial Statements of
this Form 10-Q.

Business Overview
Rambus produces products and innovations that address the fundamental challenges
of accelerating data. We make industry-leading chips and silicon IP that enable
critical performance improvements for data center and other growing markets. The
ongoing shift to the cloud, along with the widespread advancement of AI across
the data center, 5G, automotive and IoT, has led to exponential growth in data
usage and tremendous demands on data infrastructure. Creating fast and safe
connections, both in and across systems, remains one of the most
mission-critical design challenges limiting performance in advanced hardware for
these markets.
As an industry pioneer with over 30 years of advanced semiconductor experience
in interconnect technologies, Rambus is ideally positioned to address the
challenges of moving and protecting data. We are a leader in high-performance
memory subsystems, providing chips, silicon IP and innovations that maximize the
performance and security in data-intensive systems. Whether in the cloud, at the
edge or in your hand, real-time and immersive applications depend on data
throughput and integrity. Rambus products and innovations deliver the increased
bandwidth, capacity and security required to meet the world's data needs and
drive ever-greater end-user experiences.
Our strategic objectives are focusing our product portfolio and research around
our core strength in semiconductors, optimizing our operational efficiency, and
leveraging our strong cash generation to re-invest for growth. We continue to
maximize synergies across our businesses and customer base, leveraging the
significant overlap in our ecosystem of customers, partners and influencers. The
Rambus product and technology roadmap, as well as our go-to-market strategy, is
driven by the application-specific requirements of our focus markets.
Executive Summary
The Company's continued execution delivered strong results during the third
quarter, driven by continued demand in our memory interface chips, continued
design wins in Silicon IP and continued stability from our royalties revenue. We
also closed our acquisitions of AnalogX Inc. ("AnalogX") and PLDA Group
("PLDA"), bolstering our Silicon IP business and CXL Memory Interconnect
Initiative.
Key 2021 third quarter financial results included:
•Revenue of $81.3 million;
•Operating expenses of $58.2 million; and
•Net cash provided by operating activities of $46.0 million.
Operational Highlights
Revenue Sources
The Company's consolidated revenue is comprised of product revenue, contract and
other revenue and royalties.
Product revenue consists primarily of memory interface chips and is a
significant and growing segment of the business. Our memory interface chips are
sold to major DRAM manufacturers, Micron, Samsung and SK hynix, as well as
directly to system
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manufacturers and cloud providers, for integration into server memory modules.
Product revenue accounted for 45% and 42% of our consolidated revenue for the
three and nine months ended September 30, 2021, as compared to 52% and 50% for
the three and nine months ended September 30, 2020.
Contract and other revenue consists primarily of Silicon IP, which is comprised
of our high-speed interface and security IP. Revenue sources under contract and
other include our IP core licenses, software licenses and related
implementation, support and maintenance fees, and engineering services fees. The
timing and amounts invoiced to customers can vary significantly depending on
specific contract terms and can therefore have a significant impact on deferred
revenue or accounts receivable in any given period. Contract and other revenue
accounted for 14% of our consolidated revenue for both the three and nine months
ended September 30, 2021, as compared to 19% for both the three and nine months
ended September 30, 2020.
Royalty revenue is derived from our patent licenses, through which we provide
our customers certain rights to our broad worldwide portfolio of patented
inventions. Our patent licenses enable our customers to use a portion of our
patent portfolio in their own digital electronics products. The licenses
typically range in term up to ten years and define the specific field of use
where our customers may utilize our inventions in their products. Royalties may
be structured as fixed, variable or a hybrid of fixed and variable royalty
payments. Leading semiconductor and electronic system companies such as AMD,
Broadcom, Cisco, CXMT, IBM, Infineon, Kioxia, Marvell, Mediatek, Micron, Nanya,
NVIDIA, Panasonic, Phison, Qualcomm, Samsung, SK hynix, Socionext,
STMicroelectronics, Toshiba, Western Digital, Winbond, and Xilinx have licensed
our patents. The vast majority of our patents originate from our internal
research and development efforts. Revenues from royalties accounted for 41% and
44% of our consolidated revenue for the three and nine months ended
September 30, 2021, as compared to 29% and 31% for the three and nine months
ended September 30, 2020.
