Business and Financial Highlights:
- Generated quarterly revenue of $89.9
million; quarterly GAAP diluted net income per share of $0.04 and
quarterly non-GAAP diluted net income per share of $0.16
- Signed license agreement with Xilinx,
showcasing portfolio and ability to collaborate with leading FPGA
provider
- Executing data center programs with
SerDes IP cores now available at multiple foundries and shipping
memory buffer chip products
Rambus Inc. (NASDAQ:RMBS) today reported financial results for
the third quarter ended September 30, 2016.
Commenting on the quarter, chief executive officer Dr. Ron Black
stated, “We turned in very positive results for the third quarter
with a general uptick across our business showcasing growth, both
organically and inorganically, to support our strategy and plan.
Our licensing program continues to be strong with the signing of
FPGA-leader Xilinx, which expands our footprint beyond DRAM and SoC
sectors. We’ve also seen strong support in our security business
within the mobile payments segment and believe we are well
positioned to advance this technology further. We have steadily
grown the business in terms of revenue, technologies, offerings and
relevance, and expect a strong finish to the year.”
GAAP Financial Results:
Revenue for the third quarter of 2016 was $89.9 million, which
was up 17% from the second quarter of 2016 primarily due to revenue
from our licensing program and higher revenue from sales of memory
products and security technology development projects, including
revenue from the various acquisitions during the year. As compared
to the third quarter of 2015, revenue was up 22% primarily due to
higher revenue from sales of memory products and security
technology development projects, including revenue from the various
acquisitions during the year.
Revenue for the nine months ended September 30, 2016 was $239.0
million, which was up 9% over the prior year period, primarily due
to higher revenue from memory products and security technology
development projects, offset by lower royalty revenue from various
customers.
Total operating costs and expenses for the third quarter of 2016
were $78.0 million, 21% higher than the previous quarter and 39%
higher than the third quarter of 2015. Third quarter operating
costs and expenses of $78.0 million included $5.4 million of
stock-based compensation expenses, $10.2 million of amortization
expenses, $1.2 million related to the purchase accounting
adjustment for inventory fair value step-up and $0.4 million of
acquisition-related transaction costs. In comparison, total
operating costs and expenses for the second quarter of 2016 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. Total operating costs and
expenses for the third quarter of 2015 were $56.1 million which
included $3.6 million of stock-based compensation expenses and $6.3
million of amortization expenses. The change in total operating
costs and expenses in the third quarter of 2016 as compared to the
second quarter of 2016 was primarily due to higher headcount
related costs, higher consulting costs, higher amortization
expense, higher costs of goods sold related to memory and security
products and the purchase accounting adjustment for inventory fair
value step-up. The change in total operating costs and expenses in
the third quarter of 2016 as compared to the third quarter of 2015
was primarily due to higher headcount related costs, higher
amortization expense, higher consulting costs, higher costs of
goods sold related to memory and security products, the purchase
accounting adjustment for inventory fair value step-up and lower
gain from settlement. These increases were primarily due to the
business acquisitions during 2016.
Total operating costs and expenses for the nine months ended
September 30, 2016 were $205.9 million, 22% higher than the nine
months ended September 30, 2015. The nine months operating costs
and expenses of $205.9 million included $15.4 million of
stock-based compensation expenses, $26.0 million of amortization
expenses, $1.2 million related to the purchase accounting
adjustment for inventory fair value step-up and $3.0 million of
acquisition-related transaction costs. This is compared to total
operating costs and expenses for the nine months ended September
30, 2015 of $168.4 million, which included $11.7 million of
stock-based compensation expenses and $18.9 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
and the purchase accounting adjustment for inventory fair value
step-up. These increases were primarily due to the business
acquisitions during 2016. Additionally, the change was due to 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 third quarter of 2016 was $4.5 million
as compared to net income of $3.9 million in the second quarter of
2016 and net income of $182.0 million in the third quarter of 2015.
Diluted net income per share for the third quarter of 2016 was
$0.04 as compared to diluted net income per share of $0.03 in the
second quarter of 2016 and diluted net income per share of $1.52 in
the third quarter of 2015, respectively.
Net income for the nine months ended September 30, 2016 was
$10.3 million as compared to a net income of $198.4 million for the
same period of 2015. Diluted net income per share for the nine
months ended September 30, 2016 was $0.09 as compared to a diluted
net income per share of $1.67 for the same period of 2015.
Non-GAAP Financial Results (1):
Total non-GAAP operating costs and expenses in the third quarter
of 2016 were $60.8 million, which was 20% higher than the previous
quarter, and 31% higher than the third quarter of 2015. The change
in total non-GAAP operating costs and expenses in the third quarter
of 2016 as compared to the second quarter of 2016 was primarily due
to higher headcount related costs, higher consulting costs and
higher costs of goods sold related to memory and security products.
