Restatement of Consolidated Financial Statements

6 Months Ended

Jun. 30, 2021

Accounting Changes and Error Corrections [Abstract]

Restatement of Consolidated Financial Statements

Restatement of Condensed Consolidated Financial Statements and Immaterial Correction of Prior-Period Error

Rambus Inc. (the “Company” or “Rambus”) restated its previously issued consolidated financial statements and related disclosures as of and for the fiscal years ended December 31, 2020 and 2019 and presented the impact of the restatement on the relevant unaudited interim financial information for each of the quarterly periods during the years ended December 31, 2020 and 2019 on Form 10-K/A filed on March 29, 2021, in order to correct errors resulting from the incorrect application of generally accepted accounting principles relating to revenue recognition as it pertains to a single customer agreement (the “Impacted Agreement”). Additionally, to correct errors that the Company has determined to be immaterial, both individually and in aggregate, the Company also restated the consolidated financial statements for the fiscal years ended December 31, 2020 and 2019.

Impact of Restatement

The following errors in the Company’s consolidated financial statements were identified and corrected:

a) Correction of revenue related to the Impacted Agreement: During the quarter ended March 31, 2021, the Company determined that a portion of revenue under a single customer agreement that had not yet been recognized, should have been recognized during the quarters ended September 30, 2019, December 31, 2019, March 31, 2020, and June 30, 2020. The Impacted Agreement contained a single performance obligation for a license to the Company’s patents and technology in exchange for consideration, a portion of which was fixed at the inception of the contract and a portion that was dependent on the customer’s applicable sales (as stipulated in the agreement) for the four consecutive quarters commencing on July 1, 2019 and ending on June 30, 2020. The Company accounted for the agreement as a right-to-use IP license agreement with the fixed portion of the consideration appropriately recognized at the inception of the agreement when control of the license was transferred to the customer. However, the Company did not recognize as revenue the portion of the consideration that depended on the customer’s sales beginning in the quarter ended September 30, 2019. During the quarter ended March 31, 2021, the Company reassessed its accounting for this uncertain portion of the consideration and determined that revenue associated with that uncertain portion of the consideration should have been recognized over the four quarters commencing on July 1, 2019 and ending June 30, 2020, which are the periods when the uncertainty surrounding the amount of the contingent consideration was resolved (that is when the customer’s sales occurred for which the contingent payments were based). This error resulted in royalty revenue being corrected by approximately $3.6 million in each of the years ended December 31, 2020 and 2019, resulting in an increase in royalty revenue for each of the respective periods. Unbilled receivables (both current and non-current, as applicable) on the consolidated balance sheets were also increased by the correction, given this additional revenue recognized is payable by the customer in ten equal quarterly installments with the first installment payable in the quarter ended March 31, 2021. Additionally, due to the significant financing component of the Impacted Agreement, immaterial amounts were corrected to increase interest and other income (expense), net, on the consolidated statements of operations.

b) Correction of immaterial asset retirement obligation (“ARO”) related to the Company’s previous Sunnyvale, California headquarters of approximately $1.0 million in fiscal year 2019 related to facility restoration costs. The Company originally recorded a liability for the ARO but expensed (included in sales, general and administrative expenses on the consolidated statements of operations) the entire amount in the year ended December 31, 2019. The Company corrected the consolidated financial statements to record the ARO asset within property, plant and equipment, net, within the consolidated balance sheets and reflect the amortization of the ARO asset over the remaining life of the lease of seven months beginning in December of 2019 through June 2020.

c) Recording of provision for income taxes impacts due to adjustments a) and b) above.

The restatement tables below present a reconciliation from the previously reported amounts to the restated amounts (in thousands, except shares and per share amounts). The amounts originally reported were derived from the Company’s Quarterly Report on Form 10-Q for the interim period ended June 30, 2020. Certain line items in the quarterly financial data below were excluded because they were not impacted by the restatement.