Costs and Expenses
Cost of product revenue for the three months ended September 30, 2021 increased
approximately $3.5 million as compared to the same period in 2020. Cost of
product revenue for the nine months ended September 30, 2021 increased
approximately $5.7 million as compared to the same period in 2020. The increase
in both periods was primarily due to increases in sales volumes during the
respective periods.
Cost of contract and other revenue for the three months ended September 30, 2021
increased by approximately $0.2 million as compared to the same period in 2020.
Cost of contract and other revenue for the nine months ended September 30, 2021
was flat as compared to the same period in 2020.
Research and development expenses continue to play a key role in our efforts to
drive our product innovations. Our research and development expenses for the
three months ended September 30, 2021 increased $1.9 million as compared to the
same period in 2020, primarily due to increased prototyping costs of
$1.2 million, consulting costs of $0.6 million, facilities costs of
$0.4 million, equipment maintenance costs of $0.2 million, offset by decreased
engineering development tool costs of $0.3 million, headcount-related expenses
of $0.2 million and legal patent costs of $0.2 million. Research and development
expenses for the nine months ended September 30, 2021 decreased $5.7 million as
compared to the same period in 2020, primarily due to decreased
headcount-related expenses of $2.2 million, retention bonus expense related to
acquisitions of $1.5 million, engineering development tool costs of
$1.4 million, facilities costs of $1.2 million and allocated information
technology costs of $1.0 million, offset by increased consulting costs of
$0.8 million and prototyping costs of $0.6 million.
Sales, general and administrative expenses for the three months ended
September 30, 2021 increased $2.0 million as compared to the same period in
2020, primarily due to increased depreciation expense of $0.6 million,
stock-based compensation expense of $0.6 million, acquisition-related costs
(including retention bonus expense) of $0.3 million and consulting costs of
$0.3 million. Sales, general and administrative expenses for the nine months
ended September 30, 2021 increased $2.8 million as compared to the same period
in 2020, primarily due to increased consulting, legal and accounting costs of
$3.0 million related to the shareholder activism activity and restatement
matters, acquisition-related costs (including retention bonus expense) of
$1.5 million, stock-based compensation expense of $1.5 million and allocated
information technology costs of $1.0 million, offset by decreased facilities
costs of $1.9 million, headcount-related expenses of $0.9 million, other
consulting costs of $0.6 million, equipment maintenance costs of $0.5 million
and bonus accrual expense of $0.5 million.
Intellectual Property
As of September 30, 2021, our semiconductor, security, and other technologies
are covered by 2,369 U.S. and foreign patents. Additionally, we have 584 patent
applications pending. Some of the patents and pending patent applications are
derived from a common parent patent application or are foreign counterpart
patent applications. We have a program to file applications for and obtain
patents in the United States and in selected foreign countries where we believe
filing for such protection is appropriate and would further our overall business
strategy and objectives. In some instances, obtaining appropriate levels of
protection may involve prosecuting continuation and counterpart patent
applications based on a common parent application. We
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believe our patented innovations provide our customers with the ability to
achieve improved performance, lower risk, greater cost-effectiveness, and other
benefits in their products and services.
Impact of the COVID-19 Pandemic
In December 2019, the Novel Coronavirus (COVID-19) was reported in China, in
January 2020 the World Health Organization ("WHO") declared it a Public Health
Emergency of International Concern, and in March 2020 the WHO declared it a
pandemic. The COVID-19 pandemic has created significant global economic
uncertainty and may adversely impact the business of our customers, partners and
vendors. The extent of the impact of the Novel Coronavirus (COVID-19) on our
operational and financial performance will depend on certain developments,
including the duration and spread of the outbreak, impact on our customers and
our sales cycles, and impact on our partners or employees, all of which are
uncertain and cannot be predicted. The extent to which the Novel Coronavirus
(COVID-19) may impact our financial condition or results of operations remains
uncertain. Actual results could differ from any estimates and any such
differences could be material to our financial statements. Furthermore, the
effect of the Novel Coronavirus (COVID-19) may not be fully reflected in our
results of operations until future periods, if at all.