These increases were primarily due to the business acquisitions
during 2016. The change in total non-GAAP operating costs and
expenses in the third quarter of 2016 as compared to the third
quarter of 2015 was primarily due to higher headcount related
costs, higher consulting costs, higher costs of goods sold related
to memory and security products and lower gain from settlement.
These increases were primarily due to the business acquisitions
during 2016.
Total non-GAAP operating costs and expenses for the nine months
ended September 30, 2016 were $160.3 million as compared to $137.8
million in the same period of 2015 due primarily to higher
headcount related costs due to the business acquisitions during
2016, 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 third quarter of 2016 was $18.0
million, 8% higher than the prior quarter and 6% higher than the
third quarter of 2015. Non-GAAP diluted net income per share was
$0.16 in the third quarter of 2016 as compared to $0.15 in the
prior quarter and $0.14 in the third quarter of 2015.
Non-GAAP net income for the nine months ended September 30, 2016
was $49.3 million as compared to $50.0 million in the same period
of 2015. Non-GAAP diluted net income per share was $0.44 for the
nine months ended September 30, 2016 as compared to non-GAAP
diluted net income per share of $0.42 in the same period of
2015.
Other Financial Highlights:
Cash, cash equivalents, and marketable securities as of
September 30, 2016 were $150.8 million, a decrease of
$108.5 million from June 30, 2016. The decrease in cash
was primarily due to cash used to acquire businesses of $122
million.
During the third quarter of 2016, the Company recorded an income
tax provision of approximately $4.3 million.
Fourth Quarter 2016 Outlook:
For the fourth quarter of 2016, the Company expects revenue to
be between $94 million and $98 million. Achieving revenue in this
range will require that the Company sign new customer agreements
for various product sales, mobile payments software and solutions
licensing among other matters. The company also expects
operating costs and expenses to be between $85 million and $88
million, and diluted net income per share to be between $0.03 and
$0.07. The company also expects non-GAAP operating costs and
expenses to be between $65 million and $68 million, and non-GAAP
diluted net income per share to be between $0.14 and
$0.18. These non-GAAP expectations assume non-GAAP interest
expense of $1 million, tax rate of 35% (refer to non-GAAP financial
information below - income tax adjustments) and share count of 114
million, and exclude stock-based compensation expense ($5.3
million), amortization expense ($11.3 million), purchase accounting
adjustment for inventory fair value step-up ($1.2 million), and
non-cash interest expense on convertible notes ($1.7 million).
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# 95495228.
(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.
Purchase accounting adjustment for inventory fair value step-up.
These adjustments are the result of accounting for certain business
acquisitions and are excluded because such adjustments are
non-recurring. Additionally, 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 financial guidance for
the fourth quarter of 2016, including revenue, operating costs and
expenses, earnings per share 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)
September 30,2016
December 31,2015
ASSETS Current assets: Cash and cash equivalents $
89,479 $ 143,764 Marketable securities 61,310 143,942 Accounts
receivable 26,363 16,408 Prepaids and other current assets 22,150
11,476 Total current assets 199,302 315,590 Intangible
assets, net 164,862 64,266 Goodwill 207,531 116,899 Property, plant
and equipment, net 59,191 56,616 Deferred taxes 165,661 162,485
Other assets 3,749 2,165 Total assets $ 800,296 $
718,021
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities: Accounts payable $ 10,188 $ 4,096 Accrued
salaries and benefits 10,209 12,278 Deferred revenue 17,772 5,780
Other current liabilities 21,632 6,212 Total current
liabilities 59,801 28,366 Long-term liabilities: Convertible notes,
long-term 124,443 119,418 Long-term imputed financing obligation
38,194 38,625 Other long-term liabilities 25,018 5,079 Total
long-term liabilities 187,655 163,122 Total stockholders’
equity 552,840 526,533 Total liabilities and stockholders’
equity $ 800,296 $ 718,021
Rambus Inc.
