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Rambus Reports First Quarter Financial Results



  Rambus Reports First Quarter Financial Results

Business and Financial Highlights:

  * Signed license agreements with LSI Corporation and EchoStar
  * Marvell selected Cryptography Research’s CryptoFirewall™
    Anti-Counterfeiting Technology for use in Consumable Security Chip
  * Transferred a set of display patents to Acacia Research subsidiary
  * Quarterly revenue of $66.9 million; non-GAAP customer licensing income of
    $72.1 million
  * Quarterly GAAP diluted loss per share of $0.09; non-GAAP diluted income
    per share of $0.11

Business Wire

SUNNYVALE, Calif. -- April 18, 2013

Rambus Inc. (NASDAQ:RMBS), the innovative technology solutions company that
brings invention to market, today reported financial results for the first
quarter ended March 31, 2013.

GAAP Financial Results:

Revenue for the first quarter of 2013 was $66.9 million, up 16% on a
sequential basis from the fourth quarter of 2012 primarily due to recognition
of one-time royalty revenue during the first quarter of 2013 from a patent
license agreement with LSI Corporation. As compared to the first quarter of
2012, revenue was up 6% for the same reason.

Total operating costs and expenses for the first quarter of 2013 were $65.4
million, 6% higher than the previous quarter, primarily due to bonus accruals
and restructuring charges. First quarter operating costs and expenses of $65.4
million included $2.0 million of general litigation expenses, $4.9 million of
stock-based compensation expenses, $2.2 million of restructuring charges, $7.0
million of amortization expenses and $4.0 million of retention bonuses from
past business acquisitions. This is compared to total operating costs and
expenses for the fourth quarter of 2012 of $61.5 million, which included $2.1
million of general litigation expenses, $4.5 million of stock-based
compensation expenses, $0.7 million of restructuring charges, $6.8 million of
amortization expenses and $4.2 million of retention bonuses from past business
acquisitions. Total operating costs and expenses for the first quarter of 2012
were $80.4 million, which included $4.1 million of general litigation
expenses, $6.7 million of stock-based compensation expenses, $7.6 million of
amortization expenses and $9.4 million of acquisition-related transaction
costs and retention bonuses from past business acquisitions.

Net loss for the first quarter of 2013 was $10.4 million as compared to net
loss of $16.1 million in the fourth quarter of 2012 and net loss of
$27.9 million in the first quarter of 2012. Diluted net loss per share for the
first quarter of 2013 was $0.09 as compared to diluted net loss per share of
$0.14 in the fourth quarter of 2012 and diluted net loss per share of $0.25 in
the first quarter of 2012.

Non-GAAP Financial Results (1):

Customer licensing income in the first quarter of 2013 was $72.1 million, up
17% sequentially from the fourth quarter of 2012, and up 11% from the first
quarter of 2012, primarily due to recognition of one-time royalty revenue
during the first quarter of 2013 from a patent license agreement with LSI
Corporation.

Total non-GAAP operating costs and expenses in the first quarter of 2013 were
$48.0 million, 6% higher than the previous quarter, primarily due to the
higher bonus accruals. Litigation expenses for the current quarter, which are
included in the non-GAAP operating costs and expenses above, were $2.0
million. The prior quarter’s non-GAAP operating costs and expenses of $45.2
million included general litigation expenses of $2.1 million. Total non-GAAP
operating costs and expenses in the first quarter of 2012 were $56.7 million,
which included general litigation expenses of $4.1 million.

Non-GAAP net income in the first quarter of 2013 was $13.4 million as compared
to non-GAAP net income of $8.3 million in the fourth quarter of 2012 and
non-GAAP net income of $3.6 million in the first quarter of 2012. Non-GAAP
diluted net income per share was $0.11 in the first quarter of 2013 as
compared to $0.07 in the fourth quarter of 2012 and $0.03 in the first quarter
of 2012.

Other Financial Highlights:

Cash, cash equivalents, and marketable securities as of March 31, 2013 were
$214.8 million, an increase of approximately $11.5 million as compared to
December 31, 2012, due primarily to cash generated from operations.

During the first quarter of 2013, the Company recorded an income tax provision
of approximately $4.5 million. As the Company continues to maintain a full
valuation allowance against its U.S. deferred tax assets, the Company’s tax
provision consists of primarily foreign withholding taxes.