Tendencies

There are a number of trends that may have a material impact on us in the
future, including but not limited to, the evolution of memory and SerDes
technology, adoption of security solutions, the use and adoption of our
inventions or technologies generally, industry consolidation, and global
economic conditions with the resulting impact on sales of consumer electronic
systems.
We have a high degree of revenue concentration. Our top five customers
represented approximately 59% and 54% of our revenue for the three and nine
months ended September 30, 2021 as compared to 49% and 48% for the three and
nine months ended September 30, 2020. The particular customers which account for
revenue concentration have varied from period-to-period as a result of the
addition of new contracts, expiration of existing contracts, renewals of
existing contracts, industry consolidation, and the volumes and prices at which
the customers have recently sold to their customers. These variations are
expected to continue in the foreseeable future.
Our revenue from companies headquartered outside of the United States accounted
for approximately 32% and 38% of our total revenue for the three and nine months
ended September 30, 2021 as compared to 49% and 48% for the three and nine
months ended September 30, 2020. We expect that revenue derived from
international customers will continue to represent a significant portion of our
total revenue in the future. Currently, our revenue from international customers
is denominated in U.S. dollars. For additional information concerning
international revenue, refer to Note 6, "Segments and Major Customers," of Notes
to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.
The royalties we receive from our semiconductor customers are partly a function
of the adoption of our technologies by system companies. Many system companies
purchase semiconductors containing our technologies from our customers and do
not have a direct contractual relationship with us. Our customers generally do
not provide us with details as to the identity or volume of licensed
semiconductors purchased by particular system companies. As a result, we face
difficulty in analyzing the extent to which our future revenue will be dependent
upon particular system companies. Several of our licensees have renewed or
extended their license agreements with us during the nine months ended September
30, 2021 including Qualcomm, Kioxia and Western Digital.
As a part of our overall business strategy, from time to time, we evaluate
businesses and technologies for potential acquisitions that are aligned with our
core business and designed to supplement our growth, including the 2021
acquisitions of AnalogX and PLDA, as well as the 2019 acquisitions of Northwest
Logic and the Secure Silicon IP and Protocols business from Verimatrix, formerly
Inside Secure. Similarly, we evaluate our current businesses and technologies
that are not aligned with our core business for potential divestiture, such as
the sale of our Payments and Ticketing businesses to Visa International Service
Association in 2019. We expect to continue to evaluate and potentially enter
into strategic acquisitions or divestitures which may adversely impact our
business and operating results.
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Results of Operations
The following table sets forth, for the periods indicated, the percentage of
total revenue represented by certain items reflected on our unaudited condensed
consolidated statements of operations:
                                                                          Three Months Ended                                   Nine Months Ended
                                                                             September 30,                                       September 30,
                                                                                                                                               2020 (As
                                                                     2021                  2020 (As Restated)             2021                 Restated)
Revenue:
Product revenue                                                              45.1  %                  52.3  %                41.7  %                 50.0  %
Royalties                                                                    40.7  %                  29.2  %                43.9  %                 30.8  %
Contract and other revenue                                                   14.2  %                  18.5  %                14.4  %                 19.2  %
Total revenue                                                               100.0  %                 100.0  %               100.0  %                100.0  %
Cost of revenue:
Cost of product revenue                                                      16.2  %                  17.0  %                15.2  %                 16.4  %
Cost of contract and other revenue                                            1.8  %                   2.2  %                 1.7  %                  2.2  %
Amortization of acquired intangible assets                                    4.7  %                   7.6  %                 5.4  %                  7.0  %
Total cost of revenue                                                        22.7  %                  26.8  %                22.3  %                 25.6  %
Gross profit                                                                 77.3  %                  73.2  %                77.7  %                 74.4  %
Operating expenses:
Research and development                                                     43.8  %                  59.3  %                42.0  %                 57.0  %
Sales, general and administrative                                            27.3  %                  35.5  %                28.7  %                 35.3  %
Amortization of acquired intangible assets                                    0.4  %                   0.4  %                 0.3  %                  0.5  %

Restructuring charges                                                           -  %                     -  %                 0.2  %                  0.5  %
Change in fair value of earn-out liability                                      -  %                     -  %                   -  %                 

(1.0)%

Total operating expenses                                                     71.5  %                  95.2  %                71.2  %                 92.3  %
Operating income (loss)                                                       5.8  %                 (22.0) %                 6.5  %                (17.9) %
Interest income and other income (expense), net                               3.4  %                   6.2  %                 3.4  %                  8.0  %
Interest expense                                                             (3.4) %                  (4.5) %                (3.3) %                 (4.2) %
Interest and other income (expense), net                                        -  %                   1.7  %                 0.1  %                  3.8  %
Income (loss) before income taxes                                             5.8  %                 (20.3) %                 6.6  %                (14.1) %
Provision for income taxes                                                    1.3  %                   2.1  %                 1.4  %                  1.3  %
Net income (loss)                                                             4.5  %                 (22.4) %                 5.2  %                (15.4) %


                                                               Three Months Ended                                                  Nine Months Ended
                                                                 September 30,                        Change in                      September 30,                      Change in
                                                                                                                                                  2020 (As
(Dollars in millions)                                        2021                 2020               Percentage                2021              Restated)             Percentage
Total revenue:
Product revenue                                       $     36.7               $   29.8                      23.3  %       $     98.7          $      92.2                     7.0  %
Royalties                                                   33.1                   16.6                      99.0  %            103.8                 56.8                    82.7  %
Contract and other revenue                                  11.5                   10.5                       9.3  %             34.0                 35.4                    (3.7) %
Total revenue                                         $     81.3               $   56.9                      42.8  %       $    236.5          $     184.4                    28.3  %


