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Acquisitions (Notes) | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Acquisitions | Acquisitions Northwest Logic, Inc. On July 26, 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Northwest Logic, a leading supplier of memory, PCIe, and MIPI digital controllers. On August 23, 2019 (the “Closing Date”), the Company completed its acquisition of Northwest Logic by acquiring all issued and outstanding shares of Northwest Logic through the merger of a wholly-owned Rambus subsidiary with Northwest Logic. Under the terms of the Merger Agreement, the Company paid approximately $21.9 million in cash, including certain bonus payments and adjustments for working capital. Of the purchase price, $3.0 million of the consideration was deposited into an escrow account to fund indemnification obligations and other contractual provisions, to be released 24 months after the Closing Date. This acquisition allows the Company to further scale, bringing together high-speed design expertise with the physical and digital IP families from renowned market leaders to offer comprehensive memory and SerDes IP solutions for chip designers. The Company integrated Northwest Logic’s offerings and design team into its IP cores technology solutions. As part of the acquisition, the Company agreed to pay $9.0 million to certain Northwest Logic employees in cash over three years following August 23, 2019 (the “Retention Bonus”). The Retention Bonus will be paid in three installments of $3.0 million on each of the dates that are 12 months, 24 months and 36 months following the Closing Date. The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed as incurred. As of December 31, 2019, the Company had incurred approximately $0.7 million in external acquisition costs in connection with the transaction, which were expensed as incurred. The purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company’s estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period. In accordance with ASC No. 805, during the measurement period an acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of the acquisition date. Accordingly, the Company has recognized a measurement period adjustment made during the fourth quarter of 2019 to the fair value of certain assets acquired and liabilities assumed as a result of further refinements in the Company’s estimates. This adjustment was retrospectively applied to the August 23, 2019 acquisition date balance sheet. The effect of this adjustment on the preliminary purchase price allocation was an increase in goodwill of $2.1 million and an increase in deferred tax liability, net, of $2.1 million. This adjustment did not have a material impact on the Company’s previously reported results of operations. The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the existing technologies less charges representing the contribution of other assets to those cash flows. The Company performed a valuation of the net assets acquired as of the Closing Date. The total consideration from the business combination was allocated as of the Closing Date, including the retrospective adjustment made in the fourth quarter of 2019, as follows:
| Total
| (in thousands)
Cash and cash equivalents | $ | 159 |
Accounts receivable | 1,679 |
Prepaid expenses and other current assets | 65 |
Identified intangible assets | 8,800 |
Goodwill | 13,477 |
Operating lease right-of-use asset | 178 |
Other asset | 9 |
Accounts payable | (9 | )
Operating lease liability | (178 | )
Other current liabilities | (108 | )
Deferred tax liability, net | (2,133 | )
Total | $ | 21,939 |
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of Northwest Logic. This goodwill is not expected to be deductible for tax purposes. The identified intangible assets assumed in the acquisition of Northwest Logic were recognized as follows based upon their estimated fair values as of the acquisition date:
| Total |  | Estimated Weighted Average Useful Life
| (in thousands) |  | (in years)
Existing technology | $ | 8,100 |  |  | 5
Customer contracts and contractual relationships | 400 |  |  | 2
Customer backlog | 300 |  |  | 0.5
Total | $ | 8,800 |  |  |
Secure Silicon IP and Protocols Business from Verimatrix On September 11, 2019, the Company announced it had signed an asset purchase agreement to acquire the Secure Silicon IP and Protocols business from Verimatrix, formerly Inside Secure, for $65.0 million in cash. On December 8, 2019 (the “Closing Date”), the Company completed its acquisition of the Secure Silicon IP and Protocols business. Under the terms of the Asset Purchase Agreement, as amended, the Company paid approximately $45.0 million in cash at the Closing Date, and will pay up to an additional $20.0 million, currently valued at $1.8 million, subject to certain revenue targets of the transferred business for the calendar year 2020. The addition of the embedded security teams, products and expertise from the Secure Silicon IP and Protocols business augments the Company’s portfolio of mission-critical embedded security products and expands its offerings for data center, AI, networking and automotive. The total adjusted purchase consideration for the acquisition of the Secure Silicon IP and Protocols business was $46.8 million, which consisted of the following:
| Total
| (in thousands)
