(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 second quarter of 2024, the Company expects licensing billings to be between $61 million and $67 million. The Company also expects royalty revenue to be between $55 million and $61 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 $95 million and $91 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $80 million and $76 million. These expectations also assume non-GAAP interest and other income (expense), net, of $3 million, a tax rate of 22% and a diluted share count of 109 million, and exclude stock-based compensation expense of $12 million and amortization of acquired intangible assets of $3 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# 691469.
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, expense on abandoned operating leases, facility restoration costs, change in fair value of earn-out liability, loss on fair value adjustment of derivatives, net, non-cash interest expense on convertible notes 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 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 as they are related to acquisitions and have no direct correlation to the Company’s operations.
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.
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.
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.
Loss on fair value adjustment of derivatives, net. The Company has excluded its loss on fair value adjustment of derivatives, net, as this represents the costs and benefits of repurchasing its convertible notes and 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 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 22 percent and 24 percent for 2024 and 2023, respectively, 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 second quarter of 2024 and related drivers, and the Company’s ability to effectively manage 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. 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) |
March 31,
|
|
December 31,
|
||
| ASSETS |
|
|
|
||
| Current assets: |
|
|
|
||
| Cash and cash equivalents |
$ |
112,614 |
|
$ |
94,767 |
| Marketable securities |
|
278,443 |
|
|
331,077 |
| Accounts receivable |
|
86,940 |
|
|
82,925 |
| Unbilled receivables |
|
38,484 |
|
|
50,872 |
| Inventories |
|
47,599 |
|
|
36,154 |
| Prepaids and other current assets |
|
12,376 |
|
|
34,850 |
| Total current assets |
|
576,456 |
|
|
630,645 |
| Intangible assets, net |
|
25,518 |
|
|
28,769 |
| Goodwill |
|
286,812 |
|
|
286,812 |
| Property, plant and equipment, net |
|
67,277 |
|
|
67,808 |
| Operating lease right-of-use assets |
|
21,574 |
|
|
21,497 |
| Unbilled receivables |
|
3,980 |
|
|
4,423 |
| Deferred tax assets |
|
131,885 |
|
|
127,892 |
| Income taxes receivable |
|
93,926 |
|
|
88,768 |
| Other assets |
|
1,408 |
|
|
1,613 |
| Total assets |
$ |
1,208,836 |
|
$ |
1,258,227 |
|
|
|
|
|
||
| LIABILITIES & STOCKHOLDERS’ EQUITY |
|
|
|
||
| Current liabilities: |
|
|
|
||
| Accounts payable |
$ |
24,775 |
|
$ |
18,074 |
| Accrued salaries and benefits |
|
12,687 |
|
|
17,504 |
| Deferred revenue |
|
16,399 |
|
|
17,393 |
| Income taxes payable |
|
3,899 |
|
|
5,099 |
| Operating lease liabilities |
|
4,722 |
|
|
4,453 |
| Other current liabilities |
|
20,125 |
|
|
26,598 |
| Total current liabilities |
|
82,607 |
|
|
89,121 |
| Long-term liabilities: |
|
|
|
||
| Long-term operating lease liabilities |
|
25,899 |
|
|
26,255 |
| Long-term income taxes payable |
|
85,569 |
|
|
78,947 |
| Deferred tax liabilities |
|
4,205 |
|
|
4,462 |
| Other long-term liabilities |
|
18,964 |
|
|
21,341 |
| Total long-term liabilities |
|
134,637 |
|
|
131,005 |
| Total stockholders’ equity |
|
991,592 |
|
|
1,038,101 |
| Total liabilities and stockholders’ equity |
$ |
1,208,836 |
|
$ |
1,258,227 |