The Company will host a conference call at 2:00 p.m. PT today to discuss its
financial results. The call, audio and slides will be available online at
investor.rambus.com. A replay will be available following the call on the
Rambus Investor Relations website for one week at the following numbers: (855)
859-2056 (domestic) or (404) 537-3406 (international) with ID# 32237211.

(1) 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: customer licensing income, operating costs and expenses, operating
income (loss) and net income (loss). In computing each of these non-GAAP
financial measures, the Company combined revenue, other patent royalties
received but not recognized as revenue and gain from settlement, and excluded
charges or gains relating to: stock-based compensation expenses,
acquisition-related transaction costs and retention bonus expense,
amortization expenses, costs of restatement and related legal activities,
restructuring charges, severance costs and non-cash interest expense. 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:

Customer licensing income. Customer licensing income includes the Company’s
measure of the total cash royalties received from its customers under its
licensing agreements with them. In addition, customer licensing income
includes other patent royalties received but not recognized as revenue. In
both the fourth quarter of 2012 and first quarter of 2013, a receipt of a
patent royalty payment from a customer was not recognized as revenue as not
all revenue recognition criteria were met during the period. Additionally,
since the third quarter of 2011, the Company has received patent royalty
payments from certain patent license agreements assumed in the acquisition of
CRI which were treated as favorable contracts. Cash received from these
acquired favorable contracts reduced the favorable contract intangible asset
on the Company’s balance sheet. The Company has combined these cash royalty
payments as customer licensing income to reflect the total amounts received
from its customers.

Stock-based compensation expense. These expenses consist primarily of expenses
related 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
they 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 transaction 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.

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.

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 core operation of the Company’s business.

Costs of restatement and related legal activities. These expenses consist
primarily of investigation, audit, legal and other professional fees related
to the 2006-2007 stock option investigation and related litigation, as well as
recoveries received from third parties. The Company excludes these costs and
recoveries from its non-GAAP measures primarily because the Company believes
that these non-recurring costs and recoveries have no direct correlation to
the core operation of the Company’s business.

Non-cash interest expense. 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.

Severance costs. These expenses relate to the separation payment to the
Company’s former chief executive officer. The Company excludes these costs
from its non-GAAP measures because the Company believes that these
non-recurring costs have no direct correlation to the core operations of the
Company’s business.

Income tax adjustments. For purposes of internal forecasting, planning and
analyzing future periods that assumes net income from operations, the Company
estimates a fixed, long-term projected tax rate of approximately 36 percent.
Accordingly, the Company has applied the 36 percent tax rate to its non-GAAP
financial results to assist the Company’s planning for future periods.

On occasion in the future, there may be other items, such as impairment of
goodwill and long-lived assets or 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 the innovative technology solutions company that brings invention to
market. Unleashing the intellectual power of our world-class engineers and
scientists in a collaborative and synergistic way, Rambus invents, licenses
and develops solutions that challenge and enable our customers to create the
future. While best known for creating unsurpassed semiconductor memory
architectures, Rambus is also developing world-changing products and services
in security, advanced LED lighting and displays, and immersive mobile media.
For additional information visit rambus.com.

RMBSFN

 
Rambus Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)
 
                                                March 31,      December 31,
                                             2013              2012
ASSETS
                                                                
Current assets:
Cash and cash equivalents                    $    157,215      $   148,984
Marketable securities                             57,613           54,346
Accounts receivable                               60               529
Prepaids and other current assets                 9,038            10,529
Deferred taxes                                    788              788
Total current assets                              224,714          215,176
Intangible assets, net                            145,930          153,173
Goodwill                                          124,969          124,969
Property, plant and equipment, net                78,218           86,905
Deferred taxes, long-term                         4,806            4,458
Other assets                                      3,029            3,131
Total assets                                 $    581,666      $   587,812
                                                                
LIABILITIES & STOCKHOLDERS’ EQUITY
                                                                
Current liabilities:
Accounts payable                             $    4,036        $   7,918
Accrued salaries and benefits                     31,925           23,992
Accrued litigation expenses                       10,256           9,822
Other accrued liabilities                         7,954            12,402
Total current liabilities                         54,171           54,134
Long-term liabilities:
Convertible notes, long-term                      151,487          147,556
Long-term imputed financing obligation            39,685           45,919
Other long-term liabilities                       20,526           18,609
Total long-term liabilities                       211,698          212,084
Total stockholders’ equity                        315,797          321,594
Total liabilities and stockholders’ equity   $    581,666      $   587,812
                                                                    

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)
                                                    
