Rambus Reports Second Quarter Financial Results

  Rambus Reports Second Quarter Financial Results

Business and Financial Highlights:

  *Signed license agreements with SK Hynix and STMicroelectronics; settled
    all legal claims
  *Expanded family of LED-based bulbs with advanced color temperature change
    technology
  *Quarterly revenue of $57.9 million; non-GAAP customer licensing income of
    $61.3 million
  *Quarterly GAAP diluted loss per share of $0.06; non-GAAP diluted income
    per share of $0.06

Business Wire

SUNNYVALE, Calif. -- July 18, 2013

Rambus Inc. (NASDAQ:RMBS), the innovative technology solutions company that
brings invention to market, today reported financial results for the second
quarter ended June 30, 2013.

GAAP Financial Results:

Revenue for the second quarter of 2013 was $57.9 million, down 13% on a
sequential basis from the first quarter of 2013 primarily due to recognition
of one-time royalty revenue during the first quarter of 2013 from LSI
Corporation. This was, however, partially offset by royalty revenue received
from STMicroelectronics, subsequent to the settlement, in the second quarter
of 2013. As compared to the second quarter of 2012, revenue was up 3%
primarily due to the royalty revenue received in the second quarter of 2013
from STMicroelectronics.

Revenue for the six months ended June 30, 2013 was $124.8 million, which was
up 5% over the prior year period, primarily due to recognition of one-time
royalty revenue during the first quarter of 2013 from LSI Corporation.

Total operating costs and expenses for the second quarter of 2013 were $52.2
million, 20% lower than the previous quarter, mostly due to the one-time
reversal of accrued SK Hynix related litigation costs and the absence of
restructuring charges. Second quarter operating costs and expenses of $52.2
million included negative $6.2 million of general litigation expenses
(primarily due to the reversal of the accrued litigation costs referred to
above), $3.6 million of stock-based compensation expenses, $7.0 million of
amortization expenses and $3.4 million of retention bonuses from past business
acquisitions. This is compared to total operating costs and expenses for the
first quarter of 2013 of $65.4 million, which 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. As compared
to a year ago, total operating costs and expenses for the second quarter of
2012 were $78.0 million, which included $4.5 million of general litigation
expenses, $6.2 million of stock-based compensation expenses, $7.9 million of
amortization expenses and $7.7 million of acquisition-related transaction
costs and retention bonuses from past business acquisitions.

Total operating costs and expenses for the six months ended June 30, 2013 were
$117.6 million, which included $8.5 million of stock-based compensation
expenses, $14.0 million of amortization expenses and $7.4 million of retention
bonuses from past business acquisitions. This is compared to total operating
costs and expenses for the six months ended June 30, 2012 of $158.4 million,
which included $12.9 million of stock-based compensation expenses, $15.6
million of amortization expenses and $17.1 million of acquisition-related
transaction costs and retention bonuses from past business acquisitions.
General litigation expenses for the six months ended June 30, 2013 were
negative $4.2 million, a decrease of $12.8million from the same period in
2012. The change in total operating costs and expenses was primarily
attributable to lower general litigation expenses, lower acquisition-related
transaction costs and retention bonuses from past business acquisitions, lower
headcount-related costs due to the restructuring efforts in the second half of
2012 and lower consulting costs, partially offset by restructuring charges in
the first half of 2013.

Net loss for the second quarter of 2013 was $6.4million as compared to net
loss of $10.4million in the first quarter of 2013 and net loss of
$32.2million in the second quarter of 2012. Diluted net loss per share for
the second quarter of 2013 was $0.06 as compared to diluted net loss per share
of $0.09 in the first quarter of 2013 and diluted net loss per share of $0.29
in the second quarter of 2012.

Net loss for the six months ended June 30, 2013 was $16.8 million as compared
to a net loss of $60.1 million for the same period of 2012. Diluted net loss
per share for the six months ended June 30, 2013 was $0.15 as compared to a
diluted net loss per share of $0.54 for the same period of 2012.

Non-GAAP Financial Results (1):

Customer licensing income in the second quarter of 2013 was $61.3 million,
down 15% sequentially from the first quarter of 2013 primarily due to
recognition of one-time royalty revenue during the first quarter of 2013 from
LSI Corporation, and up 7% from the second quarter of 2012, primarily due to
royalty revenue from STMicroelectronics in the second quarter of 2013.

Customer licensing income for the six months ended June 30, 2013 was $133.4
million as compared to $122.7 million in the same period of 2012, primarily
due to recognition of one-time royalty revenue from LSI Corporation.

Total non-GAAP operating costs and expenses in the second quarter of 2013 were
$47.7 million, 1% lower than the previous quarter. Non-GAAP general litigation
expenses for the current quarter, which are included in the non-GAAP operating
costs and expenses above, were $2.3 million. The prior quarter’s non-GAAP
operating costs and expenses of $48.0 million included general litigation
expenses of $2.0 million. Total non-GAAP operating costs and expenses in the
second quarter of 2012 were $56.0 million, which included general litigation
expenses of $4.5 million.

Total non-GAAP operating costs and expenses for the six months ended June 30,
2013 were $95.6 million as compared to $112.7 million in the same period of
2012 due primarily to lower general litigation expenses, lower
headcount-related costs due to the restructuring in the second half of 2012
and lower consulting costs.

Non-GAAP net income in the second quarter of 2013 was $6.6 million as compared
to non-GAAP net income of $13.4 million in the first quarter of 2013 and
non-GAAP net loss of $1.1 million in the second quarter of 2012. Non-GAAP
diluted net income per share was $0.06 in the second quarter of 2013 as
compared to $0.11 in the first quarter of 2013 and diluted net loss per share
of $0.01 in the second quarter of 2012. Non-GAAP net income for the six months
ended June 30, 2013 was $20.0 million as compared to $2.5 million in the same
period of 2012. Non-GAAP diluted net income per share was $0.17 for the six
months ended June 30, 2013 as compared to non-GAAP diluted net income per
share of $0.02 for the six months ended June 30, 2012.