Product Revenue
Product revenue consists of revenue from the sale of memory and security
products. Product revenue increased approximately $6.9 million to $36.7 million
for the three months ended September 30, 2021 from $29.8 million for the same
period in 2020. Product revenue increased approximately $6.5 million to
$98.7 million for the nine months ended September 30, 2021 from $92.2 million
for the same period in 2020. The increase in both periods was due to higher
sales of our memory interface chips.
We believe that product revenue will continue to increase in 2021 as compared to
2020, mainly from the sale of our memory interface chips. However, our ability
to continue to grow product revenue is dependent on, among other things, our
ability to continue to obtain orders from customers and our ability to meet our
customers' demands.
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Royalties
Our royalties, which include patent and technology license royalties, increased
approximately $16.5 million to $33.1 million for the three months ended
September 30, 2021 from $16.6 million for the same period in 2020. Our royalty
revenue increased approximately $47.0 million to $103.8 million for the nine
months ended September 30, 2021 from $56.8 million for the same period in 2020.
The increase in both periods was primarily due to the timing and structure of
renewals.
We are continuously in negotiations for licenses with prospective customers. We
expect patent royalties will continue to vary from period to period based on our
success in adding new customers, renewing or extending existing agreements, as
well as the level of variation in our customers' reported shipment volumes,
sales price and mix, offset in part by the proportion of customer payments that
are fixed or hybrid in nature. We also expect that our technology royalties will
continue to vary from period to period based on our customers' shipment volumes,
sales prices, and product mix.
Contract and Other Revenue
Contract and other revenue consists of revenue from technology development
projects. Contract and other revenue increased approximately $1.0 million to
$11.5 million for the three months ended September 30, 2021 from $10.5 million
for the same period in 2020. The increase was primarily due to higher support
revenue. Contract and other revenue decreased approximately $1.4 million to
$34.0 million for the nine months ended September 30, 2021 from $35.4 million
for the same period in 2020. The decrease was primarily due to lower revenue
associated with our Silicon IP offerings.
We believe that contract and other revenue will fluctuate over time based on our
ongoing technology development contractual requirements, the amount of work
performed, the timing of completing engineering deliverables, and the changes to
work required, as well as new technology development contracts booked in the
future.
Cost of Product Revenue
                                                             Three Months Ended                                                  Nine Months Ended
                                                                September 30,                       Change in                      September 30,                     Change in
(Dollars in millions)                                       2021                  2020              Percentage                 2021                2020
             Percentage
Cost of product revenue                             $      13.2                $   9.7                     36.2  %       $     36.0              $ 30.3                     18.9  %


Cost of product revenue increased approximately $3.5 million to $13.2 million
for the three months ended September 30, 2021 from $9.7 million for the same
period in 2020. Cost of product revenue increased approximately $5.7 million to
$36.0 million for the nine months ended September 30, 2021 from $30.3 million
for the same period in 2020. The increase for both periods was primarily due to
increases in sales volumes during the respective periods.
In the near term, we expect costs of product revenue to continue to be higher as
we expect higher sales of our various products in 2021 as compared to 2020.
Cost of Contract and Other Revenue
                                                               Three Months Ended                                             Nine Months Ended
                                                                 September 30,                       Change in                  September 30,                   Change in
(Dollars in millions)                                         2021                 2020             Percentage               2021             2020             Percentage
Cost of contract and other revenue                    $      1.5                 $  1.3                    14.9  %       $     4.0          $  4.0                       -  %


Cost of contract and other revenue for the three months ended September 30, 2021
increased by approximately $0.2 million as compared to the same period in 2020.
Cost of contract and other revenue for the nine months ended September 30, 2021
was flat as compared to the same period in 2020.
In the near term, we expect costs of contract and other revenue to vary from
period to period based on varying revenue recognized from contract and other
revenue.
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Research and Development Expenses
                                                               Three Months Ended                                              Nine Months Ended
                                                                 September 30,                      Change in                    September 30,                     Change in
(Dollars in millions)                                         2021                2020             Percentage                2021                2020             Percentage

Research and development costs:

Research and development expenses                      $     33.0               $ 31.1                     6.0  %       $    91.7             $  97.3                    (5.8) %
Stock-based compensation                                      2.6                  2.6                       -  %             7.7                 7.8                    (0.8) %
Total research and development expenses                $     35.6               $ 33.7                     5.5  %       $    99.4             $ 105.1                    (5.4) %


Total research and development expenses increased $1.9 million for the three
months ended September 30, 2021 as compared to the same period in 2020,
primarily due to increased prototyping costs of $1.2 million, consulting costs
of $0.6 million, facilities costs of $0.4 million, equipment maintenance costs
of $0.2 million, offset by decreased engineering development tool costs of
$0.3 million, headcount-related expenses of $0.2 million and legal patent costs
of $0.2 million.
Total research and development expenses decreased $5.7 million for the nine
months ended September 30, 2021 as compared to the same period in 2020,
primarily due to decreased headcount-related expenses of $2.2 million, retention
bonus expense related to acquisitions of $1.5 million, engineering development
tool costs of $1.4 million, facilities costs of $1.2 million and allocated
information technology costs of $1.0 million, offset by increased consulting
costs of $0.8 million and prototyping costs of $0.6 million.
In the near term, we expect research and development expenses to be higher as we
continue to make investments in the infrastructure and technologies required to
maintain our product innovation in semiconductor, security and other
technologies.
Sales, General and Administrative Expenses
                                                              Three Months Ended                                                 Nine Months Ended
                                                                September 30,                      Change in                       September 30,                        Change in
                                                                                                                                                  2020 (As
(Dollars in millions)                                        2021                2020             Percentage                 2021                Restated)             Percentage
Sales, general and administrative expenses:
Sales, general and administrative expenses            $     17.4               $ 16.0                     9.2  %       $     54.7              $      53.3                     2.4  %