| Rambus Inc. Condensed Consolidated Statements of Operations (Unaudited) |
|||||||
|
|
Three Months Ended March 31, |
||||||
| (In thousands, except per share amounts) |
2024 |
|
2023 |
||||
| Revenue: |
|
|
|
||||
| Product revenue |
$ |
50,360 |
|
|
$ |
63,775 |
|
| Royalties |
|
47,476 |
|
|
|
28,169 |
|
| Contract and other revenue |
|
20,035 |
|
|
|
21,818 |
|
| Total revenue |
|
117,871 |
|
|
|
113,762 |
|
| Cost of revenue: |
|
|
|
||||
| Cost of product revenue |
|
20,048 |
|
|
|
26,423 |
|
| Cost of contract and other revenue |
|
555 |
|
|
|
1,691 |
|
| Amortization of acquired intangible assets |
|
3,056 |
|
|
|
3,562 |
|
| Total cost of revenue |
|
23,659 |
|
|
|
31,676 |
|
| Gross profit |
|
94,212 |
|
|
|
82,086 |
|
| Operating expenses: |
|
|
|
||||
| Research and development |
|
37,359 |
|
|
|
41,898 |
|
| Sales, general and administrative |
|
25,827 |
|
|
|
30,964 |
|
| Amortization of acquired intangible assets |
|
195 |
|
|
|
382 |
|
| Change in fair value of earn-out liability |
|
700 |
|
|
|
6,900 |
|
| Total operating expenses |
|
64,081 |
|
|
|
80,144 |
|
| Operating income |
|
30,131 |
|
|
|
1,942 |
|
| Interest income and other income (expense), net |
|
4,587 |
|
|
|
2,161 |
|
| Loss on fair value adjustment of derivatives, net |
|
— |
|
|
|
(240 |
) |
| Interest expense |
|
(366 |
) |
|
|
(381 |
) |
| Interest and other income (expense), net |
|
4,221 |
|
|
|
1,540 |
|
| Income before income taxes |
|
34,352 |
|
|
|
3,482 |
|
| Provision for income taxes |
|
1,454 |
|
|
|
201 |
|
| Net income |
$ |
32,898 |
|
|
$ |
3,281 |
|
| Net income per share: |
|
|
|
||||
| Basic |
$ |
0.30 |
|
|
$ |
0.03 |
|
| Diluted |
$ |
0.30 |
|
|
$ |
0.03 |
|
| Weighted average shares used in per share calculation |
|
|
|
||||
| Basic |
|
108,090 |
|
|
|
108,277 |
|
| Diluted |
|
110,037 |
|
|
|
111,153 |
|
| Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (Unaudited) |
|||||||
|
|
Three Months Ended March 31, |
||||||
| (In thousands) |
2024 |
|
2023 |
||||
| Cost of product revenue |
$ |
20,048 |
|
|
$ |
26,423 |
|
| Adjustment: |
|
|
|
||||
| Stock-based compensation expense |
|
(124 |
) |
|
|
(131 |
) |
| Non-GAAP cost of product revenue |
$ |
19,924 |
|
|
$ |
26,292 |
|
|
|
|
|
|
||||
| Total operating expenses |
$ |
64,081 |
|
|
$ |
80,144 |
|
| Adjustments: |
|
|
|
||||
| Stock-based compensation expense |
|
(9,372 |
) |
|
|
(12,932 |
) |
| Acquisition-related costs and retention bonus expense |
|
(111 |
) |
|
|
(825 |
) |
| Amortization of acquired intangible assets |
|
(195 |
) |
|
|
(382 |
) |
| Expense on abandoned operating leases |
|
— |
|
|
|
(521 |
) |
| Facility restoration costs |
|
— |
|
|
|
(316 |
) |
| Change in fair value of earn-out liability |
|
(700 |
) |
|
|
(6,900 |
) |
| Non-GAAP total operating expenses |
$ |
53,703 |
|
|
$ |
58,268 |
|
|
|
|
|
|
||||
| Interest and other income (expense), net |
$ |
4,221 |
|
|
$ |
1,540 |
|
| Adjustments: |
|
|
|
||||
| Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements |
|
(180 |
) |
|
|
(919 |
) |
| Non-cash interest expense on convertible notes |
|
— |
|
|
|
3 |
|
| Loss on fair value adjustment of derivatives, net |
|
— |
|
|
|
240 |
|
| Non-GAAP interest and other income (expense), net |
$ |
4,041 |
|
|
$ |
864 |
|
| Rambus Inc. Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates (Unaudited) |
||||||||
| 2024 Second Quarter Outlook |
|
Three Months Ended June 30, 2024 |
||||||
| (In millions) |
|
Low |
|
High |
||||
| Forward-looking operating costs and expenses |
|
$ |
95.0 |
|
|
$ |
91.0 |
|
| Adjustments: |
|
|
|
|
||||
| Stock-based compensation expense |
|
|
(12.0 |
) |
|
|
(12.0 |
) |
| Amortization of acquired intangible assets |
|
|
(3.0 |
) |
|
|
(3.0 |
) |
| Forward-looking Non-GAAP operating costs and expenses |
|
$ |
80.0 |
|
|
$ |
76.0 |
|