Cash consideration transferred at the Closing Date | $ | 45,000 |
Fair value of earn-out liability | 1,800 |
Total adjusted purchase price | $ | 46,800 |
As part of the acquisition, the Company agreed to pay $1.0 million to certain employees in cash over two years effective January 1, 2020 (the “Retention Bonus”). The Retention Bonus will be paid in arrears in two annual installments of $0.5 million in December 2020 and December 2021, respectively. The Retention Bonus payouts are subject to the condition of continued employment, and therefore treated as compensation and expensed as incurred. As of December 31, 2019, the Company had incurred approximately $3.1 million in external acquisition costs in connection with the transaction, which were expensed as incurred. The purchase price allocation and related accounting for this acquisition is preliminary. The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and the Company’s estimates and assumptions for the acquisition are subject to change if the Company obtains additional information during the measurement period. The fair value of the assets acquired was determined by management primarily by using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the existing technologies less charges representing the contribution of other assets to those cash flows. The Company performed a valuation of the net assets acquired as of the Closing Date. The Company performed a valuation of the net assets acquired as of the Closing Date. The total consideration from the acquisition was allocated as follows:
| Total
| (in thousands)
Prepaid expenses and other current assets | $ | 267 |
Unbilled receivables | 6,765 |
Operating lease right-of-use assets | 852 |
Identified intangible assets | 23,500 |
Goodwill | 16,845 |
Deferred revenue | (310 | )
Operating lease liabilities | (852 | )
Other current liabilities | (267 | )
Total | $ | 46,800 |
The goodwill arising from the acquisition is primarily attributed to synergies related to the combination of new and complementary technologies of the Company and the assembled workforce of the Secure Silicon IP and Protocols business. Approximately $15.0 million of the goodwill is expected to be deductible for tax purposes. The identified intangible assets assumed in the acquisition of the Secure Silicon IP and Protocols business were recognized as follows based upon their estimated fair values as of the acquisition date:
| Total |  | Estimated Weighted Average Useful Life
| (in thousands) |  | (in years)
Existing technology | $ | 21,600 |  |  | 3 to 5 years
Customer contracts and contractual relationships | 900 |  |  | 5 years
IPR&D | 1,000 |  |  | Not applicable
Total | $ | 23,500 |  |  |
IPR&D consists of one project, primarily relating to the development of Media Access Control Security frame engines, which is part of the Silicon IP solutions. The project is expected to be completed over the next twelve months. The acquired IPR&D will not be amortized until completion of the related product which is determined by when the underlying project reaches technological feasibility and commences commercial production. Upon completion, the IPR&D project will be amortized over its useful life, which is expected to range between three years and five years. Unaudited Pro Forma Combined Consolidated Financial Information The following unaudited pro forma financial information presents the combined results of operations for the Company and Northwest Logic as if the acquisition had occurred on January 1, 2018. The unaudited pro forma financial information has been prepared for comparative purposes only and does not purport to be indicative of the actual operating results that would have been recorded had the acquisition actually taken place on January 1, 2018, and should not be taken as indicative of future consolidated operating results. Additionally, the unaudited pro forma financial results do not include any anticipated synergies or other expected benefits from the acquisition (unaudited, in thousands, except per share amounts):
| Years Ended December 31,
| 2019 |  | 2018
Revenue | $ | 231,492 |  |  | $ | 241,049 |
Net loss | $ | (90,688 | ) |  | $ | (160,742 | )
Net loss per share - diluted | $ | (0.82 | ) |  | $ | (1.48 | )
Pro forma loss for 2019 was adjusted to exclude $0.7 million of acquisition-related costs incurred in 2019. Consequently, pro forma loss for 2018 was adjusted to include these costs. Pro forma financial information on the combined results of operations for the Company and the Secure Silicon IP and Protocols business as if the acquisition had occurred on January 1, 2018 has not been presented as it was impracticable to prepare full financial statements for the Secure Silicon IP and Protocols business, given that the Secure Silicon IP and Protocols business had not been managed as a stand-alone business and thus stand-alone financial statements were not readily available. Additionally, the revenue recognized from the Northwest Logic and Secure Silicon IP and Protocols business acquisitions is not material to the Company’s consolidated financial statements during the year ended December 31, 2019, either individually or in the aggregate. Furthermore, the Company does not track operating results from these businesses separately.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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