                                                     Three Months Ended
                                                     March 31,
                                                       2013          2012     
Revenue:
Royalties                                            $ 66,222      $ 62,043
Contract revenue                                       644           820      
Total revenue                                          66,866        62,863   
Operating costs and expenses:
Cost of revenue (1)                                    5,249         7,163
Research and development (1)                           32,848        38,394
Marketing, general and administrative (1)              25,105        34,834
Restructuring charges                                  2,206         —
Costs of restatement and related legal activities      17            30       
Total operating costs and expenses                     65,425        80,421   
Operating income (loss)                                1,441         (17,558 )
Interest income and other income (expense), net        (20     )     98
Interest expense                                       (7,312  )     (6,580  )
Interest and other income (expense), net               (7,332  )     (6,482  )
Loss before income taxes                               (5,891  )     (24,040 )
Provision for income taxes                             4,511         3,850    
Net loss                                             $ (10,402 )   $ (27,890 )
Net loss per share:
Basic                                                $ (0.09   )   $ (0.25   )
Diluted                                              $ (0.09   )   $ (0.25   )
                                                                    
Weighted average shares used in per share
calculation
Basic                                                  111,599       110,358  
Diluted                                                111,599       110,358  
                                                                    
(1) Total stock-based compensation expense for the three month periods ended

March 31, 2013 and 2012 are presented as follows:
                                                                    
                                                     Three Months Ended
                                                     March 31,
                                                       2013          2012     
Cost of revenue                                      $ —           $ 10
Research and development                             $ 1,876       $ 2,720
Marketing, general and administrative                $ 3,072       $ 3,996
                                                                              

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(In thousands)

(Unaudited)
                               
                                Three Months Ended
                                March 31,       December 31,     March 31,
                                2013            2012             2012
                                                                              
Revenue                         $  66,866       $   57,443       $  62,863
Adjustments:
Other patent royalties             5,237            4,175           2,414
received
Total customer licensing        $  72,103       $   61,618       $  65,277
income
                                                                              
Operating costs and expenses    $  65,425       $   61,470       $  80,421
Adjustments:
Other patent royalties             1,285            —               —
received
Stock-based compensation           (4,948   )       (4,516   )      (6,726   )
Acquisition-related
transaction costs and              (4,012   )       (4,191   )      (9,351   )
retention bonuses
Amortization                       (7,040   )       (6,811   )      (7,616   )
Restructuring charges              (2,206   )       (679     )      —
Severance costs                    (514     )       —               —
Costs of restatement and           (17      )       (52      )      (30      )
related legal activities
Non-GAAP operating costs and    $  47,973       $   45,221       $  56,698
expenses
                                                                              
Operating income (loss)         $  1,441        $   (4,027   )   $  (17,558  )
Adjustments:
Other patent royalties             3,952            4,175           2,414
received
Stock-based compensation           4,948            4,516           6,726
Acquisition-related
transaction costs and              4,012            4,191           9,351
retention bonuses
Amortization                       7,040            6,811           7,616
Restructuring charges              2,206            679             —
Severance costs                    514              —               —
Costs of restatement and           17               52              30
related legal activities
Non-GAAP operating income       $  24,130       $   16,397       $  8,579
                                                                              
Loss before income taxes        $  (5,891   )   $   (11,233  )   $  (24,040  )
Adjustments:
Other patent royalties             3,952            4,175           2,414
received
Stock-based compensation           4,948            4,516           6,726
Acquisition-related
transaction costs and              4,012            4,191           9,351
retention bonuses
Amortization                       7,040            6,811           7,616
Restructuring charges              2,206            679             —
Severance costs                    514              —               —
Costs of restatement and           17               52              30
related legal activities
Non-cash interest expense on       4,089            3,839           3,510
convertible notes
Non-GAAP income before income   $  20,887       $   13,030       $  5,607
taxes
Non-GAAP provision for income      7,519            4,691           2,019
taxes
Non-GAAP net income             $  13,368       $   8,339        $  3,588
                                                                              
Non-GAAP basic net income per   $  0.12         $   0.07         $  0.03
share
Non-GAAP diluted net income     $  0.11         $   0.07         $  0.03
per share
Weighted average shares used
in non-GAAP per share
calculation:
Basic                              111,599          111,332         110,358
Diluted                            118,021          118,022         115,717

Contact:

Rambus Inc.
Carolyn Robinson, 408-462-8717
Public Relations
crobinson@rambus.com
or
Rambus Inc.
Nicole Noutsios, 408-462-8050
Investor Relations
nnoutsios@rambus.com
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