EX-99.1 2 exhibit991earningsreleaseq.htm EXHIBIT 99.1 Exhibit

Exhibit 99.1

rambuslogoa01a01a02a01a06.gif
News Release
RAMBUS REPORTS SECOND QUARTER 2019 FINANCIAL RESULTS

Second quarter revenue and billings in line with expectations; GAAP revenue of $58.3 million, with royalty revenue of $27.1 million and licensing billings of $64.9 million
$38.7 million in cash provided by operating activities
Executing on our strategic semiconductor portfolio refocus with agreement to sell Payments and Ticketing business to Visa, and agreement to acquire digital controller IP provider, Northwest Logic
Record quarterly revenue for both IP Cores and Server DIMM Chipset businesses

SUNNYVALE, Calif. - July 29, 2019 - Rambus Inc. (NASDAQ:RMBS) today reported financial results for the second quarter ended June 30, 2019. Total revenue for the second quarter was in line with expectations at $58.3 million, with royalty revenue of $27.1 million and licensing billings of $64.9 million. The company also generated $38.7 million in cash provided by operating activities.

“Rambus made great progress toward our strategic vision to refocus on our core strengths in semiconductor, optimize for operational efficiency, and reinvest for growth,” said Luc Seraphin, chief executive officer of Rambus. “Propelled by strong operational execution and gains in market share, we delivered a solid second quarter.”

Business Review

Rambus took several significant steps in support of our strategic vision this quarter. The first was an agreement to sell our Payments and Ticketing business to Visa, simplifying our portfolio and redefining our perimeter to focus on the semiconductor market. Following that, we announced an agreement to acquire Northwest Logic to augment our interface IP offerings with best-in-class digital controllers, amplifying our market and technology position through new investments in our core focus area. In addition to these strategic steps, Rambus business units continued to deliver organic growth with overall product revenue for server DIMM chips and silicon IP, including IP Cores and Cryptography, increasing quarter over quarter.

Revenue was up significantly for our Server DIMM Chipset business, despite declines in the overall memory market, and the business is on track for 50% growth on the year as a whole. This growth continues to be driven by increased OEM and data center qualifications, leading to steady gains in our DDR4 buffer chip market share. In addition to the gains in DDR4, we remain well positioned as the first-mover for next-generation DDR5 server DIMM chips, shipping samples at the top-end speeds for both the RCD and DB chips.

Our high-speed IP Cores business delivered record revenue for the second consecutive quarter and remains on a trajectory of approximately 50% compounded annual growth rate. We announced the addition of our 112G SerDes PHY for 400G and 800G networking, a GDDR6 win at Achronix and continue to close new Tier 1 SoC design wins for data center, networking and artificial intelligence. In line with our strategy of investing in our focus areas, we have signed an agreement to acquire the digital controller company, Northwest Logic, and will be integrating their offerings and design team into our IP Cores business. As a market leader in memory, PCIe and MIPI digital controllers, Northwest Logic will expand our solutions by creating a complementary product portfolio of PHYs and controllers for data center, AI, communications and automotive.

The Cryptography business is delivering on an application-driven product roadmap with the launch of the expanded family of CryptoManager Root of Trust secure processor cores. The family now includes a comprehensive suite of configurations, tailored for artificial intelligence, data center, automotive and government, making the cores readily available to the market and easy to integrate for our customers. Focused on creating the most resilient and deployable embedded security on market, our simplified go-to-market strategy to deliver secure silicon IP and provisioning solutions to our customers is gaining traction with our first security win in artificial intelligence (AI) at a leading provider of AI accelerators.






