RAMBUS INC. 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 theSecurities and Exchange Commission . The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that are included elsewhere in this report.
Rambus is a trademark of
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 artificial
intelligence ("AI") across the data center, edge and Internet of Things ("IoT")
end points, 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 design
experience, 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.
Rambus benefits from a balanced and diverse portfolio of offerings across chips,
silicon IP and patent licensing with each of them contributing at scale. From
2018 to 2021, product revenue sustained a 55% compound annual growth rate,
making products the leading revenue source for the Company. Driven by the
continued market momentum of our memory interface chips, we recognized record
product revenue of $143.9 million in 2021. The Company achieved silicon IP
growth through increasing design wins at leading system on chip ("SoC")
customers with contributions from the businesses acquired in 2021. In addition,
Rambus successfully closed key patent licensing agreements, solidifying our
foundation of sustained cash generation and fueling investment in our product
and technology roadmaps. Rambus continued its technology leadership with the
launch of the CXL Memory Interconnect Initiative and development of solutions
for next-generation data centers.
Executive Summary
The Company's continued execution delivered strong results during the first quarter, driven by continued demand in our memory interface chips, continued design wins in Silicon IP and continued stability from our royalties revenue.
Key 2022 first quarter financial results included:
•Revenue of
•Operating expenses of
•Net cash provided by operating activities of
We had record quarterly product revenue of
24
--------------------------------------------------------------------------------Table of Contents Operational Highlights Revenue Sources
The Company's consolidated revenue is comprised of product revenue, royalty revenue and contract and other revenue.
Product revenue consists primarily of memory interface chips and is an increasingly growing part of our business. Our memory interface chips are sold to major DRAM manufacturers, Micron, Samsung and SK hynix, as well as directly to system manufacturers and cloud providers, for integration into server memory modules. Product revenue accounted for 48% of our consolidated revenue for the three months endedMarch 31, 2022 , as compared to 44% for the three months endedMarch 31, 2021 . 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 asAMD , 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 31% of our consolidated revenue for the three months endedMarch 31, 2022 , as compared to 41% for the three months endedMarch 31, 2021 . 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 21% of our consolidated revenue for the three months endedMarch 31, 2022 , as compared to 15% for the three months endedMarch 31, 2021 .
Costs and Expenses
Cost of product revenue for the three months ended
Cost of contract and other revenue for the three months endedMarch 31, 2022 decreased by approximately$1.0 million as compared to the same period in 2021. The decrease was due to lower engineering services associated with the contracts. 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 endedMarch 31, 2022 increased$7.4 million as compared to the same period in 2021, primarily due to headcount-related expenses of$2.6 million , consulting costs of$1.1 million , stock-based compensation expense of$0.6 million , engineering development tool costs of$0.6 million and prototyping costs of$0.4 million . Sales, general and administrative expenses for the three months endedMarch 31, 2022 increased$3.3 million as compared to the same period in 2021, primarily due to increased headcount-related expenses of$1.4 million , acquisition-related costs (including retention bonus expense) of$1.2 million , stock-based compensation expense of$0.7 million , bonus accrual expense of$0.6 million , depreciation costs of$0.5 million , facilities costs of$0.4 million , consulting costs of$0.3 million , accounting and audit fees of$0.3 million and legal fees of$0.3 million , offset by decreased consulting, legal and accounting costs of$3.0 million related to the shareholder activism activity and restatement matters in 2021.
