Rambus Reports Third Quarter 2020 Financial Results
SAN JOSE, Calif., Nov. 2, 2020 /PRNewswire/ -- Rambus Inc. (NASDAQ:RMBS), a premier silicon IP and chip provider making data faster and safer, today reported financial results for the third quarter ended September 30, 2020. GAAP revenue for the third quarter was $56.9 million; licensing billings were $63.1 million, product revenue was $29.8 million, and contract and other revenue was $10.5 million. The Company also generated $44.1 million in cash provided by operating activities.
"With our sustained focus on cloud and data center markets, Rambus had a very solid third quarter driven by great execution across our businesses," said Luc Seraphin, chief executive officer of Rambus. "Our proven track record of cash generation and ability to deliver on revenue and profit makes us well positioned for strong top-line growth in 2021."
Business Review
The Company's memory interface chip business had a solid quarter, continuing to significantly outpace market growth with a 39% increase in quarterly revenue year over year. This growth is driven by ongoing increases in market share in DDR4 and continued demand in cloud and data center. For the industry transition to DDR5, Rambus is in a leading position for qualification with the memory ecosystem and CPU partners in next-generation systems.
Growing complexity in SoC design across data center, AI and 5G markets continues to drive customer engagement for the Rambus Silicon IP business, with an increasing number of design wins in interface and security IP. Designed to meet the needs of the most demanding data center AI/ML workloads, Rambus leads the industry with the fastest, silicon-demonstrated HBM2E memory interface solution capable of running up to 4 Gbps.
Lastly, Rambus extended its DRAM license agreement with Micron for an additional four years. The extension maintains the existing financial terms of the agreement, providing Micron with a license to the Company's extensive portfolio of memory interface patents through December of 2024.
Quarterly Financial Review - GAAP Three Months Ended
September 30,
(In millions, except for percentages and per share amounts) 2020 2019
Revenue
Royalties $
16.6 $
19.4
Product revenue 29.8 21.4
Contract and other revenue 10.5 16.6
Total revenue $
56.9 $
57.4
Cost of product revenue $
9.7 $
7.1
Cost of contract and other revenue $
1.3 $
2.5
Amortization of acquired intangible assets (included in total cost of revenue) $
4.3 $
3.0
Total operating expenses (1) $
54.2 $
67.7
Operating loss $
(12.5) $
(22.9)
Operating margin (22) (40)
% %
Net loss $
(12.8) $
(17.3)
Diluted net loss per share $
(0.11) $
(0.16)
Net cash provided by operating activities $
44.1 $
25.6
(1)
Includes amortization of acquired intangible assets of approximately $0.2 million for each of the three months ended
September 30, 2020 and 2019.
Quarterly Financial Review - Non-GAAP (including operational metric) (1) Three Months Ended
September 30,
(In millions) 2020 2019
Licensing billings (2) $
63.1 $
63.1
Product revenue $
29.8 $
21.4
Contract and other revenue $
10.5 $
16.6
Cost of product revenue $
9.7 $
7.1
Cost of contract and other revenue $
1.3 $
2.5
Total operating expenses $
45.7 $
57.5
Interest and other income (expense), net $
(0.6) $
1.0
Diluted share count 116 114
(1)
See "Supplemental Reconciliation of GAAP to Non-GAAP Results" table included below. Note that the applicable
non-GAAP measures are presented and that revenue, cost of product revenue and cost of contract and other
revenue are solely presented on a GAAP basis.
(2)
Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the
period, as adjusted for certain differences.
GAAP revenue for the quarter was $56.9 million, in line with expectations. The Company also had licensing billings of $63.1 million, product revenue of $29.8 million, and contract and other revenue of $10.5 million. Rambus had total GAAP cost of revenue of $15.3 million and operating expenses of $54.2 million. The Company also had total non-GAAP operating expenses of $56.7 million (which includes non-GAAP cost of revenue), below the low end of its expectations through its cost management actions. Due to the Company's strong performance and cost management actions, its revenue was in line with expectations and its profit was at the high end of its expectations. The Company had GAAP diluted net loss per share of $0.11. The Company's basic share count was 114 million shares and its diluted share count would have been 116 million shares.
