- Great quarter, exceeding expectations; GAAP revenue of $57.4
million; licensing billings of $63.1 million, product revenue of
$21.4 million, and contract and other revenue of $16.6 million
- $25.6 million in cash provided by operating activities
- Refocused business on semiconductor with completed sale of
payments and ticketing business to Visa
- Expanded silicon IP offerings with acquisition of digital
controller IP provider, Northwest Logic, and agreement to acquire
silicon IP and secure protocols businesses from Verimatrix
- Second consecutive quarter of record revenue for memory
interface chip business
Rambus Inc. (NASDAQ:RMBS) today reported financial results for
the third quarter ended September 30, 2019. Total revenue for the
third quarter was above expectations at $57.4 million; licensing
billings were $63.1 million, product revenue was $21.4 million, and
contract and other revenue was $16.6 million. The Company also
generated $25.6 million in cash provided by operating activities in
the third quarter of 2019. The Company has generated $93.1 million
in cash provided by operating activities through the nine months
ended September 30, 2019, greater than what was generated during
the full fiscal year of 2018.
“Rambus delivered a great third quarter. We made tremendous
progress toward the strategic objectives critical to our future and
successfully realigned the Company around our core strengths in
semiconductor,” said Luc Seraphin, chief executive officer of
Rambus. “With record revenue from our memory interface chip
business and continued silicon IP design wins at tier-one SoC
customers, we exceeded our commitments to the market.”
Business Review
Consistent with the Company’s areas of focus and mission to
deliver data faster and safer, Rambus completed a number of
significant M&A activities over the course of the third
quarter. The Company closed the sale of its payments and ticketing
business to Visa, redefining its perimeter in the semiconductor
market. Rambus also announced two silicon IP acquisitions to
enhance its offerings and amplify its market position in interfaces
and security for data center, artificial intelligence (AI),
automotive and government. The first was the completed acquisition
of digital controller company, Northwest Logic, and the second was
an agreement to acquire the secure silicon IP and protocols
businesses of Verimatrix, formerly Inside Secure, which we expect
to close by the end of the year.
Rambus continued to drive sustained silicon IP revenue growth
with key design wins for both its interface and security IP
solutions. The Company closed four tier-1 SoC design wins across
the portfolio for data center, edge, IoT and government and
announced a combined interface and security IP win at SEAKR for
aerospace and satellite communications. The team expanded its
portfolio with leading-edge interface solutions for GDDR6, HBM2 and
112G to deliver the critical building blocks for AI, data center,
5G and automotive. And finally, Rambus announced the industry’s
fastest complete memory subsystem solution for GDDR6, including the
PHY and controller, capable of running at 18 Gbps to meet the
demands of performance-intensive applications.
Finally, the Company’s memory interface chip business achieved a
second consecutive quarter of record revenue and is on track to
almost double year over year. This is driven by increased OEM and
data center qualifications, leading to steady gains in DDR4 memory
interface chip market share. The Company also remains well
positioned as a first mover for the industry transition to
DDR5.
Quarterly Financial Review -
GAAP
Three Months Ended September
30,
(In millions, except for percentages and
per share amounts)
2019
2018
Revenue
Royalties
$
19.4
$
33.6
Product revenue
21.4
11.8
Contract and other revenue
16.6
14.4
Total revenue
$
57.4
$
59.8
Total operating costs and expenses
$
80.3
$
78.9
Operating loss
$
(22.9
)
$
(19.1
)
Operating margin
(40
)%
(32
)%
Net loss
$
(17.3
)
$
(104.9
)
Diluted net loss per share
$
(0.16
)
$
(0.97
)
Net cash provided by operating
activities
$
25.6
$
31.6
Quarterly Financial Review - Non-GAAP (including operational
metric) (1)
Three Months Ended September
30,
(In millions)
2019
2018
Licensing billings (2)
$
63.1
$
75.4
Product revenue
$
21.4
$
11.8
Contract and other revenue
$
16.6
$
14.4
Total operating costs and expenses
$
67.1
$
67.6
Interest and other income (expense),
net
$
6.0
$
6.2
Diluted share count
114
110
(1)
See “Supplemental Reconciliation of GAAP
to Non-GAAP Results” and “Reconciliation of Other GAAP to Non-GAAP
Items” tables included below. Note that the applicable non-GAAP
measures are presented and that revenue is solely presented on a
GAAP basis.