Condensed Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016 2015 2016 2015
Revenue: Royalties $ 68,298 $ 66,823 $ 194,010 $ 196,173
Contract and other revenue 21,557 6,956 45,028
23,332 Total revenue 89,855 73,779 239,038
219,505 Operating costs and expenses: Cost of revenue
(1) 19,424 11,111 45,720 34,004 Research and development (1) 33,820
27,784 91,100 85,506 Sales, general and administrative (1) 24,795
17,860 69,679 53,701 Gain from sale of intellectual property — (106
) — (3,262 ) Gain from settlement — (510 ) (579 ) (1,530 )
Total operating costs and expenses 78,039 56,139
205,920 168,419 Operating income 11,816 17,640 33,118
51,086 Interest income and other income (expense), net 142 539
1,522 874 Interest expense (3,193 ) (3,117 ) (9,497 ) (9,291 )
Interest and other income (expense), net (3,051 ) (2,578 ) (7,975 )
(8,417 ) Income before income taxes 8,765 15,062 25,143 42,669
Provision for (benefit from) income taxes 4,254 (166,971 )
14,878 (155,727 ) Net income $ 4,511 $ 182,033
$ 10,265 $ 198,396 Net income per share: Basic $ 0.04
$ 1.56 $ 0.09 $ 1.71 Diluted $ 0.04
$ 1.52 $ 0.09 $ 1.67 Weighted average
shares used in per share calculation Basic 110,214 116,444
109,951 115,940 Diluted 113,723 119,542
112,805 118,997
_________
(1) Total stock-based compensation expense for the three and
nine months ended September 30, 2016 and 2015 is presented as
follows:
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2016 2015 2016 2015 Cost of revenue $
14 $ 12 $ 42 $ 51 Research and development $ 2,337 $ 1,548 $ 6,526
$ 5,303 Sales, general and administrative $ 3,092 $ 2,008 $ 8,788 $
6,395
Rambus Inc.
Supplemental Reconciliation of GAAP to
Non-GAAP Results
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30,2016
June 30,2016
September 30,2015
September 30,2016
September 30,2015
Operating costs and expenses $ 78,039 $ 64,493 $ 56,139 $
205,920 $ 168,419 Adjustments: Stock-based compensation expense
(5,443 ) (5,049 ) (3,568 ) (15,356 ) (11,749 ) Acquisition-related
transaction costs and retention bonus expense (441 ) (789 ) —
(3,038 ) (2 ) Purchase accounting adjustment for inventory fair
value step-up (1,168 ) — — (1,168 ) — Amortization expense (10,174
) (8,152 ) (6,268 ) (26,045 ) (18,914 )
Non-GAAP operating costs
and expenses $ 60,813 $
50,503 $ 46,303 $
160,313 $ 137,754
Operating income $ 11,816 $ 12,008 $ 17,640 $ 33,118 $ 51,086
Adjustments: Stock-based compensation expense 5,443 5,049 3,568
15,356 11,749 Acquisition-related transaction costs and retention
bonus expense 441 789 — 3,038 2 Purchase accounting adjustment for
inventory fair value step-up 1,168 — — 1,168 — Amortization expense
10,174 8,152 6,268 26,045 18,914
Non-GAAP operating income $ 29,042
$ 25,998 $ 27,476
$ 78,725 $ 81,751
Income before income taxes $ 8,765 $ 9,983 $ 15,062 $ 25,143 $
42,669 Adjustments: Stock-based compensation expense 5,443 5,049
3,568 15,356 11,749 Acquisition-related transaction costs and
retention bonus expense 441 789 — 3,038 2 Purchase accounting
adjustment for inventory fair value step-up 1,168 — — 1,168 —
Amortization expense 10,174 8,152 6,268 26,045 18,914 Non-cash
interest expense on convertible notes 1,700 1,675
1,605 5,026 4,745 Non-GAAP income before
income taxes $ 27,691 $ 25,648 $ 26,503 $ 75,776 $ 78,079 GAAP
provision for (benefit from) income taxes 4,254 6,107 (166,971 )
14,878 (155,727 ) Adjustment to GAAP provision for income taxes
5,438 2,870 176,512 11,644 183,836
Non-GAAP provision for income taxes 9,692 8,977
9,541 26,522 28,109
Non-GAAP net
income $ 17,999 $ 16,671
$ 16,962 $ 49,254
$ 49,970 Non-GAAP basic net income
per share $ 0.16 $ 0.15 $ 0.15 $ 0.45 $ 0.43
Non-GAAP
diluted net income per share $ 0.16 $ 0.15 $ 0.14 $ 0.44 $ 0.42
Weighted average shares used in non-GAAP per share calculation:
Basic 110,214 109,904 116,444 109,951 115,940 Diluted 113,723
112,061 119,542 112,805 118,997
Supplemental Reconciliation of GAAP to
Non-GAAP Effective Tax Rate (1)
Three Months Ended Nine Months Ended
September 30,2016
June 30,2016
September 30,2015
September 30,2016
September 30,2015
GAAP effective tax rate 49
%
61
%
1,109
%
59
%
365
%
Adjustment to GAAP effective tax rate (14 )% (26 )% (1,073 )% (24
)% (329 )% 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161024006423/en/
Rambus Inc.Linda Ashmore, 408-462-8411Corporate
Communicationslashmore@rambus.comorRambus Inc.Rahul Mathur,
408-462-8000Senior Vice President, Finance and Chief Financial
Officerrmathur@rambus.com
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