Quarterly Financial Review - GAAP
Three Months Ended June 30,
(In millions, except for percentages and per share amounts)
2019
 
2018
Revenue
 
 
 
Royalties
$
27.1

 
$
30.1

Product revenue
16.0

 
8.1

Contract and other revenue
15.2

 
18.3

Total revenue
$
58.3

 
$
56.5

Total operating costs and expenses
$
95.3

 
$
76.4

Operating loss
$
(37.0
)
 
$
(19.9
)
Operating margin
(64
)%
 
(35
)%
Net loss
$
(37.0
)
 
$
(15.4
)
Diluted net loss per share
$
(0.33
)
 
$
(0.14
)
 
 
 
 
Licensing billings (1)
$
64.9

 
$
73.2

 
 
 
 
Net cash provided by operating activities
$
38.7

 
$
3.6


(1)
Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the period, as adjusted for certain differences.
Quarterly Financial Review - Non-GAAP (1)
Three Months Ended June 30,
(In millions, except for percentages and per share amounts)
2019
 
2018
Revenue
 
 
 
Royalties
$
27.1

 
$
30.1

Product revenue
16.0

 
8.1

Contract and other revenue
15.2

 
18.3

Total revenue
$
58.3

 
$
56.5

Total operating costs and expenses
$
64.1

 
$
66.8

Operating loss
$
(5.8
)
 
$
(10.3
)
Operating margin
(10
)%
 
(18
)%
Net income (loss)
$
0.2

 
$
(3.1
)
Diluted net income (loss) per share
$
0.00

 
$
(0.03
)

(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.

Revenue for the quarter was $58.3 million, with royalty revenue of $27.1 million and licensing billings of $64.9 million, in line with expectations. We had GAAP total operating costs and expenses of $95.3 million, above the high end of our expectations, primarily related to charges associated with our agreement to sell our payments and ticketing business. We also had non-GAAP total operating costs and expenses of $64.1 million, below our expectations due to our cost containment actions. We had GAAP and non-GAAP diluted net income (loss) per share of ($0.33) and $0.00, respectively. Our basic share count was 110.9 million shares and our diluted share count would have been 112.5 million shares.

Cash, cash equivalents, and marketable securities as of June 30, 2019 were $337.7 million, an increase of $31.8 million from March 31, 2019, mainly due to $38.7 million in cash provided by operating activities. Cash provided by operating activities for the six months ended June 30, 2019 was $67.5 million, an increase of $47.1 million from the same period in the prior year.






2019 Third Quarter Outlook

The Company will discuss revenue guidance for the third quarter of 2019 during its upcoming conference call. The following table sets forth third quarter outlook for other measures, and excludes our Payments and Ticketing business.

(In millions)
GAAP
 
Non-GAAP (1)
Total operating costs and expenses
$70 - $66
 
$58 - $54
Interest and other income (expense), net
$4
 
$1
Diluted share count
113
 
113

(1)
See “Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates” tables included below.

For the third quarter of 2019, the Company expects operating costs and expenses to be between $70 million and $66 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $58 million and $54 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 113 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 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# 3471916.

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 margin, operating income (loss), net income (loss), and diluted net income (loss) per share. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related costs and retention bonus expense, amortization expenses, impairment 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 costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current period’s 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 have no direct correlation to the Company’s operations.




Restructuring 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 of assets held for sale. These charges consist of non-cash charges to assets held for sale and are excluded because such charges 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.

Escrow settlement refund. The Company received a refund from an escrow settlement related to a prior acquisition. The Company excludes these items because these receipts are not reflective of ongoing operating results. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

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.

Dedicated to making data faster and safer, Rambus creates innovative hardware, software and services that drive technology advancements from the data center to the mobile edge. Our architecture licenses, IP cores, chips, software and services span memory and interfaces, security and emerging technologies to positively impact the modern world. We collaborate with the industry, partnering with leading chip and system designers, foundries and service providers. Integrated into tens of billions of devices and systems, our products power and secure diverse applications, including Big Data, Internet of Things (IoT) security, mobile payments and smart ticketing. 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 product and service offerings, the expected benefits of our merger, acquisition and divestiture activity, future profit and growth, and financial guidance for the third quarter of 2019, including operating costs and expenses, and estimated, fixed, long-term projected tax rates, both 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.




Contact:
Rahul Mathur
Senior Vice President, Finance and Chief Financial Officer
Rambus Inc.
(408) 462-8000
rmathur@rambus.com


Source: Rambus Inc.





Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

 
 
June 30,
2019
 
December 31,
2018
ASSETS
   
 
   
 
 
 
 
Current assets:
   
 
   
Cash and cash equivalents
$
114,186

 
$
115,924

Marketable securities
223,532

 
161,840

Accounts receivable
28,225

 
50,863

Unbilled receivables
177,897

 
176,613

Inventories
9,326

 
6,772

Assets held for sale
78,388

 

Prepaids and other current assets
9,350

 
15,738

Total current assets
640,904

 
527,750

Intangible assets, net
29,748

 
59,936

Goodwill
153,144

 
207,178

Property, plant and equipment, net
41,590

 
57,028

Operating lease right-of-use assets
16,081

 

Deferred tax assets
4,399

 
4,435

Unbilled receivables, long-term
419,532

 
497,003

Other assets
6,763

 
7,825

Total assets
$
1,312,161

 
$
1,361,155

 
 
 
 
LIABILITIES & STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
7,794

 
$
7,392

Accrued salaries and benefits
13,966

 
16,938

Deferred revenue
6,448

 
19,374

Income taxes payable, short-term
17,461

 
16,390

Operating lease liabilities
8,381

 

Liabilities held for sale
13,706

 

Other current liabilities
16,668

 
9,191

Total current liabilities
84,424

 
69,285

Long-term liabilities:
 
 
 
Convertible notes, long-term
145,314

 
141,934

Long-term imputed financing obligation

 
36,297

Long-term operating lease liabilities
9,548

 

Long-term income taxes payable
69,359

 
77,280

Other long-term liabilities
30,290

 
24,247

Total long-term liabilities
254,511

 
279,758

Total stockholders’ equity
973,226

 
1,012,112

Total liabilities and stockholders’ equity
$
1,312,161

 
$
1,361,155








Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
Revenue:
 
 
 
 
 
 
 
Royalties
$
27,050

 
$
30,049

 
$
51,903

 
$
51,423

Product revenue
16,031

 
8,087

 
24,995

 
15,400

Contract and other revenue
15,216

 
18,322

 
29,783

 
36,061

Total revenue
58,297

 
56,458

 
106,681

 
102,884

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of product revenue (1)
6,310

 
4,199

 
10,737

 
8,556

Cost of contract and other revenue
6,717

 
11,089

 
13,488

 
23,211

Research and development (1)
37,890

 
37,696

 
78,509

 
77,813

Sales, general and administrative (1)
24,908

 
24,483

 
52,553

 
54,681

Restructuring charges (recoveries)
2,528

 
(1,022
)
 
2,859

 
2,223

Impairment of assets held for sale
16,990

 

 
16,990

 

Total operating costs and expenses
95,343

 
76,445

 
175,136

 
166,484

Operating loss
(37,046
)
 
(19,987
)
 
(68,455
)
 
(63,600
)
Interest income and other income (expense), net
6,972

 
8,249

 
14,385

 
17,365

Interest expense
(2,534
)
 
(4,634
)
 
(4,805
)
 
(9,055
)
Interest and other income (expense), net
4,438

 
3,615

 
9,580

 
8,310

Loss before income taxes
(32,608
)
 
(16,372
)
 
(58,875
)
 
(55,290
)
Provision for (benefit from) income taxes
4,372

 
(1,015
)
 
4,681

 
(4,244
)
Net loss
$
(36,980
)
 
$
(15,357
)
 
$
(63,556
)
 
$
(51,046
)
Net loss per share:
   
 
   
 
   
 
   
Basic
$
(0.33
)
 
$
(0.14
)
 
$
(0.58
)
 
$
(0.47
)
Diluted
$
(0.33
)
 
$
(0.14
)
 
$
(0.58
)
 
$
(0.47
)
Weighted average shares used in per share calculation
   
 
   
 
   
 
   
Basic
110,875

 
107,737

 
110,287

 
108,542

Diluted
110,875

 
107,737

 
110,287

 
108,542

_________
(1) Total stock-based compensation expense for the three and six months ended June 30, 2019 and 2018 is presented as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Cost of product revenue
$
1