Stock-based compensation                                     4.8                  4.2                    13.1  %             13.3                     11.9                    12.4  %
Total sales, general and administrative
expenses                                              $     22.2               $ 20.2                    10.0  %       $     68.0              $      65.2                     4.2  %


Total sales, general and administrative expenses increased $2.0 million for the
three months ended September 30, 2021 as compared to the same period in 2020,
primarily due to increased depreciation expense of $0.6 million, stock-based
compensation expense of $0.6 million, acquisition-related costs (including
retention bonus expense) of $0.3 million and consulting costs of $0.3 million.
Total sales, general and administrative expenses increased $2.8 million for the
nine months ended September 30, 2021 as compared to the same period in 2020,
primarily due to increased consulting, legal and accounting costs of
$3.0 million related to the shareholder activism activity and restatement
matters, acquisition-related costs (including retention bonus expense) of
$1.5 million, stock-based compensation expense of $1.5 million and allocated
information technology costs of $1.0 million, offset by decreased facilities
costs of $1.9 million, headcount-related expenses of $0.9 million, other
consulting costs of $0.6 million, equipment maintenance costs of $0.5 million
and bonus accrual expense of $0.5 million.
In the future, sales, general and administrative expenses will vary from period
to period based on the trade shows, advertising, legal, acquisition and other
sales, marketing and administrative activities undertaken, and the change in
sales, marketing and administrative headcount in any given period. In the near
term, we expect our sales, general and administrative expenses to remain
relatively flat.
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Amortization of Acquired Intangible Assets
                                                               Three Months Ended                                                Nine Months Ended
                                                                 September 30,                       Change in                     September 30,                     Change in
(Dollars in millions)                                         2021                 2020             Percentage                 2021                2020             Percentage
Amortization of acquired intangible assets:
Amortization of acquired intangible assets
included in total cost of revenue                     $      3.8                 $  4.3                   (12.1) %       $     12.6              $ 13.0                    (2.9) %
Amortization of acquired intangible assets
included in total operating expenses                         0.4                    0.2                    52.1  %              0.8                 0.8                       -  %
Total amortization of acquired intangible
assets                                                $      4.2                 $  4.5                    (8.7) %       $     13.4              $ 13.8                    (2.8) %


Amortization of acquired intangible assets recognized in cost of revenue and
operating expenses for the three and nine months ended September 30, 2021
decreased as compared to the same periods in 2020.
Restructuring Charges
                                                                 Three Months Ended                                               Nine Months Ended
                                                                   September 30,                         Change in                  September 30,                   Change in
(Dollars in millions)                                          2021                    2020             Percentage               2021             2020             Percentage
Restructuring charges                                 $       -                     $     -                       -  %       $     0.4          $  0.8                   (56.0) %


In November 2020, we initiated a restructuring plan to reduce overall expenses
to improve future profitability by reducing spending on research and development
efforts and sales, general and administrative programs (the "2020 Restructuring
Plan"). During the nine months ended September 30, 2021, we recorded additional
restructuring charges of $0.4 million, primarily related to headcount costs.
Refer to Note 16, "Restructuring Charges," of Notes to Unaudited Condensed
Consolidated Financial Statements of this Form 10-Q for further discussion.
Change in Fair Value of Earn-Out Liability
                                                                 Three Months Ended                                              Nine Months Ended
                                                                   September 30,                         Change in                 September 30,                  Change in
(Dollars in millions)                                          2021                    2020             Percentage              2021            2020    

Percentage

Change in fair value of earn-out liability            $       -                     $     -                       -  %       $     -          $ (1.8)                 (100.0) %


During the first quarter of 2020, we recorded a reduction in the fair value of
the earn-out liability related to the 2019 asset purchase agreement to acquire
the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside
Secure, based on its then-current fair value in light of the likely achievement
of the specified performance milestones, resulting in a gain on our condensed
consolidated statements of operations.
Interest and Other Income (Expense), Net
                                                                   Three Months Ended                                                      Nine Months Ended
                                                                     September 30,                          Change in                        September 30,                        Change in
                                                                                     2020 (As                                                               2020 (As
(Dollars in millions)                                          2021                  Restated)              Percentage                 2021                Restated)              Percentage

Interest income and other income (expense), net $ 2.7

      $        3.6                    (23.3) %       $     8.1               $      14.7                    (44.9) %
Interest expense                                             (2.7)                        (2.6)                     3.3  %            (8.0)                     (7.7)                     3.2  %
Interest and other income (expense), net               $      0.1                 $        1.0                    (94.4) %       $     0.1               $       7.0                    (98.3) %