Intellectual Property
As ofMarch 31, 2022 , our semiconductor, security and other technologies are covered by 2,404U.S. and foreign patents. Additionally, we have 599 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 inthe 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 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. 25 -------------------------------------------------------------------------------- Table of Contents Impact of the COVID-19 Pandemic InDecember 2019 , the COVID-19 virus was reported inChina , inJanuary 2020 theWorld Health Organization ("WHO") declared it a Public Health Emergency of International Concern, and inMarch 2020 theWHO declared it a pandemic. The COVID-19 pandemic and new variants have created significant global economic uncertainty and may adversely impact the business of our customers, partners and vendors. The extent of the impact of the ongoing COVID-19 pandemic and subsequent variants 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 ongoing COVID-19 pandemic and subsequent variants 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 COVID-19 and the new variants may not be fully reflected in our results of operations until future periods, if at all. Trends
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% of our revenue for both the three months endedMarch 31, 2022 and 2021, respectively. 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 ofthe United States accounted for approximately 44% of our total revenue for the three months endedMarch 31, 2022 as compared to 34% for the three months endedMarch 31, 2021 . 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 inU.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. 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 toVisa 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. 26 -------------------------------------------------------------------------------- Table of Contents 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 March 31, 2022 2021 Revenue: Product revenue 48.4 % 43.7 % Royalties 30.8 % 41.0 % Contract and other revenue 20.8 % 15.3 % Total revenue 100.0 % 100.0 % Cost of revenue: Cost of product revenue 18.6 % 16.2 % Cost of contract and other revenue 0.6 % 2.2 % Amortization of acquired intangible assets 3.4 % 6.2 % Total cost of revenue 22.6 % 24.6 % Gross profit 77.4 % 75.4 % Operating expenses: Research and development 40.2 % 46.0 % Sales, general and administrative 27.2 % 33.5 % Amortization of acquired intangible assets 0.4 %
0.3 %
Restructuring charges - % 0.5 %
Change in fair value of earn-out liability 1.2 % - %
Total operating expenses 69.0 % 80.3 %
Operating income (loss) 8.4 % (4.9) %
Interest income and other income (expense), net 1.4 % 4.2 %
Loss on extinguishment of debt (67.1) % - %
Loss on fair value adjustment of derivatives, net (8.4) % - %
Interest expense (0.6) % (3.7) %
Interest and other income (expense), net (74.7) % 0.5 %
Loss before income taxes (66.3) % (4.4) %
Provision for (benefit from) income taxes 0.5 % (0.7) %
Net loss (66.8) % (3.7) %
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Total revenue:
Product revenue $ 48.0 $ 30.8 55.8 %
Royalties 30.4 28.9 5.6 %
Contract and other revenue 20.6 10.7 91.9 %
Total revenue $ 99.0 $ 70.4 40.7 %
Product Revenue
Product revenue consists of revenue from the sale of memory and security
products. Product revenue increased approximately $17.2 million to $48.0 million
for the three months ended March 31, 2022 from $30.8 million for the same period
in 2021. The increase was due to continued market share gains of our memory
interface chips.
We believe that product revenue will continue to increase in 2022 as compared to
2021, 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, our ability to meet our
customers' demands and our ability to mitigate any supply chain risk due to the
ongoing COVID-19 pandemic and subsequent variants.
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Royalties
Royalty revenue, which includes patent and technology license royalties,
increased approximately $1.5 million to $30.4 million for the three months ended
March 31, 2022 from $28.9 million for the same period in 2021. The increase was
primarily due to the timing and structure of license 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 $9.9 million to
$20.6 million for the three months ended March 31, 2022 from $10.7 million for
the same period in 2021. The increase was primarily due to higher 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
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Cost of product revenue $ 18.4 $ 11.4 61.2 %
Cost of product revenue are costs attributable to the sale of memory and
security products. Cost of product revenue increased approximately $7.0 million
to $18.4 million for the three months ended March 31, 2022 from $11.4 million
for the same period in 2021. The increase was primarily due to increases in
sales volumes of our memory interface chips during the period.
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 2022 as compared to 2021.
Cost of Contract and Other Revenue
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Cost of contract and other revenue $ 0.6 $ 1.6 (59.9) %
Cost of contract and other revenue reflects the portion of the total engineering costs which are specifically devoted to individual customer development and support services. Cost of contract and other revenue for the three months endedMarch 31, 2022 decreased by approximately$1.0 million as compared to the same period in 2021 due to lower engineering services associated with the contracts. In the near term, we expect costs of contract and other revenue to vary from period to period based on varying revenue recognized from contract and other revenue.
