Rambus Reports First Quarter 2017 Financial Results

Impairment of long-lived assets. These charges consist of non-cash charges to long-lived assets and are excluded because such charges are non-recurring and do not reduce the Company’s liquidity.

Change in contingent consideration. This change is due to a reduction of acquisition purchase consideration. This is a non-recurring benefit that has no direct correlation to the operation of the Company's business and no cash flow impact.

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 both 2017 and 2016, 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 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.

RMBSFN

 
Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
 
  March 31,   December 31,
2017 2016
ASSETS
 
Current assets:
Cash and cash equivalents $ 177,455 $ 135,294
Marketable securities 10,170 36,888
Accounts receivable 27,353 21,099
Prepaids and other current assets 12,676 17,867
Inventories 5,840 5,633
Total current assets 233,494 216,781
Intangible assets, net 121,355 132,388
Goodwill 206,085 204,794
Property, plant and equipment, net 56,468 58,442
Deferred tax assets 206,075 168,342
Other assets 2,733 2,749
Total assets $ 826,210 $ 783,496
 
LIABILITIES & STOCKHOLDERS’ EQUITY
 
Current liabilities:
Accounts payable $ 8,437 $ 9,793
Accrued salaries and benefits 10,576 14,177
Deferred revenue 15,658 16,932
Other current liabilities 9,453 10,399
Total current liabilities 44,124 51,301
Long-term liabilities:
Convertible notes, long-term 127,916 126,167
Long-term imputed financing obligation 37,859 38,029
Other long-term liabilities 14,754 15,217
Total long-term liabilities 180,529 179,413
Total stockholders’ equity 601,557 552,782
Total liabilities and stockholders’ equity $ 826,210 $ 783,496
 
Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended
March 31,
  2017       2016  
 
Revenue:
Royalties $ 68,956 $ 62,877
Contract and other revenue   28,395     9,805  
Total revenue   97,351     72,682  
Operating costs and expenses:
Cost of revenue (1) 19,731 12,207
Research and development (1) 36,000 28,527
Sales, general and administrative (1) 28,186 23,095
Gain from settlement       (441 )
Total operating costs and expenses   83,917     63,388  
Operating income 13,434 9,294
Interest income and other income (expense), net 154 242
Interest expense   (3,206 )   (3,141 )
Interest and other income (expense), net   (3,052 )   (2,899 )
Income before income taxes 10,382 6,395
Provision for income taxes   7,376     4,517  
Net income $ 3,006   $ 1,878  
Net income per share:
Basic $ 0.03   $ 0.02  
Diluted $ 0.03   $ 0.02  
Weighted average shares used in per share calculation
Basic   111,464     109,733  
Diluted   115,325     112,252  
__________
    (1) Total stock-based compensation expense for the three months ended March 31, 2017 and 2016 is presented as follows:
 
  Three Months Ended
March 31,
2017   2016
Cost of revenue $ 14 $ 14
Research and development $ 3,012 $ 2,080
Sales, general and administrative $ 3,570 $ 2,770
 
Rambus Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
 
  Three Months Ended
March 31,  

December 31,

  March 31,
  2017    

2016

    2016  
 
Operating costs and expenses $ 83,917 $ 97,035 $ 63,388
Adjustments:
Stock-based compensation expense (6,596 ) (5,657 ) (4,864 )
Acquisition-related transaction costs and retention bonus expense (81 ) (197 ) (1,808 )
Purchase accounting adjustment for inventory fair value step-up (1,136 )
Amortization expense (10,488 ) (11,093 ) (7,719 )
Impairment of long-lived assets (18,300 )
Change in contingent consideration       6,845      
Non-GAAP operating costs and expenses $ 66,752   $ 67,497   $ 48,997  
 
Operating income $ 13,434 $ 524 $ 9,294
Adjustments:
Stock-based compensation expense 6,596 5,657 4,864
Acquisition-related transaction costs and retention bonus expense 81 197 1,808
Purchase accounting adjustment for inventory fair value step-up 1,136
Amortization expense 10,488 11,093 7,719
Impairment of long-lived assets 18,300
Change in contingent consideration       (6,845 )    
Non-GAAP operating income $ 30,599   $ 30,062   $ 23,685  
 
