Rambus Inc.
Jul 18, 2016

Rambus Reports Second Quarter Financial Results

Business and Financial Highlights:

SUNNYVALE, Calif.--(BUSINESS WIRE)-- Rambus Inc. (NASDAQ:RMBS) today reported financial results for the second quarter ended June 30, 2016.

GAAP Financial Results:

Revenue for the second quarter of 2016 was $76.5 million, which was up 5% from the first quarter of 2016 primarily due to higher revenue from security technology development projects, including revenue from the acquisition of SCS. As compared to the second quarter of 2015, revenue was up 5% primarily due to higher revenue from security technology development projects, including revenue from the acquisition of SCS, offset by lower royalty revenue from various customers.

Revenue for the six months ended June 30, 2016 was $149.2 million, which was up 2% over the prior year period, primarily due to higher revenue from security technology development projects, offset by lower royalty revenue from various customers.

Total operating costs and expenses for the second quarter of 2016 were $64.5 million, 2% higher than the previous quarter and 13% higher than the second quarter of 2015. Second quarter operating costs and expenses of $64.5 million included $5.0 million of stock-based compensation expenses, $8.2 million of amortization expenses and $0.8 million of acquisition-related transaction costs. In comparison, total operating costs and expenses for the first quarter of 2016 of $63.4 million included $4.9 million of stock-based compensation expenses, $7.7 million of amortization expenses and $1.8 million of acquisition-related transaction costs. Total operating costs and expenses for the second quarter of 2015 were $57.3 million which included $4.4 million of stock-based compensation expenses and $6.3 million of amortization expenses. The change in total operating costs and expenses in the second quarter of 2016 as compared to the first quarter of 2016 was primarily due to higher consulting costs, higher prototyping costs, higher headcount related costs, higher amortization expense due to the SCS acquisition in the first quarter of 2016 and lower gain from settlement, partially offset by lower bonus accrual expense and lower acquisition-related transaction costs. The change in total operating costs and expenses in the second quarter of 2016 as compared to the second quarter of 2015 was primarily due to higher headcount related costs, higher amortization expense, higher acquisition-related transaction costs and lower gain from sale of intellectual property, partially offset by lower prototyping costs.

Total operating costs and expenses for the six months ended June 30, 2016 were $127.9 million, 14% higher than the six months ended June 30, 2015. The six months operating costs and expenses of $127.9 million included $9.9 million of stock-based compensation expenses, $15.9 million of amortization expenses and $2.6 million of acquisition-related transaction costs. This is compared to total operating costs and expenses for the six months ended June 30, 2015 of $112.3 million, which included $8.2 million of stock-based compensation expenses and $12.6 million of amortization expenses. The change in total operating costs and expenses was primarily attributable to higher headcount related costs, higher amortization expense, higher acquisition-related transaction costs, lower gain from sale of intellectual property, higher stock-based compensation expense and higher expenses related to software design tools offset by lower prototyping costs.

Net income for the second quarter of 2016 was $3.9 million as compared to net income of $1.9 million in the first quarter of 2016 and net income of $6.9 million in the second quarter of 2015. Diluted net income per share for the second quarter of 2016 was $0.03 as compared to diluted net income per share of $0.02 in the first quarter of 2016 and diluted net income per share of $0.06 in the second quarter of 2015, respectively.

Net income for the six months ended June 30, 2016 was $5.8 million as compared to a net income of $16.4 million for the same period of 2015. Diluted net income per share for the six months ended June 30, 2016 was $0.05 as compared to a diluted net income per share of $0.14 for the same period of 2015.

Non-GAAP Financial Results (1):

Total non-GAAP operating costs and expenses in the second quarter of 2016 were $50.5 million, which was 3% higher than the previous quarter, and 9% higher than the second quarter of 2015.

Total non-GAAP operating costs and expenses for the six months ended June 30, 2016 were $99.5 million as compared to $91.5 million in the same period of 2015 due primarily to higher headcount related costs, lower gain from sale of intellectual property and higher expenses related to software design tools offset by lower prototyping costs.

Non-GAAP net income in the second quarter of 2016 was $16.7 million, 14% higher than the prior quarter and 4% higher than the second quarter of 2015. Non-GAAP diluted net income per share was $0.15 in the second quarter of 2016 as compared to $0.13 in the prior quarter and $0.13 in the second quarter of 2015.

Non-GAAP net income for the six months ended June 30, 2016 was $31.3 million as compared to $33.0 million in the same period of 2015. Non-GAAP diluted net income per share was $0.28 for the six months ended June 30, 2016 as compared to non-GAAP diluted net income per share of $0.28 in the same period of 2015.

Other Financial Highlights:

Cash, cash equivalents, and marketable securities as of June 30, 2016 were $259.3 million, an increase of $33.8 million from March 31, 2016. The increase in cash was primarily due to cash generated from operating activities.

During the second quarter of 2016, the Company recorded an income tax provision of approximately $6.1 million.