Research and Development Expenses
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 PercentageResearch and development expenses:
Research and development expenses$ 36.6 $ 29.8 23.1 % Stock-based compensation 3.2 2.6 22.5 % Total research and development expenses$ 39.8 $ 32.4
23.1 %
Research and development expenses are those expenses incurred for the development of applicable technologies. Total
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research and development expenses increased $7.4 million for the three months
ended March 31, 2022 as compared to the same period in 2021, primarily due to
headcount-related expenses of $2.6 million , consulting costs of $1.1 million ,
stock-based compensation expense of $0.6 million , engineering development tool
costs of $0.6 million and prototyping costs of $0.4 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
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Sales, general and administrative expenses:
Sales, general and administrative expenses $ 22.4 $ 19.8 13.6 %
Stock-based compensation 4.5 3.8 17.2 %
Total sales, general and administrative expenses $ 26.9 $ 23.6 14.2 %
Sales, general and administrative expenses include expenses and costs associated
with trade shows, public relations, advertising, litigation, general legal,
insurance and other sales, marketing and administrative efforts. Consistent with
our business model, our licensing, sales and marketing activities aim to develop
or strengthen relationships with potential new and current customers. In
addition, we work with current customers through marketing, sales and technical
efforts to drive adoption of their products that use our innovations and
solutions, by system companies. Due to the long business development cycles we
face and the semi-fixed nature of sales, general and administrative expenses in
a given period, these expenses generally do not correlate to the level of
revenue in that period or in recent or future periods.
Total sales, general and administrative expenses increased $3.3 million for the
three months ended March 31, 2022 as compared to the same period in 2021,
primarily due to increased headcount-related expenses of $1.4 million ,
acquisition-related costs (including retention bonus expense) of $1.2 million ,
stock-based compensation expense of $0.7 million , bonus accrual expense of
$0.6 million , depreciation costs of $0.5 million , facilities costs of
$0.4 million , consulting costs of $0.3 million , accounting and audit fees of
$0.3 million and legal fees of $0.3 million , offset by decreased consulting,
legal and accounting costs of $3.0 million related to the shareholder activism
activity and restatement matters in 2021.
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.
Amortization of Acquired Intangible Assets
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 PercentageAmortization of acquired intangible assets: Amortization of acquired intangible assets included in total cost of revenue
$ 3.4 $ 4.4 (23.0) %
Amortization of acquired intangible assets included in total operating expenses
0.4 0.2 78.6 %
Total amortization of acquired intangible assets $ 3.8 $ 4.6 (17.9) %
Amortization expense is related to various acquired IP. Amortization of acquired
intangible assets recognized in cost of revenue and operating expenses for the
three months ended March 31, 2022 decreased as compared to the same periods in
2021 primarily due to certain intangible assets being fully amortized, offset by
additional amortization from intangible assets acquired as part of the
acquisitions of AnalogX and PLDA in the third quarter of 2021.
Change in Fair Value of Earn-Out Liability
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Change in fair value of earn-out liability $ 1.2 $ - 100.0 %
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During the first quarter of 2022, we remeasured the fair value of the earn-out
liability related to the acquisition of PLDA in the third quarter of 2021, which
is subject to certain revenue targets of the acquired business for a period of
three years from the date of acquisition, and which is to be paid in shares of
our common stock. The remeasurement of the earn-out liability resulted in
additional expense of $1.2 million on our unaudited condensed consolidated
statements of operations during the three months ended March 31, 2022 .
Interest and Other Income (Expense), Net
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Interest income and other income (expense), net $ 1.4 $ 3.0 (54.4) %
Loss on extinguishment of debt (66.5) - 100.0 %
Loss on fair value adjustment of derivatives, net (8.3) - 100.0 %
Interest expense (0.6) (2.6) (76.9) %
Interest and other income (expense), net $ (74.0) $ 0.4 NM*
_________________________________________
* NM - percentage is not meaningful
Interest income and other income (expense), net, consists primarily of the loss on extinguishment of debt of$66.5 million and$8.3 million loss on fair value adjustment of derivatives, net, for the three months endedMarch 31, 2022 , due to the repurchase of$123.1 million aggregate principal amount of our 2023 Notes during the period and the settlement of the related convertible senior note hedges and warrants. Interest income and other income (expense), net, also includes interest income due to the significant financing component of licensing agreements, 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 issuance costs on the 1.375% convertible senior notes due 2023 (the "2023 Notes"), as well as the coupon interest related to these notes. Prior to the adoption of ASU No. 2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) onJanuary 1, 2022 , interest expense also included the non-cash interest expense related to the amortization of the debt discount. Refer to Note 2. "Recent Accounting Pronouncements," of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for additional information on the adoption of ASU No. 2020-06. We expect our non-cash interest expense to decrease steadily as there will be no additional non-cash interest related to the debt discount after the adoption of ASU No. 2020-06 and as the non-cash interest expense related to the debt issuance costs was reduced due to the repurchase of our 2023 notes. Refer to Note 10. "Convertible Notes," of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for additional information.