Cash, cash equivalents, and marketable securities as of September 30, 2020 were $520.2 million, an increase of $34.1 million from June 30, 2020, mainly due to $44.1 million in cash provided by operating activities.
2020 Fourth Quarter Outlook
The Company will discuss its full revenue guidance for the fourth quarter of 2020 during its upcoming conference call. The following table sets forth fourth quarter outlook for other measures.
(In millions) GAAP
Non-GAAP (1)
Licensing billings (2)
$61 - $67
$61 - $67
Product revenue
$18 - $24
$18 - $24
Contract and other revenue
$9 - $15
$9 - $15
Total operating costs and expenses
$71 - $67
$59 - $55
Interest and other income (expense), net $0 ($1)
Diluted share count 117 117
(1)
See "Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates" table included
below. Note that the applicable non-GAAP measures are presented, and that revenue is solely presented on a GAAP
basis.
(2)
Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the period,
as adjusted for certain differences. This metric is the same for both GAAP and non-GAAP presentations.
For the fourth quarter of 2020, the Company expects licensing billings to be between $61 million and $67 million. The Company also expects royalty revenue to be between $12 million and $18 million, product revenue to be between $18 million and $24 million and contract and other revenue to be between $9 million and $15 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for various product sales, solutions licensing among other matters.
The Company also expects operating costs and expenses to be between $71 million and $67 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $59 million and $55 million. These expectations also assume non-GAAP interest and other income (expense), net, of ($1 million), tax rate of 24% and diluted share count of 117 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million), non-cash interest expense on convertible notes ($2 million) and interest income related to the significant financing component from fixed-fee patent and technology licensing arrangements ($3 million).
Conference Call
Rambus management will discuss the results of the quarter during a conference call scheduled for 2:00pm 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: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID# 2281104.
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 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, restructuring charges, impairment (recovery) of assets held for sale, amortization expense, 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 costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the reported 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.
Restructuring 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.
Impairment (recovery) of assets held for sale. These charges consist of non-cash charges (recoveries) to assets held for sale and are excluded because such charges are non-recurring and do not reduce the Company's liquidity.
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 24 percent for both 2020 and 2019, 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 premier Silicon IP and chip provider that makes data faster and safer. With 30 years of innovation, we continue to develop the foundational technology for all modern computing systems. Leveraging our semiconductor expertise, Rambus solutions speed performance, expand capacity and improve security for today's most demanding applications. From data center and edge to artificial intelligence and automotive, our interface and security IP, and memory interface chips enable SoC and system designers to deliver their vision of the future. 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 operating results and business opportunities, growth in product and service offerings and product revenue, expected benefits of our merger, acquisition and divestiture activity and related integration, and financial guidance for the fourth quarter of 2020, including licensing billings and revenue estimates, operating costs and expenses, interest and other income (expense), net and estimated, fixed, long-term projected tax rates on a GAAP and non-GAAP basis, as appropriate. 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, as well as the potential adverse impacts related to, or arising from, the Novel Coronavirus (COVID-19). Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.
Contact
Rahul Mathur
Senior Vice President, Finance and Chief Financial Officer
Rambus Inc.