 
$
2

 
$
2

 
$
5

Research and development
$
3,058

 
$
3,286

 
$
6,268

 
$
6,478

Sales, general and administrative
$
4,021

 
$
(1,400
)
 
$
7,999

 
$
2,919







Rambus Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
 
Three Months Ended June 30,
 
2019
 
2018
 
 
 
 
Operating costs and expenses
$
95,343

 
$
76,445

Adjustments:
 
 
 
Stock-based compensation expense
(7,080
)
 
(1,888
)
Acquisition-related costs and retention bonus expense

 
(30
)
Amortization expense
(4,921
)
 
(8,738
)
Restructuring charges (recoveries)
(2,528
)
 
1,022

Impairment of assets held for sale
(16,990
)
 

Escrow settlement refund
296

 

Non-GAAP operating costs and expenses
$
64,120

 
$
66,811

 
 
 
 
Operating loss
$
(37,046
)
 
$
(19,987
)
Adjustments:
 
 
 
Stock-based compensation expense
7,080

 
1,888

Acquisition-related costs and retention bonus expense

 
30

Amortization expense
4,921

 
8,738

Restructuring charges (recoveries)
2,528

 
(1,022
)
Impairment of assets held for sale
16,990

 

Escrow settlement refund
(296
)
 

Non-GAAP operating loss
$
(5,823
)
 
$
(10,353
)
 
 
 
 
Loss before income taxes
$
(32,608
)
 
$
(16,372
)
Adjustments:
 
 
 
Stock-based compensation expense
7,080

 
1,888

Acquisition-related costs and retention bonus expense

 
30

Amortization expense
4,921

 
8,738

Restructuring charges (recoveries)
2,528

 
(1,022
)
Impairment of assets held for sale
16,990

 

Escrow settlement refund
(296
)
 

Non-cash interest expense on convertible notes
1,702

 
2,717

Non-GAAP income (loss) before income taxes
$
317

 
$
(4,021
)
GAAP provision for (benefit from) income taxes
4,372

 
(1,015
)
Adjustment to GAAP provision for (benefit from) income taxes
(4,296
)
 
50

Non-GAAP provision for (benefit from) income taxes
76

 
(965
)
Non-GAAP net income (loss)
$
241

 
$
(3,056
)
 
 
 
 
Non-GAAP basic net income (loss) per share
$
0.00

 
$
(0.03
)
Non-GAAP diluted net income (loss) per share
$
0.00

 
$
(0.03
)
Weighted average shares used in non-GAAP per share calculation:
 
 
 
Basic
110,875

 
107,737

Diluted
112,522

 
107,737














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

 
Three Months Ended June 30,
 
2019
 
2018
GAAP effective tax rate
(13
)%
 
6
%
Adjustment to GAAP effective tax rate
37
 %
 
18
%
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 Other GAAP to Non-GAAP Items
(In thousands, except percentages)
(Unaudited)

 
GAAP
 
Non-GAAP
 
Three Months Ended June 30,
 
Three Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue (i)
$
58,297

 
$
56,458

 
$
58,297

 
$
56,458

Operating loss (ii)
(37,046
)
 
(19,987
)
 
(5,823
)
 
(10,353
)
Operating margin (ii/i)
(64
)%
 
(35
)%
 
(10
)%
 
(18
)%






Rambus Inc.
Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates
(In millions)
(Unaudited)
2019 Third Quarter Outlook
Three Months Ended September 30, 2019
 
Low
 
High
 
 
 
 
Forward-looking operating costs and expenses
$
69.8

 
$
65.8

Adjustments:
 
 
 
Stock-based compensation expense
(7.1
)
 
(7.1
)
Amortization expense
(4.9
)
 
(4.9
)
Forward-looking Non-GAAP operating costs and expenses
$
57.8

 
$
53.8

 
 
 
 
Forward-looking interest and other income (expense), net
$
4.4

 
$
4.4

Adjustments:
 
 
 
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements
(5.3
)
 
(5.3
)
Non-cash interest expense on convertible notes
1.7

 
1.7

Forward-looking Non-GAAP interest and other income (expense), net
$
0.8

 
$
0.8