Rambus Reports Third Quarter 2023 Financial Results

GAAP revenue for the quarter was $105.3 million. The Company also had licensing billings of $57.9 million, product revenue of $52.2 million, and contract and other revenue of $24.2 million. The Company had total GAAP cost of revenue of $24.0 million and operating benefits of $(23.6) million. The Company also had total non-GAAP operating expenses of $72.9 million (including non-GAAP cost of revenue of $20.5 million). The Company had GAAP diluted net income per share of $0.93, largely driven by a net gain on divestiture of $90.8 million from the sale of the Company's PHY IP business in the third quarter. The Company’s basic share count was 108 million shares and its diluted share count was 111 million shares.

Cash, cash equivalents, and marketable securities as of September 30, 2023 were $375.5 million, an increase of $42.9 million from June 30, 2023, mainly due to $51.6 million in cash provided by operating activities and the net proceeds from the PHY IP business divestiture of $106.3 million, partly offset by $100.0 million paid in connection with an accelerated share repurchase program.

2023 Fourth Quarter Outlook

The Company will discuss its full revenue guidance for the fourth quarter of 2023 during its upcoming conference call. The following table sets forth fourth quarter outlook for other measures.

(In millions)

GAAP

 

Non-GAAP (1)

Licensing billings (operational metric) (2)

$56 - $62

 

$56 - $62

Product revenue (GAAP)

$52 - $58

 

$52 - $58

Contract and other revenue (GAAP)

$17 - $23

 

$17 - $23

Total operating costs and expenses

$88 - $84

 

$73 - $69

Interest and other income (expense), net

$2

 

$2

Diluted share count

110

 

110

_________________________________________

(1)

See “Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates” table included below.

(2)

Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the period, as adjusted for certain differences relating to advanced payments for variable licensing agreements.

For the fourth quarter of 2023, the Company expects licensing billings to be between $56 million and $62 million. The Company also expects royalty revenue to be between $42 million and $48 million, product revenue to be between $52 million and $58 million and contract and other revenue to be between $17 million and $23 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for various product sales and solutions licensing, among other matters.

The Company also expects operating costs and expenses to be between $88 million and $84 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $73 million and $69 million. These expectations also assume non-GAAP interest and other income (expense), net, of $2 million, a tax rate of 24% and diluted share count of 110 million, and exclude stock-based compensation expense of $11 million, amortization of acquired intangible assets of $4 million, and interest income related to the significant financing component from fixed-fee patent and technology licensing arrangements of $0 million.

Conference Call

The Company’s management will discuss the results of the quarter during a conference call scheduled for 2:00 p.m. 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: (866) 813-9403 (domestic) or (+1) 929-458-6194 (international) with ID# 195743.

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: cost of product revenue, operating 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 expense, acquisition-related costs and retention bonus expense, amortization of acquired intangible assets, restructuring and other charges, expense on abandoned operating leases, facility restoration costs, gain on divestiture, impairment of assets, change in fair value of earn-out liability, gain on sale of equity security, loss on extinguishment of debt, loss on fair value adjustment of derivatives, net, realized loss on sale of marketable securities sold for the purpose of notes repurchase, 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. A 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.

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