Interest income and other income (expense), net, consists primarily of interest
income of $2.2 million and $7.4 million for the three and nine months ended
September 30, 2021, respectively, due to the significant financing component of
licensing agreements. Interest income and other income (expense), net, also
includes interest income generated from investments in high quality fixed income
securities and any gains or losses from the re-measurement of our monetary
assets or liabilities denominated in foreign currencies.
Interest expense primarily consists of interest expense associated with the
non-cash interest expense related to the amortization of the debt discount and
issuance costs on the 1.375% convertible senior notes due 2023 (the "2023
Notes"), as
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well as the coupon interest related to these notes. We expect our non-cash
interest expense to increase steadily as the notes reach maturity.
Provision for Income Taxes
                                                                    Three Months Ended                                                 Nine Months Ended
                                                                      September 30,                       Change in                      September 30,                       Change in
                                                                                     2020 (As                                                          2020 (As
(Dollars in millions)                                         2021                  Restated)            Percentage              2021                 Restated)              Percentage
Provision for income taxes                                $    1.1                $     1.2                (11.0)%           $    3.2               $     2.3                       37.4  %
Effective tax rate                                            22.6   %                (10.4)   %                                 20.7   %                (8.9)   %



The provision for income taxes reported for the three and nine months ended
September 30, 2021 was driven by a combination of the valuation allowance
recorded on U.S. deferred tax assets, foreign withholding taxes, the statutory
tax expense for the foreign jurisdictions for 2021, tax on Canadian capital
gains related to the acquisition of AnalogX, and indefinite-lived intangible tax
amortization expense. Our income tax provision for the three months ended
September 30, 2021 and 2020 reflected an effective tax rate of 22.6% and
(10.4)%, respectively. Our income tax provision for the nine months ended
September 30, 2021 and 2020 reflected an effective tax rate of 20.7% and (8.9)%,
respectively. Our effective tax rate for the three and nine months ended
September 30, 2021 differed from the statutory rate primarily due to foreign tax
credits and the full valuation allowance against U.S. deferred tax assets. Our
effective tax rate for the three and nine months ended September 30, 2020
differed from the statutory rate primarily due to U.S. and foreign current taxes
payable and no benefit for current losses due to the full valuation allowance
against U.S. deferred tax assets.
During the three months ended September 30, 2021 and 2020, we paid withholding
taxes of $5.0 million and $5.2 million, respectively. During the nine months
ended September 30, 2021 and 2020, we paid withholding taxes of $15.4 million
and $14.8 million, respectively.
We periodically evaluate the realizability of our net deferred tax assets based
on all available evidence, both positive and negative. During the third quarter
of 2018, we assessed the changes in our underlying facts and circumstances and
evaluated the realizability of our existing deferred tax assets based on all
available evidence, both positive and negative, and the weight accorded to each,
and concluded a full valuation allowance associated with U.S. federal and
California deferred tax assets was appropriate. During 2020, as a result of the
enactment of California A.B. 85 and the temporary suspension of California net
operating loss utilization for tax years 2020 through 2022, we released
$0.7 million of the valuation allowance on our deferred tax asset for California
research and development tax credits. We continue to maintain a full valuation
allowance on the remainder of our California and U.S. federal deferred tax
assets as we do not expect to be able to fully utilize them.
We have U.S. federal deferred tax assets related to research and development
credits, foreign tax credits and other tax attributes that can be used to offset
U.S. federal taxable income in future periods. These credit carryforwards will
expire if they are not used within certain time periods. It is possible that
some or all of these attributes could ultimately expire unused.

Liquidity and capital resources

                                                                                             As of
                                                                              September 30,           December 31,
(In millions)                                                                     2021                    2020
Cash and cash equivalents                                                   $        151.9          $       129.0
Marketable securities                                                                267.8                  373.6
Total cash, cash equivalents, and marketable securities                     $        419.7          $       502.6


                                                                  Nine Months Ended
                                                                    September 30,
(In millions)                                               2021         2020 (As Restated)
Net cash provided by operating activities                $   137.0      $   

143.4

Net cash provided by (used in) investing activities $ 1.1 $

(146.1)

Net cash used in financing activities                    $  (114.9)     $              (9.9)



