Rambus Reports Third Quarter 2023 Financial Results

Amortization of acquired intangible assets. 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.

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.

Expense on abandoned operating leases. Reflects the expense on building leases that were abandoned. The Company excludes these charges because such charges are not directly related to ongoing business results and do not reflect expected future operating expenses.

Facility restoration costs. These charges consist of exit costs associated with our leased office space and are excluded because such charges are not directly related to ongoing business results and do not reflect expected future operating expenses.

Gain on divestiture. Reflects the gain on the sale of the Company's PHY IP business. The Company excludes these charges (benefits) because such charges (benefits) are not directly related to ongoing business results and do not reflect expected future operating expenses (benefits).

Impairment of assets. These charges primarily consist of non-cash charges to long-lived assets and other assets resulting from the divestiture of the Company's PHY IP business, and are excluded because such charges are non-recurring and do not reduce the Company’s liquidity.

Change in fair value of earn-out liability. This change is due to adjustments to acquisition purchase consideration. The Company excludes these adjustments because such adjustments are not directly related to ongoing business results and do not reflect expected future operating expenses.

Gain on sale of equity security. The Company has excluded gain on sale of equity security as this is not a reflection of the Company’s ongoing operations.

Loss on extinguishment of debt. The Company has excluded loss on extinguishment of debt as this represents a cost of repurchasing its existing convertible notes and is not a reflection of the Company’s ongoing operations.

Loss on fair value adjustment of derivatives, net. The Company has excluded its loss on fair value adjustment of derivatives, net, as this represents cost and benefits of repurchasing its convertible notes and is not a reflection of the Company's ongoing operations.

Realized loss on sale of marketable securities sold for the purpose of notes repurchase. The Company has excluded its realized loss on sale of marketable securities sold for the purpose of repurchasing its convertible notes as this is not a reflection of the Company's ongoing operations.

Non-cash interest expense on convertible notes. The Company incurred non-cash interest expense related to its convertible notes through the first quarter of 2023, at which point the remaining convertible notes matured. 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 2023 and 2022, 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.

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 provider of industry-leading chips and silicon IP making data faster and safer. With over 30 years of advanced semiconductor experience, we are a pioneer in high-performance memory solutions that solve the bottleneck between memory and processing for data-intensive systems. Whether in the cloud, at the edge or in your hand, real-time and immersive applications depend on data throughput and integrity. Rambus products and innovations deliver the increased bandwidth, capacity and security required to meet the world’s data needs and drive ever-greater end-user experiences. 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 business opportunities, the Company’s ability to deliver long-term, profitable growth, product and investment strategies, and the Company’s outlook and financial guidance for the fourth quarter of 2023 and related drivers, and the Company’s ability to effectively manage supply chain and other market challenges. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by the Company’s management. Actual results may differ materially. The Company’s 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, as well as potential adverse impacts related to, or arising from, COVID-19 and its variants. The Company undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc. Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	131,957	$	125,334
Marketable securities		243,588		187,892
Accounts receivable		65,101		55,368
Unbilled receivables		64,252		125,698
Inventories		34,615		20,900
Prepaids and other current assets		11,112		12,022
Total current assets		550,625		527,214
Intangible assets, net		32,015		50,880
Goodwill		286,812		292,040
Property, plant and equipment, net		73,466		86,255
Operating lease right-of-use assets		20,964		24,143
Deferred tax assets		131,020		3,031
Unbilled receivables		3,479		25,222
Income taxes receivable		84,487		1,064
Other assets		1,463		2,745
Total assets	$	1,184,331	$	1,012,594

LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,682	$	24,815
Accrued salaries and benefits		13,076		20,502
Convertible notes		—		10,378
Deferred revenue		17,459		23,861
Income taxes payable		8,638		18,137
Operating lease liabilities		4,174		5,024
Other current liabilities		25,167		23,992
Total current liabilities		84,196		126,709
Long-term liabilities:
Long-term operating lease liabilities		26,117		29,079
Long-term income taxes payable		77,655		5,892
Deferred tax liabilities		5,819		24,964
Other long-term liabilities		34,978		46,653
Total long-term liabilities		144,569		106,588
Total stockholders’ equity		955,566		779,297
Total liabilities and stockholders’ equity	$	1,184,331	$	1,012,594