	For the Three Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Operations
Revenue:
Royalties	$	16,957	$	1,787	$	18,744


Total revenue	59,930		1,787		61,717





Gross profit	43,782		1,787		45,569
Operating expenses:

Sales, general and administrative	21,310		411		21,721





Total operating expenses	56,246		411		56,657
Operating income (loss)	(12,464)		1,376		(11,088)
Interest income and other income (expense), net	4,597		91		4,688

Interest and other income (expense), net	2,017		91		2,108
Income (loss) before income taxes	(10,447)		1,467		(8,980)
Provision for (benefit from) income taxes	334		(174)		160
Net income (loss)	(10,781)		1,641		(9,140)
Net income (loss) per share:
Basic	$	(0.09)	$	0.01	$	(0.08)
Diluted	$	(0.09)	$	0.01	$	(0.08)


	For the Six Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Operations
Revenue:
Royalties	$	36,651	$	3,575	$	40,226


Total revenue	123,919		3,575		127,494





Gross profit	91,886		3,575		95,461
Operating expenses:

Sales, general and administrative	44,205		822		45,027





Total operating expenses	115,189		822		116,011
Operating income (loss)	(23,303)		2,753		(20,550)
Interest income and other income (expense), net	10,971		160		11,131

Interest and other income (expense), net	5,836		160		5,996
Income (loss) before income taxes	(17,467)		2,913		(14,554)
Provision for (benefit from) income taxes	1,297		(172)		1,125
Net income (loss)	(18,764)		3,085		(15,679)
Net income (loss) per share:
Basic	$	(0.17)	$	0.03	$	(0.14)
Diluted	$	(0.17)	$	0.03	$	(0.14)


	For the Three Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Comprehensive Loss
Net income (loss)	$	(10,781)	$	1,641	$	(9,140)



Total comprehensive income (loss)	(10,645)		1,641		(9,004)


	For the Six Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Comprehensive Loss
Net income (loss)	$	(18,764)	$	3,085	$	(15,679)



Total comprehensive income (loss)	(18,724)		3,085		(15,639)


	For the Three and Six Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Stockholders’ Equity
Net loss attributable to:
Accumulated deficit	$	(309,008)	$	7,540	$	(301,468)
Total stockholders’ equity	965,190		7,540		972,730


	For the Six Months Ended June 30, 2020
	As Originally Reported		Adjustments		As Restated
Condensed Consolidated Statement of Cash Flows
Cash flows from operating activities:
Net income (loss)	$	(18,764)	$	3,085	$	(15,679)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation	14,625		822		15,447


Deferred income taxes	102		(49)		53








Change in operating assets and liabilities, net of effects of acquisitions:

Unbilled receivables	83,577		(3,735)		79,842
Prepaid expenses and other assets	1,849		(123)		1,726






Net cash provided by operating activities	99,273		—		99,273

Immaterial Correction of Prior-Period Error

Subsequent to the reissuance of the consolidated financial statements as of and for the year ended December 31, 2020, the Company determined that $7.2 million in corporate investments originally classified as cash equivalents should have been classified as marketable securities in the consolidated balance sheet as of December 31, 2020. The Company assessed the effect of this correction based on an analysis of both quantitative and qualitative factors and determined that the correction was not material. Accordingly, the Company corrected the error as of December 31, 2020 in the accompanying condensed consolidated balance sheet and related footnotes. The following adjustments were made:

•Cash and cash equivalents as of December 31, 2020 originally reported as $136.1 million was corrected to $129.0 million.

•Marketable securities as of December 31, 2020 originally reported as $366.5 million was corrected to $373.6 million.

•Correction of Note 7, “Marketable Securities” and Note 8, “Fair Value of Financial Instruments”, to reflect the above adjustments.

Additionally, in the 10-K for the period ending December 31, 2021, the Company will correct its presentation of net cash used in investing activities for the year ended December 31, 2020, which was originally reported as $90.4 million, to reflect cash used in investing activities of $97.6 million. The corrections did not affect the net cash provided by operating activities nor net cash used in financing activities.