Income (loss) before income taxes $ 10,382 $ (2,506 ) $ 6,395
Adjustments:
Stock-based compensation expense 6,596 5,657 4,864
Acquisition-related transaction costs and retention bonus expense 81 197 1,808
Purchase accounting adjustment for inventory fair value step-up 1,136
Amortization expense 10,488 11,093 7,719
Impairment of long-lived assets 18,300
Change in contingent consideration (6,845 )
Non-cash interest expense on convertible notes   1,749     1,723     1,651  
Non-GAAP income before income taxes $ 29,296 $ 28,755 $ 22,437
GAAP provision for income taxes 7,376 939 4,517
Adjustment to GAAP provision for income taxes   2,878     9,125     3,336  
Non-GAAP provision for income taxes   10,254     10,064     7,853  
Non-GAAP net income $ 19,042   $ 18,691   $ 14,584  
 
Non-GAAP basic net income per share $ 0.17 $ 0.17 $ 0.13
Non-GAAP diluted net income per share $ 0.17 $ 0.16 $ 0.13
Weighted average shares used in non-GAAP per share calculation:
Basic 111,464 110,788 109,733
Diluted 115,325 114,060 112,252
 

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

 
  Three Months Ended
March 31,  

December 31,

  March 31,
2017

2016

2016
 
GAAP effective tax rate 71 % (38 )% 71 %
Adjustment to GAAP effective tax rate (36 )% 73 % (36 )%
Non-GAAP effective tax rate 35 % 35 % 35 %
   

(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 both 2017 and 2016, 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

Three Months Ended

March 31,

March 31,

  2017       2016     2017       2016  
Revenue (i) $ 97,351 $ 72,682 $ 97,351 $ 72,682
Operating income (ii) 13,434 9,294 30,599 23,685
Operating margin (ii/i) 14 % 13 % 31 % 33 %
 
Three Months Ended
March 31,
2017   2016
 
Net income $ 3,006 $ 1,878
Add back:
Interest and other income (expense), net 3,052 2,899
Provision for income taxes 7,376 4,517
Depreciation expense 3,392 2,969
Amortization expense   10,488   7,719
EBITDA (1) $ 27,314 $ 19,982
Adjustments:
Stock-based compensation expense 6,596 4,864
Acquisition-related transaction costs and retention bonus expense   81   1,808
Adjusted EBITDA (2) $ 33,991 $ 26,654
   
(1) EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company. The most directly comparable GAAP measure is net income. EBITDA is net income adjusted for net interest expense, income taxes, and depreciation and amortization. It should not be considered as an alternative to net income computed under GAAP.
(2) Adjusted EBITDA excludes the impact of other non-GAAP adjustments indicated in the above tables.
 
Rambus Inc.
Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates
(In millions, except per share amounts)
(Unaudited)
 
  Three Months Ended
June 30, 2017
Low   High
 
Forward-looking operating costs and expenses $ 89.6 $ 85.6
Adjustments:
Stock-based compensation expense (7.5 ) (7.5 )
Amortization expense   (11.1 )   (11.1 )
Forward-looking Non-GAAP operating costs and expenses $ 71.0   $ 67.0  
 
Forward-looking operating income $ 0.4 $ 10.4
Adjustments:
Stock-based compensation expense 7.5 7.5
Amortization expense   11.1     11.1  
Forward-looking Non-GAAP operating income $ 19.0   $ 29.0  
 
Forward-looking income (loss) before income taxes $ (2.3 ) $ 7.7
Adjustments:
Stock-based compensation expense 7.5 7.5
Amortization expense 11.1 11.1
Non-cash interest expense on convertible notes   1.7     1.7  
Forward-looking Non-GAAP income before income taxes $ 18.0 $ 28.0
Forward-looking GAAP provision for (benefit from) income taxes (0.8 ) 2.7
Adjustment to Forward-looking GAAP provision for income taxes   7.1     7.1  
Forward-looking Non-GAAP provision for income taxes   6.3     9.8  
Forward-looking Non-GAAP net income $ 11.7   $ 18.2  
 
Forward-looking Non-GAAP basic net income per share $ 0.10 $ 0.16
Forward-looking Non-GAAP diluted net income per share $ 0.10 $ 0.16
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic 112.0 112.0
Diluted 115.0 115.0

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