(2)
Licensing billings is an operational
metric that reflects amounts invoiced to our licensing customers
during the period, as adjusted for certain differences.
Revenue for the quarter was $57.4 million, with licensing
billings of $63.1 million, product revenue of $21.4 million, and
contract and other revenue of $16.6 million. We had GAAP total
operating costs and expenses of $80.3 million. We also had non-GAAP
total operating costs and expenses of $67.1 million, above the high
end of our guidance due to higher cost of product revenue related
to increased buffer chip sales. We also recorded $5.1 million in
revenue and $6.8 million in operating costs and expenses associated
with our payments and ticketing business in the third quarter. We
had GAAP diluted net loss per share of $0.16. Our basic share count
was 111 million shares and our diluted share count would have been
114 million shares.
Cash, cash equivalents, and marketable securities as of
September 30, 2019 were $338.0 million, which was flat as compared
to June 30, 2019, mainly due to $25.6 million in cash provided by
operating activities, offset by $21.9 million in cash paid for the
acquisition of Northwest Logic. Cash provided by operating
activities for the nine months ended September 30, 2019 was $93.1
million, an increase of $41.0 million from the same period in the
prior year.
2019 Fourth Quarter Outlook
The Company will discuss its full revenue guidance for the
fourth quarter of 2019 during its upcoming conference call. The
following table sets forth fourth quarter outlook for other
measures and excludes our Payments and Ticketing business which was
sold to Visa in the fourth quarter of 2019.
(In millions)
GAAP
Non-GAAP (1)
Licensing billings (2)
$60 - $66
$60 - $66
Product revenue
$19 - $25
$19 - $25
Contract and other revenue
$10 - $16
$10 - $16
Total operating costs and expenses
$74 - $70
$63 - $59
Interest and other income (expense),
net
$4
$1
Diluted share count
115
115
(1)
See “Reconciliation of GAAP Forward
Looking Estimates to Non-GAAP Forward Looking Estimates” tables
included below. Note that the applicable non-GAAP measures are
presented, and that revenue is solely presented on a GAAP
basis.
(2)
Licensing billings is an operational
metric that reflects amounts invoiced to our licensing customers
during the period, as adjusted for certain differences. This metric
is the same for both GAAP and non-GAAP presentations.
For the fourth quarter of 2019, the Company expects licensing
billings to be between $60 million and $66 million. The Company
also expects royalty revenue to be between $15 million and $21
million, product revenue to be between $19 million and $25 million
and contract and other revenue to be between $10 million and $16
million. Revenue is not without risk and achieving revenue in this
range will require that the Company sign customer agreements for
various product sales, solutions licensing among other matters.
The Company also expects operating costs and expenses to be
between $74 million and $70 million. Additionally, the Company
expects non-GAAP operating costs and expenses to be between $63
million and $59 million. These expectations also assume non-GAAP
interest and other income (expense), net, of $1 million, tax rate
of 24% (refer to non-GAAP financial information below - income tax
adjustments) and diluted share count of 115 million, and exclude
stock-based compensation expense ($7 million), amortization expense
($3 million), non-cash interest expense on convertible notes ($2
million) and interest income related to the significant financing
component from fixed-fee patent and technology licensing
arrangements ($5 million).
Conference Call:
Rambus management will discuss the results of the quarter during
a conference call scheduled for 2:00pm PT today. The call, audio
and slides will be available online at investor.rambus.com and a
replay will be available for the next week at the following
numbers: (855) 859-2056 (domestic) or (404) 537-3406
(international) with ID# 7170477.