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Liquidity
We currently anticipate that existing cash, cash equivalents and marketable
securities balances and cash flows from operations will be adequate to meet our
cash needs for at least the next 12 months. Additionally, the majority of our
cash and cash equivalents is in the United States. Our cash needs for the nine
months ended September 30, 2021 were funded primarily from cash collected from
our customers.
We do not anticipate any liquidity constraints as a result of either the current
credit environment or investment fair value fluctuations. Additionally, we have
the intent and ability to hold our debt investments that have unrealized losses
in accumulated other comprehensive gain (loss) for a sufficient period of time
to allow for recovery of the principal amounts invested. Further, we have no
significant exposure to European sovereign debt. We continually monitor the
credit risk in our portfolio and mitigate our credit risk exposures in
accordance with our policies.
As a part of our overall business strategy, from time to time, we evaluate
businesses and technologies for potential acquisitions that are aligned with our
core business and designed to supplement our growth.
To provide us with more flexibility in returning capital to our stockholders, on
October 29, 2020, our Board approved the 2020 Repurchase Program authorizing the
repurchase of up to an aggregate of 20.0 million shares. Share repurchases under
the 2020 Repurchase Program may be made through the open market, established
plans or privately negotiated transactions in accordance with all applicable
securities laws, rules, and regulations. There is no expiration date applicable
to the 2020 Repurchase Program.
On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank.
The 2020 ASR Program was part of the 2020 Repurchase Program. Under the 2020 ASR
Program, we pre-paid to Deutsche Bank the $50.0 million purchase price for our
common stock and, in turn, we received an initial delivery of approximately
2.6 million shares of our common stock from Deutsche Bank in the fourth quarter
of 2020, which were retired and recorded as a $40.0 million reduction to
stockholders' equity. The remaining $10.0 million of the initial payment was
recorded as a reduction to stockholders' equity as an unsettled forward contract
indexed to our stock. During the second quarter of 2021, the accelerated share
repurchase program was completed and we received an additional 0.1 million
shares of our common stock as the final settlement of the accelerated share
repurchase program.
On June 15, 2021, we entered into the 2021 ASR Program with Deutsche Bank. The
2021 ASR Program was part of the 2020 Repurchase Program. Under the 2021 ASR
Program, we pre-paid to Deutsche Bank the $100.0 million purchase price for our
common stock and, in turn, we received an initial delivery of approximately
3.9 million shares of our common stock from Deutsche Bank in the second quarter
of 2021, which were retired and recorded as $80.0 million reduction to
stockholders' equity. The remaining $20.0 million of the initial payment was
recorded as a reduction to stockholders' equity as an unsettled forward contract
indexed to our stock. In October 2021, the accelerated share repurchase program
was completed and we received an additional 0.4 million shares of our common
stock as the final settlement of the accelerated share repurchase program.
As of September 30, 2021, there remained an outstanding authorization to
repurchase approximately 13.4 million shares of our outstanding common stock
under the 2020 Repurchase Program. Refer to "Share Repurchase Program" below.
Operating Activities
Cash provided by operating activities of $137.0 million for the nine months
ended September 30, 2021 was primarily attributable to the cash generated from
customer licensing, product sales and engineering services fees. Changes in
operating assets and liabilities for the nine months ended September 30, 2021
primarily included decreases in unbilled receivables, inventories, prepaids and
other current assets and an increase in deferred revenue, offset by an increase
in accounts receivable, as well as decreases in income taxes payable, accrued
salaries and benefits and operating lease liabilities.
Cash provided by operating activities of $143.4 million for the nine months
ended September 30, 2020 was primarily attributable to the cash generated from
customer licensing, product sales and engineering services fees. Changes in
operating assets and liabilities for the nine months ended September 30, 2020
primarily included decreases in unbilled receivables, accounts receivable, and
increases in accounts payable and deferred revenue, offset by increases in
inventories and decreases in income taxes payable as well as accrued salaries
and benefits.
Investing Activities
Cash provided by investing activities of $1.1 million for the nine months ended
September 30, 2021 consisted of proceeds from the maturities and sale of
available-for-sale marketable securities of $297.8 million and $227.0 million,
respectively, offset by purchases of available-for-sale marketable securities of
$419.1 million, $97.1 million paid for the acquisitions of AnalogX and PLDA, net
of total cash acquired of $8.6 million, and $7.5 million paid to acquire
property, plant and equipment.
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Cash used in investing activities of $146.1 million for the nine months ended
September 30, 2020 consisted of purchases of available-for-sale marketable
securities of $655.1 million, $20.8 million paid to acquire property, plant and
equipment, and $1.1 million paid to settle a net working capital adjustment
related to the divestiture of the Company's Payments and Ticketing businesses,
offset by proceeds from the maturities and sale of available-for-sale marketable
securities of $528.0 million and $2.9 million, respectively.
Financing Activities
Cash used in financing activities of $114.9 million for the nine months ended
September 30, 2021 was primarily due to an aggregate payment of $100.0 million
to Deutsche Bank as part of the 2021 ASR Program. We also paid $10.0 million in
payments of taxes on restricted stock units, $9.8 million under installment
payment arrangements to acquire fixed assets and $0.1 million in fees related to
the 2021 ASR Program, offset by $5.0 million in proceeds from the issuance of
common stock under equity incentive plans.
Cash used in financing activities of $9.9 million for the nine months ended
September 30, 2020 was primarily due to $9.2 million in payments under
installment payment arrangements to acquire fixed assets and $8.8 million in
payments of taxes on restricted stock units, offset by $8.1 million in proceeds
from the issuance of common stock under equity incentive plans.