Rambus Inc. Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands, except per share amounts)	2023			2022			2023			2022
Revenue:
Product revenue	$	52,181		$	58,619		$	170,934		$	159,890
Royalties		28,857			29,878			97,698			108,380
Contract and other revenue		24,260			23,747			70,260			64,156
Total revenue		105,298			112,244			338,892			332,426
Cost of revenue:
Cost of product revenue		19,388			21,953			64,554			60,767
Cost of contract and other revenue		1,295			1,455			4,280			3,053
Amortization of acquired intangible assets		3,349			3,576			10,472			10,375
Total cost of revenue		24,032			26,984			79,306			74,195
Gross profit		81,266			85,260			259,586			258,231
Operating expenses (benefits):
Research and development		37,368			39,295			120,842			118,648
Sales, general and administrative		25,333			26,198			82,484			79,409
Amortization of acquired intangible assets		258			433			1,022			1,259
Restructuring and other charges (recoveries)		(100	)		—			9,394			—
Gain on divestiture		(90,843	)		—			(90,843	)		—
Impairment of assets		10,045			—			10,045			—
Change in fair value of earn-out liability		(5,666	)		2,411			8,134			(1,889	)
Total operating expenses (benefits)		(23,605	)		68,337			141,078			197,427
Operating income		104,871			16,923			118,508			60,804
Interest income and other income (expense), net		2,715			2,838			7,112			6,936
Gain on fair value of equity security		—			3,547			—			3,547
Loss on extinguishment of debt		—			(17,129	)		—			(83,626	)
Loss on fair value adjustment of derivatives, net		—			(2,302	)		(240	)		(10,585	)
Interest expense		(356	)		(437	)		(1,113	)		(1,390	)
Interest and other income (expense), net		2,359			(13,483	)		5,759			(85,118	)
Income (loss) before income taxes		107,230			3,440			124,267			(24,314	)
Provision for (benefit from) income taxes		4,032			2,501			(151,092	)		5,945
Net income (loss)	$	103,198		$	939		$	275,359		$	(30,259	)
Net income (loss) per share:
Basic	$	0.95		$	0.01		$	2.54		$	(0.27	)
Diluted	$	0.93		$	0.01		$	2.48		$	(0.27	)
Weighted average shares used in per share calculation
Basic		108,317			109,968			108,412			110,102
Diluted		110,775			111,962			111,179			110,102

Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (Unaudited)

	Three Months Ended September 30,
(In thousands)	2023			2022
Cost of product revenue	$	19,388		$	21,953
Adjustment:
Stock-based compensation expense		(149	)		(142	)
Non-GAAP cost of product revenue	$	19,239		$	21,811

Total operating expenses (benefits)	$	(23,605	)	$	68,337
Adjustments:
Stock-based compensation expense		(9,889	)		(8,730	)
Acquisition-related costs and retention bonus expense		(37	)		(1,627	)
Amortization of acquired intangible assets		(258	)		(433	)
Restructuring and other recoveries		100			—
Expense on abandoned operating leases		(40	)		(520	)
Facility restoration costs		3			—
Severance costs		(373	)		—
Gain on divestiture		90,843			—
Impairment of assets		(10,045	)		—
Change in fair value of earn-out liability		5,666			(2,411	)
Non-GAAP total operating expenses	$	52,365		$	54,616

Interest and other income (expense), net	$	2,359		$	(13,483	)
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements		(426	)		(1,248	)
Non-cash interest expense on convertible notes		—			33
Gain on sale of equity security		—			(3,547	)
Loss on extinguishment of debt		—			17,129
Loss on fair value adjustment of derivatives, net		—			2,302
Realized loss on sale of marketable securities sold for the purpose of notes repurchase		—			450
Non-GAAP interest and other income (expense), net	$	1,933		$	1,636

Rambus Inc. Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates (Unaudited)

2023 Fourth Quarter Outlook	Three Months Ended December 31, 2023
(In millions)	Low			High
Forward-looking operating costs and expenses	$	87.5		$	83.5
Adjustments:
Stock-based compensation expense		(11.0	)		(11.0	)
Amortization of acquired intangible assets		(3.5	)		(3.5	)
Forward-looking Non-GAAP operating costs and expenses	$	73.0		$	69.0

Forward-looking interest and other income (expense), net	$	2.2		$	2.2
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements		(0.2	)		(0.2	)
Forward-looking Non-GAAP interest and other income (expense), net	$	2.0		$	2.0

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