Third Quarter 2016 Outlook:

For the third quarter of 2016, the Company expects revenue to be between $75 million and $80 million. Achieving revenue in this range will require that the Company sign new customer agreements for mobile payments software and solutions licensing among other matters.

Conference Call:

The Company will host a conference call at 2:00 p.m. PT today to discuss its financial results. The call, audio and slides will be available online at investor.rambus.com. A replay will be available following the call as a webcast on the Rambus Investor Relations website and for one week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID# 46588543.

(1) Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating income (loss) and net income (loss). In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company's performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company's non-GAAP financial measures reflect adjustments based on the following items:

Stock-based compensation expense. These expenses primarily relate to employee stock options, employee stock purchase plans, and employee non-vested equity stock and non-vested stock units. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Additionally, given the fact that other companies may grant different amounts and types of equity awards and may use different option valuation assumptions, excluding stock-based compensation expense permits more accurate comparisons of the Company's results with peer companies.

Acquisition-related transaction costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current periods' portion of any retention bonus expense associated with the acquisitions. The Company excludes these expenses in order to provide better comparability between periods.

Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company's prior acquisitions and have no direct correlation to the operation of the Company's core business.

Non-cash interest expense on convertible notes. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company's results with other peer companies and to more accurately reflect the Company's ongoing operations.

Income tax adjustments. For purposes of internal forecasting, planning and analyzing future periods that assume net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 35 percent for periods in 2016 and 36 percent for periods in 2015, which consists of estimated U.S. federal and state tax rates, and excludes tax rates associated with certain items such as withholding tax, tax credits, deferred tax asset valuation allowance and the release of any deferred tax asset valuation allowance. Accordingly, the Company has applied these tax rates to its non-GAAP financial results for all periods in the relevant years to assist the Company's planning for future periods. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

On occasion in the future, there may be other items, such as impairments and significant gains or losses from contingencies that the Company may exclude in deriving its non-GAAP financial measures if it believes that doing so is consistent with the goal of providing useful information to investors and management.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus' expectations regarding revenue for the third quarter of 2016, and estimated, fixed, long-term projected tax rates. Such forward-looking statements are based on current expectations, estimates and projections, management's beliefs and certain assumptions made by Rambus' management. Actual results may differ materially. Rambus' business generally is subject to a number of risks which are described more fully in Rambus' periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

About Rambus Inc.

Rambus creates cutting-edge semiconductor and IP products, spanning memory and interfaces to security, smart sensors and lighting. Our chips, customizable IP cores, architecture licenses, tools, services, training and innovations improve the competitive advantage of our customers. We collaborate with the industry, partnering with leading ASIC and SoC designers, foundries, IP developers, EDA companies and validation labs. For more information, visit www.rambus.com.

RMBSFN

 

Rambus Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

   

 

June 30, 2016 December 31, 2015
ASSETS
 
Current assets:
Cash and cash equivalents $ 188,011 $ 143,764
Marketable securities 71,320 143,942
Accounts receivable 11,326 16,408
Prepaids and other current assets 12,993   11,476
Total current assets 283,650 315,590
Intangible assets, net 100,900 64,266
Goodwill 162,715 116,899
Property, plant and equipment, net 55,056 56,616
Deferred taxes 159,097 162,485
Other assets 4,365   2,165
Total assets $ 765,783   $ 718,021
 
LIABILITIES & STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $ 6,269 $ 4,096
Accrued salaries and benefits 10,040 12,278
Deferred revenue 10,347 5,780
Other current liabilities 17,326   6,212
Total current liabilities 43,982 28,366
Long-term liabilities:
Convertible notes, long-term 122,744 119,418
Long-term imputed financing obligation 38,355 38,625
Other long-term liabilities 18,340   5,079
Total long-term liabilities 179,439   163,122
Total stockholders' equity 542,362   526,533
Total liabilities and stockholders' equity $ 765,783   $ 718,021
 

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

   

 

Three Months Ended

June 30,

Six Months Ended

June 30,

2016   2015 2016   2015
 
Revenue:
Royalties $ 62,835 $ 62,387 $ 125,712 $ 129,350
Contract and other revenue 13,666   10,425   23,471   16,376  
Total revenue 76,501   72,812   149,183   145,726  
Operating costs and expenses:
Cost of revenue (1) 14,089 12,137 26,296 22,893
Research and development (1) 28,753 29,188 57,280 57,722
Sales, general and administrative (1) 21,789 17,339 44,884 35,841
Gain from sale of intellectual property (896 ) (3,156 )
Gain from settlement (138 ) (510 ) (579 ) (1,020 )
Total operating costs and expenses 64,493   57,258   127,881   112,280  
Operating income 12,008 15,554 21,302 33,446
Interest income and other income (expense), net 1,138 203 1,380 335
Interest expense (3,163 ) (3,091 ) (6,304 ) (6,174 )
Interest and other income (expense), net (2,025 ) (2,888 ) (4,924 ) (5,839 )
Income before income taxes 9,983 12,666 16,378 27,607
Provision for income taxes 6,107   5,805   10,624   11,244  
Net income $ 3,876   $ 6,861   $ 5,754   $ 16,363  
Net income per share:
Basic $ 0.04   $ 0.06   $ 0.05   $ 0.14  
Diluted $ 0.03   $ 0.06   $ 0.05   $ 0.14  
Weighted average shares used in per share calculation
Basic 109,904   116,027   109,818   115,683  
Diluted 112,061   120,939   112,202   119,225  