Contractual obligations from September 30, 2021, our significant contractual obligations were as follows:

                                                               Remainder of
(In thousands)                                Total                2021               2022               2023              2024             2025

Contractual obligations (1) (2)

Software licenses (3)                      $  11,393          $     3,485   

$ 7,587 $ 321 $ – $ – Acquisition retention premiums (4)

              9,870                  370             5,167              2,167            2,166                -
Convertible notes                            172,500                    -                 -            172,500                -                -
Interest payments related to
convertible notes                              3,564                    -             2,372              1,192                -                -
Total                                      $ 197,327          $     3,855          $ 15,126          $ 176,180          $ 2,166          $     -

_________________________________________

(1)  The above table does not reflect possible payments in connection with
unrecognized tax benefits of approximately $21.4 million, including
$19.8 million recorded as a reduction of long-term deferred tax assets and
$1.6 million in long-term income taxes payable as of September 30, 2021. As
noted in Note 14, "Income Taxes," of Notes to Unaudited Condensed Consolidated
Financial Statements of this Form 10-Q, although it is possible that some of the
unrecognized tax benefits could be settled within the next 12 months, we cannot
reasonably estimate the outcome at this time.
(2)  For our lease commitments as of September 30, 2021, refer to Note 9,
"Leases," of Notes to Unaudited Condensed Consolidated Financial Statements of
this Form 10-Q.
(3)  We have commitments with various software vendors for agreements generally
having terms longer than one year.
(4)  In connection with the acquisition of Northwest Logic in the third quarter
of 2019, the Secure Silicon IP and Protocols business in the fourth quarter of
2019, and the acquisitions of AnalogX and PLDA in the third quarter of 2021, we
are obligated to pay retention bonuses to certain employees subject to certain
eligibility and acceleration provisions including the condition of employment.

Share Repurchase Program
On October 29, 2020, our Board approved the 2020 Repurchase Program authorizing
the repurchase of up to an aggregate of 20.0 million shares. Share repurchases
under the 2020 Repurchase Program may be made through the open market,
established plans or privately negotiated transactions in accordance with all
applicable securities laws, rules, and regulations. There is no expiration date
applicable to the 2020 Repurchase Program. During the nine months ended
September 30, 2021, we repurchased shares of our common stock under the 2020
Repurchase Program as discussed below.
On November 11, 2020, we entered into the 2020 ASR Program with Deutsche Bank.
The 2020 ASR Program was part of the 2020 Repurchase Program. Under the 2020 ASR
Program, we pre-paid to Deutsche Bank the $50.0 million purchase price for our
common stock and, in turn, we received an initial delivery of approximately
2.6 million shares of our common stock from Deutsche Bank in the fourth quarter
of 2020, which were retired and recorded as a $40.0 million reduction to
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stockholders' equity. The remaining $10.0 million of the initial payment was
recorded as a reduction to stockholders' equity as an unsettled forward contract
indexed to our stock. During the second quarter of 2021, the accelerated share
repurchase program was completed and we received an additional 0.1 million
shares of our common stock as the final settlement of the accelerated share
repurchase program.
On June 15, 2021, we entered into the 2021 ASR Program with Deutsche Bank. The
2021 ASR Program was part of the share repurchase program previously authorized
by our Board on October 29, 2020. Under the 2021 ASR Program, we pre-paid to
Deutsche Bank the $100.0 million purchase price for our common stock and, in
turn, we received an initial delivery of approximately 3.9 million shares of our
common stock from Deutsche Bank in the second quarter of 2021, which were
retired and recorded as a $80.0 million reduction to stockholders' equity. The
remaining $20.0 million of the initial payment was recorded as a reduction to
stockholders' equity as an unsettled forward contract indexed to our stock. In
October 2021, the accelerated share repurchase program was completed and we
received an additional 0.4 million shares of our common stock as the final
settlement of the accelerated share repurchase program.
During the nine months ended September 30, 2021, there were no other repurchases
of our common stock under the 2020 Repurchase Program.
As of September 30, 2021, there remained an outstanding authorization to
repurchase approximately 13.4 million shares of our outstanding common stock
under the 2020 Repurchase Program.
We record stock repurchases as a reduction to stockholders' equity. We record a
portion of the purchase price of the repurchased shares as an increase to
accumulated deficit when the price of the shares repurchased exceeds the average
original proceeds per share received from the issuance of common stock.

Critical Accounting Policies and Estimates
The discussion and analysis of our financial condition and results of operations
are based upon our condensed consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to revenue recognition, investments, income taxes, litigation and other
contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. Our critical accounting estimates include those
regarding (1) revenue recognition, (2) goodwill, (3) intangible assets,
(4) income taxes, (5) stock-based compensation and (6) business combinations.
For a discussion of our critical accounting estimates, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Critical Accounting Policies and Estimates" in our Annual Report on Form 10-K/A
for the year ended December 31, 2020.

Recent Accounting Pronouncements
Refer to Note 2, "Recent Accounting Pronouncements," of Notes to Unaudited
Condensed Consolidated Financial Statements of this Form 10-Q for discussion of
recent accounting pronouncements including the respective expected dates of
adoption.

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