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 and interest and other income (expense), net. In computing
each of these non-GAAP financial measures, the following items were
considered as discussed below: stock-based compensation expenses,
acquisition-related/divestiture costs and retention bonus expense,
amortization expenses, impairment (recovery) of assets held for
sale, 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/divestiture costs and retention bonus
expense. These expenses include all direct costs of certain
acquisitions, divestitures 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 as they are related to acquisitions
and divestitures and have no direct correlation to the Company’s
operations.
Restructuring and other charges. These charges may consist of
severance, contractual retention payments, exit costs and other
charges and are excluded because such charges are not directly
related to ongoing business results and do not reflect expected
future operating expenses.
Impairment (recovery) of assets held for sale. These charges
consist of non-cash charges (recoveries) to assets held for sale
and are excluded because such charges (recoveries) are
non-recurring and do not reduce the Company’s liquidity.
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 24 percent for both 2019 and 2018, 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. 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
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.
About Rambus Inc.
Rambus is a premier Silicon IP and chip provider that makes data
faster and safer. With 30 years of innovation, we continue to
develop the foundational technology for all modern computing
systems. Leveraging our semiconductor expertise, Rambus solutions
speed performance, expand capacity and improve security for today’s
most demanding applications. From data center and edge to
artificial intelligence and automotive, our interface and security
IP, and memory interface chips enable SoC and system designers to
deliver their vision of the future. For more information, visit
rambus.com.
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 growth in product and
service offerings and product revenue, expected benefits of our
merger, acquisition and divestiture activity and related
integration, and financial guidance for the fourth quarter of 2019,
including licensing billings and revenue estimates, operating costs
and expenses, interest and other income (expense), net and
estimated, fixed, long-term projected tax rates on a GAAP and
non-GAAP basis, as appropriate. 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.
Source: Rambus Inc.
Rambus Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
September 30, 2019
December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents
$
91,838
$
115,924
Marketable securities
246,186
161,840
Accounts receivable
38,610
50,863
Unbilled receivables
182,934
176,613
Inventories
9,854
6,772
Assets held for sale
77,203
—
Prepaids and other current assets
9,824
15,738
Total current assets
656,449
527,750
Intangible assets, net
35,362
59,936
Goodwill
164,488
207,178
Property, plant and equipment, net
38,571
57,028
Operating lease right-of-use assets
15,503
—
Deferred tax assets
6,454
4,435
Unbilled receivables, long-term
376,619
497,003
Other assets
6,381
7,825
Total assets
$
1,299,827
$
1,361,155
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
9,429
$
7,392
Accrued salaries and benefits
13,294
16,938
Deferred revenue
9,516
19,374
Income taxes payable, short-term
18,198
16,390
Operating lease liabilities
7,382
—
Liabilities held for sale
14,620
—
Other current liabilities
15,854
9,191
Total current liabilities
88,293
69,285
Long-term liabilities:
Convertible notes, long-term
147,039
141,934
Long-term imputed financing obligation
—
36,297
Long-term operating lease liabilities
9,415
—
Long-term income taxes payable
64,765
77,280
Other long-term liabilities
29,032
24,247
Total long-term liabilities
250,251
279,758
Total stockholders’ equity
961,283
1,012,112
Total liabilities and stockholders’
equity
$
1,299,827
$
1,361,155
Rambus Inc.