Provision for (Benefit From) Income Taxes
Three Months Ended
March 31, Change in
(Dollars in millions) 2022 2021 Percentage
Provision for (benefit from) income taxes $ 0.5 $ (0.5) NM*
Effective tax rate (0.8) % 16.1 %
_________________________________________
* NM - percentage is not meaningful
The provision for income taxes reported for the three months endedMarch 31, 2022 was driven by a combination of the valuation allowance recorded onU.S. deferred tax assets, foreign withholding taxes, the statutory tax expense for the foreign jurisdictions for 2022 and indefinite-lived intangible tax amortization expense. Our income tax provision for (benefit from) the three months endedMarch 31, 2022 and 2021 reflected an effective tax rate of (0.8)% and 16.1%, respectively. Our effective tax rate for the three months endedMarch 31, 2022 differed from theU.S. statutory rate primarily due to foreign tax credits and the full valuation allowance againstU.S. deferred tax assets. Our effective tax rate for the three months endedMarch 31, 2021 differed from the statutory rate primarily due to foreign tax credits and the full valuation allowances againstU.S. deferred tax assets. 30 -------------------------------------------------------------------------------- Table of Contents During the three months endedMarch 31, 2022 and 2021, we paid withholding taxes of$5.0 million and$5.4 million , respectively. We periodically evaluate the realizability of our net deferred tax assets based on all available evidence, both positive and negative. We continue to maintain a full valuation allowance on ourU.S. federal andCalifornia deferred tax assets as we do not expect to be able to fully utilize them. We haveU.S. federal deferred tax assets related to research and development credits, foreign tax credits and other tax attributes that can be used to offsetU.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
March 31, December 31,
(In millions) 2022 2021
Cash and cash equivalents $ 179.1 $ 107.9
Marketable securities 164.6 377.7
Total cash, cash equivalents and marketable securities $ 343.7 $ 485.6
Three Months Ended
March 31,
(In millions) 2022 2021
Net cash provided by operating activities $ 42.6 $ 39.5
Net cash provided by (used) in investing activities
$ (175.9) $ (10.3) 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 inthe United States . Our cash needs for the three months endedMarch 31, 2022 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 or the repayment of the remaining 2023 Notes inFebruary 2023 . 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, onOctober 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. OnNovember 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, which were retired, as the final settlement of the accelerated share repurchase program. 31 -------------------------------------------------------------------------------- Table of Contents OnJune 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. During the fourth quarter of 2021, the accelerated share repurchase program was completed and we received an additional 0.4 million shares of our common stock, which were retired, as the final settlement of the accelerated share repurchase program. As ofMarch 31, 2022 , there remained an outstanding authorization to repurchase approximately 12.9 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$42.6 million for the three months endedMarch 31, 2022 was primarily attributable to the cash generated from customer licensing, product sales and engineering services fees. Changes in operating assets and liabilities for the three months endedMarch 31, 2022 primarily included decreases in unbilled receivables, inventories and increases in accounts payable, offset by increases in accounts receivable, and decreases in accrued salaries and benefits and deferred revenue. Cash provided by operating activities of$39.5 million for the three months endedMarch 31, 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 three months endedMarch 31, 2021 primarily included decreases in unbilled receivables, inventories, prepaids and other current assets, and an increase in deferred revenue, offset by increases in accounts receivable as well as decreases in accrued salaries and benefits and income taxes payable. Investing Activities Cash provided by investing activities of$204.8 million for the three months endedMarch 31, 2022 consisted of proceeds from the sale and maturities of available-for-sale marketable securities of$204.1 million and$44.8 million , respectively, offset by purchases of available-for-sale marketable securities of$39.4 million , acquisition of intangible assets of$3.0 million and$1.7 million paid to acquire property, plant and equipment. Cash used in investing activities of$48.5 million for the three months endedMarch 31, 2021 consisted of purchases of available-for-sale marketable securities of$159.8 million and$3.5 million paid to acquire property, plant and equipment, offset by proceeds from the maturities and sale of available-for-sale marketable securities of$106.5 million and$8.3 million , respectively. Financing Activities Cash used in financing activities of$175.9 million for the three months endedMarch 31, 2022 was primarily due to$174.5 million paid in connection