(408) 462-8000
rmathur@rambus.com
Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
September 30, December 31,
2020 2019
---
ASSETS
Current assets:
Cash and cash equivalents $
89,475 $
102,176
Marketable securities 430,746 305,488
Accounts receivable 33,025 44,039
Unbilled receivables 141,341 184,366
Inventories 14,218 10,086
Prepaids and other current assets 16,229 18,524
Total current assets 725,034 664,679
Intangible assets, net 41,052 54,900
Goodwill 183,222 183,465
Property, plant and equipment, net 59,425 44,714
Operating lease right-of-use assets 29,961 37,020
Deferred tax assets 5,249 4,574
Unbilled receivables, long-term 260,404 343,703
Other assets 4,671 5,931
Total assets $
1,309,018 $
1,338,986
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
13,323 $
9,549
Accrued salaries and benefits 15,719 20,291
Deferred revenue 14,950 11,947
Income taxes payable, short-term 20,008 19,142
Operating lease liabilities 4,576 6,357
Other current liabilities 22,306 18,893
Total current liabilities 90,882 86,179
Long-term liabilities:
Convertible notes, long-term 154,182 148,788
Long-term operating lease liabilities 35,973 39,889
Long-term income taxes payable 45,882 60,094
Deferred tax liabilities 15,139 13,846
Other long-term liabilities 8,714 19,272
Total long-term liabilities 259,890 281,889
Total stockholders' equity 958,246 970,918
Total liabilities and stockholders' equity $
1,309,018 $
1,338,986
Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---
2020 2019 2020 2019
---
Revenue:
Royalties $
16,602 $
19,448 $
53,253 $
71,351
Product revenue 29,769 21,377 92,222 46,372
Contract and other revenue 10,544 16,574 35,359 46,357
Total revenue 56,915 57,399 180,834 164,080
Cost of revenue:
Cost of product revenue 9,661 7,108 30,281 17,845
Cost of contract and other revenue 1,267 2,450 4,000 8,268
Amortization of acquired intangible assets 4,336 3,016 13,016 10,686
Total cost of revenue 15,264 12,574 47,297 36,799
Gross profit 41,651 44,825 133,537 127,281
Operating expenses:
Research and development 33,733 41,486 105,085 119,995
Sales, general and administrative 20,182 26,521 64,387 76,835
Amortization of acquired intangible assets 236 170 832 2,409
Restructuring charges - 1,374 836 4,233
Change in fair value of earn-out liability - (1,800)
Impairment (recovery) of assets held for sale - (1,853) 15,137
Total operating expenses 54,151 67,698 169,340 218,609
Operating loss (12,500) (22,873) (35,803) (91,328)
Interest income and other income (expense), net 3,464 6,727 14,435 21,112
Interest expense (2,586) (2,497) (7,721) (7,302)
Interest and other income (expense), net 878 4,230 6,714 13,810
Loss before income taxes (11,622) (18,643) (29,089) (77,518)
Provision for (benefit from) income taxes 1,157 (1,312) 2,454 3,369
Net loss $
(12,779) $
(17,331) $
(31,543) $
(80,887)
Net loss per share:
Basic $
(0.11) $
(0.16) $
(0.28) $
(0.73)
Diluted $
(0.11) $
(0.16) $
(0.28) $
(0.73)
Weighted average shares used in per share calculation
Basic 113,828 111,315 113,437 110,633
Diluted 113,828 111,315 113,437 110,633
Rambus Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
Three Months Ended
September 30,
2020 2019
Total operating expenses $
54,151 $
67,698
Adjustments:
Stock-based compensation expense (6,834) (7,388)
Acquisition-related costs and retention bonus expense (1,327) (3,052)
Amortization of acquired intangible assets (236) (170)
Restructuring charges - (1,374)
Recovery of assets held for sale - 1,853
Non-GAAP total operating expenses $
45,754 $
57,567
Interest and other income (expense), net $
878 $
4,230
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology (3,289) (4,925)
licensing arrangements
Non-cash interest expense on convertible notes 1,823 1,725
Non-GAAP interest and other income (expense), net $
(588) $
1,030
Rambus Inc.
Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates
(In millions)
(Unaudited)
2020 Fourth Quarter Outlook Three Months Ended
December 31, 2020
Low High
Forward-looking operating costs and expenses $
70.7 $
66.7
Adjustments:
Stock-based compensation expense (7.0) (7.0)
Amortization of acquired intangible assets (4.6) (4.6)
Forward-looking Non-GAAP operating costs and expenses $
59.1 $
55.1
Forward-looking interest and other income (expense), net $
0.1 $
0.1
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology (2.9) (2.9)
licensing arrangements
Non-cash interest expense on convertible notes 1.8 1.8
Forward-looking Non-GAAP interest and other income (expense), net $
(1.0) $
(1.0)
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SOURCE Rambus Inc.
