Rambus Reports Second Quarter 2020 Financial Results
SAN JOSE, Calif., Aug. 3, 2020 /PRNewswire/ -- Rambus Inc. (NASDAQ: RMBS), a premier silicon IP and chip provider making data faster and safer, today reported financial results for the second quarter ended June 30, 2020. GAAP revenue for the second quarter was $59.9 million; licensing billings were $60.7 million, product revenue was $31.7 million, and contract and other revenue was $11.2 million. The Company also generated $62.0 million in cash provided by operating activities.
"Rambus had a superb second quarter with cash generated from operations at a 10-year high and our chip business delivering its fifth consecutive quarter of record revenue," said Luc Seraphin, chief executive officer of Rambus. "This tremendous performance was enabled by our sustained focus on quality and execution, demonstrating our ability to consistently deliver."
Business Review
The need for increased bandwidth, capacity and security across all data-centric applications continues to create strong sustained demand for products and solutions that improve the performance of the global data infrastructure and drive Rambus growth.
The Company's memory interface chip business continued its growth trajectory, with a fifth consecutive quarter of record revenue. This performance was driven by a combination of increased data center and OEM qualifications, and an overall increase in market demand. With the recent industry publication of the DDR5 memory specification, Rambus remains poised as a market leader to support our customers' next-generation systems.
The Rambus Silicon IP business maintained its momentum with design wins for interface and security IP at tier-1 SoC makers across data center, AI and 5G. With the availability of the cutting-edge 112G XSR SerDes for chiplets and co-packaged optics, the Company continues to deliver solutions that enable leading-edge architectures and capabilities for high-performance systems.
Quarterly Financial Review - GAAP Three Months Ended
June 30,
(In millions, except for percentages and per share amounts) 2020 2019
Revenue
Royalties $
17.0 $
27.1
Product revenue 31.7 16.0
Contract and other revenue 11.2 15.2
Total revenue $
59.9 $
58.3
Cost of product revenue $
10.3 $
6.3
Cost of contract and other revenue $
1.5 $
2.9
Amortization of acquired intangible assets (included in total cost of revenue) $
4.3 $
3.8
Total operating expenses (1) $
56.2 $
82.3
Operating loss $
(12.5) $
(37.0)
Operating margin (21)
% 64
%
Net loss $
(10.8) $
(37.0)
Diluted net loss per share $
(0.09) $
(0.33)
Net cash provided by operating activities $
62.0 $
38.7
(1) Includes amortization of acquired
intangible assets of approximately
$0.2 million and $1.1 million for
the three months ended June 30,
2020 and 2019, respectively.
Quarterly Financial Review - Non-GAAP (including operational metric) (1) Three Months Ended
June 30,
(In millions) 2020 2019
Licensing billings (2) $
60.7 $
64.9
Product revenue $
31.7 $
16.0
Contract and other revenue $
11.2 $
15.2
Cost of product revenue $
10.3 $
6.3
Cost of contract and other revenue $
1.5 $
2.9
Total operating expenses $
47.7 $
54.9
Interest and other income (expense), net $
0.1 $
0.9
Diluted share count 115 113
(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 $59.9 million, at the high end of expectations due to the Company's strong performance in its memory interface chip business. The Company also had licensing billings of $60.7 million, product revenue of $31.7 million, and contract and other revenue of $11.2 million. Rambus had total GAAP cost of revenue of $16.1 million and operating expenses of $56.2 million. The Company also had total non-GAAP operating expenses of $59.5 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 and profit were at the high end of its expectations. The Company had GAAP diluted net loss per share of $0.09. The Company's basic share count was 114 million shares and its diluted share count would have been 115 million shares.
Cash, cash equivalents, and marketable securities as of June 30, 2020 were $486.1 million, an increase of $50.7 million from March 31, 2020, mainly due to $62.0 million in cash provided by operating activities, the highest quarterly cash generation in over 10 years.
2020 Third Quarter Outlook
The Company will discuss its full revenue guidance for the third quarter of 2020 during its upcoming conference call. The following table sets forth third quarter outlook for other measures.
(In millions) GAAP
Non-GAAP (1)
Licensing billings (2)
$55 - $61
$55 - $61
Product revenue
$29 - $35
$29 - $35
Contract and other revenue
$10 - $16
$10 - $16
Total operating costs and expenses
$76 - $72
$64 - $60
Interest and other income (expense), net $2 $0
Diluted share count 116 116
(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 third quarter of 2020, the Company expects licensing billings to be between $55 million and $61 million. The Company also expects royalty revenue to be between $9 million and $15 million, product revenue to be between $29 million and $35 million and contract and other revenue to be between $10 million and $16 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 $76 million and $72 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $64 million and $60 million. These expectations also assume non-GAAP interest and other income (expense), net, of $0 million, tax rate of 24% and diluted share count of 116 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# 1788075.
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 of assets held for sale, amortization expense, escrow settlement refund, 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 of assets held for sale. These charges consist of non-cash charges 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.