with the 2023 Notes Partial Repurchase,$55.1 million paid in connection with the settlement of warrants associated with the 2023 Notes Partial Repurchase,$15.8 million in payments of taxes on restricted stock units and$3.2 million paid under installment payment arrangements to acquire fixed assets, offset by proceeds of$72.4 million from the settlement of senior convertible note hedges associated with the 2023 Notes Partial Repurchase and$0.3 million in proceeds from the issuance of common stock under equity incentive plans. Cash used in financing activities of$10.3 million for the three months endedMarch 31, 2021 was primarily due to$8.1 million in payments of taxes on restricted stock units and$3.1 million in payments under installment payment arrangements to acquire fixed assets, offset by$0.9 million in proceeds from the issuance of common stock under equity incentive plans. 32 -------------------------------------------------------------------------------- Table of Contents Contractual Obligations
As of
Remainder of
(In thousands) Total 2022 2023 2024 2025 2026
Contractual obligations (1) (2) (3)
Software licenses (4)$ 12,428 $ 7,503
9,500 5,166 2,167 2,167 - -
Convertible notes (6) 74,011 24,657 49,354 - - -
Interest payments related to
convertible notes 567 509 58 - - -
Total $ 96,506 $ 37,835 $ 54,940 $ 3,731 $ - $ -
_________________________________________
(1) The above table does not reflect possible payments in connection with unrecognized tax benefits of approximately$20.9 million , including$19.1 million recorded as a reduction of long-term deferred tax assets and$1.8 million in long-term income taxes payable as ofMarch 31, 2022 . 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 ofMarch 31, 2022 , refer to Note 9, "Leases," of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q.
(3) Our other contractual obligations as of
(4) We have commitments with various software vendors for agreements generally having terms longer than one year.
(5) 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. (6) During the three months endedMarch 31, 2022 , we repurchased$107.9 million aggregate principal amount of our 2023 Notes, refer to Note 10, "Convertible Notes," of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q. Share Repurchase Program OnOctober 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 three months endedMarch 31, 2022 , we did not repurchase shares of our common stock under the 2020 Repurchase Program. OnNovember 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, which were retired, as the final settlement of the accelerated share repurchase program. OnJune 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 onOctober 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. During the fourth quarter of 2021, the accelerated share repurchase program was completed and we received an additional 0.4 million shares of our common stock, which were retired, as the final settlement of the accelerated share repurchase program. 33 -------------------------------------------------------------------------------- Table of Contents As ofMarch 31, 2022 , there remained an outstanding authorization to repurchase approximately 12.9 million shares of our outstanding common stock under the 2020 Repurchase Program. We record share 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.
Warrants
In connection with the 2023 Notes, we separately entered into privately negotiated warrant transactions, whereby we sold warrants (the "Warrants") to certain counterparties (the "Counterparties") to acquire, collectively, subject to anti-dilution adjustments, approximately 9.1 million shares of our common stock at an initial strike price of approximately$23.30 per share, which represents a premium of 60% over the last reported sale price of our common stock of$14.56 onNovember 14, 2017 . We received aggregate proceeds of approximately$23.2 million from the sale of the Warrants to the Counterparties. The Warrants are separate transactions and are not part of the 2023 Notes or Convertible Note Hedge Transactions. The holders of the 2023 Notes and Convertible Note Hedge Transactions will not have any rights with respect to the Warrants. During the first quarter of 2022 and in connection with the 2023 Notes Partial Repurchase, we entered into agreements with certain financial institutions to retire the corresponding portions of warrants we had previously entered into with the counterparties in connection with the issuance of the 2023 Notes. Upon settlement, we paid$55.1 million in cash for the retirement of the proportionate amount of warrants during the three months endedMarch 31, 2022 . Upon entering into the 2023 Notes Partial Repurchase agreements, the conversion feature related to the 2023 Notes repurchased, as well as the settlement of the warrants, were subject to derivative accounting.
Refer to Note 10, "Convertible Notes," of Notes to Unaudited Condensed Consolidated Financial Statements of this Form 10-Q for additional information.
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 inthe 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 for the year endedDecember 31, 2021 .
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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