Condensed Consolidated
Statements of Operations
(In thousands, except per
share amounts)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Revenue:
Royalties
$
19,448
$
33,599
$
71,351
$
85,022
Product revenue
21,377
11,753
46,372
27,153
Contract and other revenue
16,574
14,402
46,357
50,463
Total revenue
57,399
59,754
164,080
162,638
Operating costs and expenses:
Cost of product revenue (1)
7,108
5,376
17,845
13,932
Cost of contract and other revenue
5,466
5,952
18,954
29,163
Research and development (1)
41,486
43,131
119,995
120,944
Sales, general and administrative (1)
26,691
24,462
79,244
79,143
Restructuring and other charges
1,374
—
4,233
2,223
Impairment (recovery) of assets held for
sale
(1,853
)
—
15,137
—
Total operating costs and expenses
80,272
78,921
255,408
245,405
Operating loss
(22,873
)
(19,167
)
(91,328
)
(82,767
)
Interest income and other income
(expense), net
6,727
8,008
21,112
25,373
Interest expense
(2,497
)
(3,976
)
(7,302
)
(13,031
)
Interest and other income (expense),
net
4,230
4,032
13,810
12,342
Loss before income taxes
(18,643
)
(15,135
)
(77,518
)
(70,425
)
Provision for (benefit from) income
taxes
(1,312
)
89,758
3,369
85,514
Net loss
$
(17,331
)
$
(104,893
)
$
(80,887
)
$
(155,939
)
Net loss per share:
Basic
$
(0.16
)
$
(0.97
)
$
(0.73
)
$
(1.44
)
Diluted
$
(0.16
)
$
(0.97
)
$
(0.73
)
$
(1.44
)
Weighted average shares used in per share
calculation
Basic
111,315
107,897
110,633
108,324
Diluted
111,315
107,897
110,633
108,324
_________
(1)
Total stock-based compensation expense for
the three and nine months ended September 30, 2019 and 2018 is
presented as follows:
Three Months Ended September
30,
Nine Months Ended
September 30,
2019
2018
2019
2018
Cost of product revenue
$
2
$
2
$
4
$
7
Research and development
$
3,008
$
3,184
$
9,276
$
9,662
Sales, general and administrative
$
4,378
$
3,003
$
12,377
$
5,922
Rambus Inc.
Supplemental Reconciliation of
GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
Three Months Ended September
30,
2019
2018
Operating costs and expenses
$
80,272
$
78,921
Adjustments:
Stock-based compensation expense
(7,388
)
(6,189
)
Acquisition-related/divestiture costs and
retention bonus expense
(3,052
)
(10
)
Amortization expense
(3,186
)
(5,083
)
Restructuring and other charges
(1,374
)
—
Recovery of assets held for sale
1,853
—
Non-GAAP operating costs and
expenses
$
67,125
$
67,639
Interest and other income (expense),
net
$
4,230
$
4,032
Adjustments:
Non-cash interest expense on convertible
notes
1,725
2,191
Non-GAAP interest and other income
(expense), net
$
5,955
$
6,223
Supplemental Reconciliation of
GAAP to Non-GAAP Effective Tax Rate (1)
Three Months Ended September
30,
2019
2018
GAAP effective tax rate
7
%
(593
)%
Adjustment to GAAP effective tax rate
17
%
617
%
Non-GAAP effective tax rate
24
%
24
%
(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 24
percent for both 2019 and 2018, 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.
Reconciliation of GAAP Forward
Looking Estimates to Non-GAAP Forward Looking Estimates
(In millions)
(Unaudited)
2019 Fourth Quarter Outlook
Three Months Ended December
31, 2019
Low
High
Forward-looking operating costs and
expenses
$
73.6
$
69.6
Adjustments:
Stock-based compensation expense
(7.4
)
(7.4
)
Amortization expense
(3.2
)
(3.2
)
Forward-looking Non-GAAP operating
costs and expenses
$
63.0
$
59.0
Forward-looking interest and other income
(expense), net
$
4.3
$
4.3
Adjustments:
Interest income related to significant
financing component from fixed-fee patent and technology licensing
arrangements
(5.0
)
(5.0
)
Non-cash interest expense on convertible
notes
1.7
1.7
Forward-looking Non-GAAP interest and
other income (expense), net
$
1.0
$
1.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191104005947/en/
Rahul Mathur Senior Vice President, Finance and Chief Financial
Officer Rambus Inc. (408) 462-8000 rmathur@rambus.com
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