_________

(1) Total stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 is presented as follows:

       

Three Months Ended
June 30,

Six Months Ended
June 30,

2016 2015 2016 2015
Cost of revenue $ 14 $ 27 $ 28 $ 39
Research and development $ 2,109 $ 1,988 $ 4,189 $ 3,755
Sales, general and administrative $ 2,926 $ 2,400 $ 5,696 $ 4,387
 

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(In thousands)

(Unaudited)

   
Three Months Ended Six Months Ended
June 30, 2016   March 31, 2016   June 30, 2015 June 30, 2016   June 30, 2015
 
Operating costs and expenses $ 64,493 $ 63,388 $ 57,258 $ 127,881 $ 112,280
Adjustments:
Stock-based compensation expense (5,049 ) (4,864 ) (4,415 ) (9,913 ) (8,181 )
Acquisition-related transaction costs and retention bonus expense (789 ) (1,808 ) (2,597 ) (2 )
Amortization expense (8,152 ) (7,719 ) (6,323 ) (15,871 ) (12,646 )
Non-GAAP operating costs and expenses $ 50,503   $ 48,997   $ 46,520   $ 99,500   $ 91,451  
 
Operating income $ 12,008 $ 9,294 $ 15,554 $ 21,302 $ 33,446
Adjustments:
Stock-based compensation expense 5,049 4,864 4,415 9,913 8,181
Acquisition-related transaction costs and retention bonus expense 789 1,808 2,597 2
Amortization expense 8,152   7,719   6,323   15,871   12,646  
Non-GAAP operating income $ 25,998   $ 23,685   $ 26,292   $ 49,683   $ 54,275  
 
Income before income taxes $ 9,983 $ 6,395 $ 12,666 $ 16,378 $ 27,607
Adjustments:
Stock-based compensation expense 5,049 4,864 4,415 9,913 8,181
Acquisition-related transaction costs and retention bonus expense 789 1,808 2,597 2
Amortization expense 8,152 7,719 6,323 15,871 12,646
Non-cash interest expense on convertible notes 1,675   1,651   1,581   3,326   3,140  
Non-GAAP income before income taxes $ 25,648 $ 22,437 $ 24,985 $ 48,085 $ 51,576
GAAP provision for income taxes 6,107 4,517 5,805 10,624 11,244
Adjustment to GAAP provision for income taxes 2,870   3,336   3,190   6,206   7,324  
Non-GAAP provision for income taxes 8,977   7,853   8,995   16,830   18,568  
Non-GAAP net income $ 16,671   $ 14,584   $ 15,990   $ 31,255   $ 33,008  
 
Non-GAAP basic net income per share $ 0.15 $ 0.13 $ 0.14 $ 0.28 $ 0.29
Non-GAAP diluted net income per share $ 0.15 $ 0.13 $ 0.13 $ 0.28 $ 0.28
Weighted average shares used in non-GAAP per share calculation:
Basic 109,904 109,733 116,027 109,818 115,683
Diluted 112,061 112,252 120,939 112,202 119,225
 

Supplemental Reconciliation of GAAP to Non-GAAP Effective Tax Rate (1)

   
Three Months Ended Six Months Ended
June 30, 2016   March 31, 2016   June 30, 2015 June 30, 2016   June 30, 2015
 
GAAP effective tax rate 61

 %

71

 %

46

 %

65

 %

41

 %

Adjustment to GAAP effective tax rate (26 )% (36 )% (10 )% (30 )% (5 )%
Non-GAAP effective tax rate 35

 %

35

 %

36

 %

35

 %

36

 %

 
(1)   For purposes of internal forecasting, planning and analyzing future periods that assume net income from operations, the Company estimates a fixed, long-term projected tax rate of approximately 35 percent for periods in 2016 and 36 percent for periods in 2015, which consists of estimated U.S. federal and state tax rates, and excludes tax rates associated with certain items such as withholding tax, tax credits, deferred tax asset valuation allowance and the release of any deferred tax asset valuation allowance. Accordingly, the Company has applied these tax rates to its non-GAAP financial results for all periods in the relevant year to assist the Company's planning for future periods.
 

Rambus Inc.
Linda Ashmore, 408-462-8411
Corporate Communications
lashmore@rambus.com
or
Rambus Inc.
Nicole Noutsios, 408-462-8050
Investor Relations
nnoutsios@rambus.com

Source: Rambus Inc.

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