Escrow settlement refund. The Company received a refund from an escrow settlement related to a prior acquisition. The Company excludes these items because these receipts are not reflective of ongoing operating results. 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 third 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)
June 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $
103,275 $
102,176
Marketable securities 382,802 305,488
Accounts receivable 35,198 44,039
Unbilled receivables 155,448 184,366
Inventories 11,554 10,086
Prepaids and other current assets 17,970 18,524
Total current assets 706,247 664,679
Intangible assets, net 45,624 54,900
Goodwill 183,222 183,465
Property, plant and equipment, net 50,858 44,714
Operating lease right-of-use assets 31,407 37,020
Deferred tax assets 5,350 4,574
Unbilled receivables, long-term 289,044 343,703
Other assets 4,895 5,931
Total assets $
1,316,647 $
1,338,986
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $
14,016 $
9,549
Accrued salaries and benefits 16,170 20,291
Deferred revenue 10,841 11,947
Income taxes payable, short-term 20,044 19,142
Operating lease liabilities 4,463 6,357
Other current liabilities 17,924 18,893
Total current liabilities 83,458 86,179
Long-term liabilities:
Convertible notes, long-term 152,359 148,788
Long-term operating lease liabilities 37,626 39,889
Long-term income taxes payable 50,472 60,094
Deferred tax liabilities 14,724 13,846
Other long-term liabilities 12,818 19,272
Total long-term liabilities 267,999 281,889
Total stockholders' equity 965,190 970,918
Total liabilities and stockholders' equity $
1,316,647 $
1,338,986
Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Revenue:
Royalties $
16,957 $
27,050 $
36,651 $
51,903
Product revenue 31,725 16,031 62,453 24,995
Contract and other revenue 11,248 15,216 24,815 29,783
Total revenue 59,930 58,297 123,919 106,681
Cost of revenue:
Cost of product revenue (1) 10,277 6,310 20,620 10,737
Cost of contract and other revenue 1,535 2,910 2,733 5,818
Amortization of acquired intangible assets 4,336 3,807 8,680 7,670
Total cost of revenue 16,148 13,027 32,033 24,225
Gross profit 43,782 45,270 91,886 82,456
Operating expenses:
Research and development (1) 34,688 37,890 71,352 78,509
Sales, general and administrative (1) 21,310 23,794 44,205 50,314
Amortization of acquired intangible assets 248 1,114 596 2,239
Restructuring charges - 2,528 836 2,859
Change in fair value of earn-out liability - (1,800)
Impairment of assets held for sale - 16,990 16,990
Total operating expenses 56,246 82,316 115,189 150,911
Operating loss (12,464) (37,046) (23,303) (68,455)
Interest income and other income (expense), net 4,597 6,972 10,971 14,385
Interest expense (2,580) (2,534) (5,135) (4,805)
Interest and other income (expense), net 2,017 4,438 5,836 9,580
Loss before income taxes (10,447) (32,608) (17,467) (58,875)
Provision for income taxes 334 4,372 1,297 4,681
Net loss $
(10,781) $
(36,980) $
(18,764) $
(63,556)
Net loss per share:
Basic $
(0.09) $
(0.33) $
(0.17) $
(0.58)
Diluted $
(0.09) $
(0.33) $
(0.17) $
(0.58)
Weighted average shares used in per share calculation
Basic 113,572 110,875 113,240 110,287
Diluted 113,572 110,875 113,240 110,287
(1) Total stock-based compensation expense for the three and six months ended June 30, 2020 and 2019 is presented as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2020 2019 2020 2019
Cost of product revenue
$ $
1
$ $
2
Research and development $
2,515 $
3,058 $
5,128 $
6,268
Sales, general and administrative $
4,192 $
4,021 $
7,651 $
7,999
Rambus Inc.
Supplemental Reconciliation of GAAP to Non-GAAP Results
(In thousands)
(Unaudited)
Three Months Ended June 30,
2020 2019
Total operating expenses $
56,246 $
82,316
Adjustments:
Stock-based compensation expense (6,707) (7,080)
Acquisition-related costs and retention bonus expense (1,577)
Amortization of acquired intangible assets (248) (1,114)
Restructuring charges - (2,528)
Impairment of assets held for sale - (16,990)
Escrow settlement refund - 296
Non-GAAP total operating expenses $
47,714 $
54,900
Interest and other income (expense), net $
2,017 $
4,438
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology
licensing arrangements (3,697) (5,288)
Non-cash interest expense on convertible notes 1,798 1,702
Non-GAAP interest and other income (expense), net $
118 $
852
Rambus Inc.
Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates
(In millions)
(Unaudited)
2020 Third Quarter Outlook Three Months Ended
September 30, 2020
Low High
Forward-looking operating costs and expenses $
75.6 $
71.6
Adjustments:
Stock-based compensation expense (7.0) (7.0)
Amortization of acquired intangible assets (4.5) (4.5)
Forward-looking Non-GAAP operating costs and expenses $
64.1 $
60.1
Forward-looking interest and other income (expense), net $
1.5 $
1.5
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements (3.3) (3.3)
Non-cash interest expense on convertible notes 1.8 1.8
Forward-looking Non-GAAP interest and other income (expense), net $
0.0 $
0.0
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SOURCE Rambus Inc.