Other Financial Highlights:

Cash, cash equivalents, and marketable securities as of June 30, 2013 were
$205.6 million, a decrease of approximately $9.2million as compared to March
31, 2013. During the second quarter of 2013, the Company used $16.7 million to
pay retention bonuses related to the acquisition of Cryptography Research,
Inc. and $4.3 million to pay the interest expense related to the Company’s
convertible notes.

During the second quarter of 2013, the Company recorded an income tax
provision of $4.7 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.

Conference Call:

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# 18188767.

(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 following items were considered: other patent
royalties received but not recognized as revenue, proceeds from sale of
intellectual property, 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, 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:

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 and
proceeds from sale of intellectual property. In both the first and second
quarters of 2013, certain patent royaltiesreceived 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 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 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.

Reversal of one-time litigation costs. This adjustment is a one-time
litigation cost reversal of prior litigation costs accrued related to
previously awarded costs in connection with the SK Hynix litigation. The
Company excludes this reversal from its non-GAAP measures because the Company
believes that this reversal has no direct correlation to the core operations
of the Company’s business and it is a one-time event.

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)
                                                             
                                            June 30,   December 31,
                                             2013               2012
ASSETS
                                                                
Current assets:
Cash and cash equivalents                    $     155,276      $   148,984
Marketable securities                              50,364           54,346
Accounts receivable                                1,003            529
Prepaids and other current assets                  8,694            10,529
Deferred taxes                                    788             788
Total current assets                               216,125          215,176
Intangible assets, net                             139,395          153,173
Goodwill                                           124,969          124,969
Property, plant and equipment, net                 75,831           86,905
Deferred taxes, long-term                          4,806            4,458
Other assets                                      3,118           3,131
Total assets                                 $     564,244      $   587,812
                                                                
LIABILITIES & STOCKHOLDERS’ EQUITY
                                                                
Current liabilities:
Accounts payable                             $     5,300        $   7,918
Accrued salaries and benefits                      29,582           23,992
Accrued litigation expenses                        1,673            9,822
Convertible notes, short-term                      155,473          —
Other accrued liabilities                         5,957           12,402
Total current liabilities                          197,985          54,134
Long-term liabilities:
Convertible notes, long-term                       —                147,556
Long-term imputed financing obligation             39,724           45,919
Other long-term liabilities                       10,600          18,609
Total long-term liabilities                       50,324          212,084
Total stockholders’ equity                        315,935         321,594
Total liabilities and stockholders’ equity   $     564,244      $   587,812
                                                                    

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)
                                                  
                   Three Months Ended                Six Months Ended

                   June 30,                          June 30,
                     2013           2012         2013       2012    
                   
Revenue:
Royalties          $  57,009         $  55,723       $ 123,231     $ 117,766
Contract             910             492          1,554       1,312   
revenue
Total revenue        57,919          56,215       124,785     119,078 
Operating costs
and expenses:
Cost of revenue       7,365             7,340          13,899        14,503
(1)
Research and          30,777            38,347         63,625        76,741
development (1)
Marketing,
general and           14,134            32,194         39,239        67,028
administrative
(1)
Gain from sale
of intellectual       (103     )        —              (1,388  )     —
property
Costs of
restatement and       2                 83             19            113
related legal
activities
Restructuring        —               —            2,206       —       
charges
Total operating
costs and            52,175          77,964       117,600     158,385 
expenses
Operating             5,744             (21,749  )     7,185         (39,307 )
income (loss)
Interest income
and other             (19      )        89             (39     )     187
income
(expense), net
Interest             (7,426   )       (6,719   )    (14,738 )    (13,299 )
expense
Interest and
other income         (7,445   )       (6,630   )    (14,777 )    (13,112 )
(expense), net
Loss before           (1,701   )        (28,379  )     (7,592  )     (52,419 )
income taxes
Provision for        4,743           3,837        9,254       7,687   
income taxes
Net loss           $  (6,444   )     $  (32,216  )   $ (16,846 )   $ (60,106 )
Net loss per
share:
Basic              $  (0.06    )     $  (0.29    )   $ (0.15   )   $ (0.54   )
Diluted            $  (0.06    )     $  (0.29    )   $ (0.15   )   $ (0.54   )
Weighted
average shares
used in per
share
calculation
Basic                112,183         110,553      111,892     110,456 
Diluted              112,183         110,553      111,892     110,456 
_________
(1) Total stock-based compensation expense for the three and six month periods
ended June 30, 2013 and June 30, 2012 are presented as follows:
                                                     
                   Three Months Ended                Six Months Ended

                   June 30,                          June 30,
                     2013            2012         2013        2012    
Cost of revenue    $  5              $  5            $ 5           $ 15
Research and       $  1,660          $  2,631        $ 3,536       $ 5,351
development
Marketing,
general and        $  1,909          $  3,579        $ 4,981       $ 7,575
administrative
                                                                             

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(In thousands)

(Unaudited)
                    
                      Three Months Ended                  Six Months Ended
                      June     March     June     June     June
                      30,      31,       30,      30,      30,
                      2013        2013        2012        2013        2012
                                                                                
Revenue               $ 57,919    $ 66,866    $ 56,215    $ 124,785   $ 119,078
Adjustments:
Other patent            3,392       5,237       1,201       8,629       3,615
royalties received
Total customer        $ 61,311    $ 72,103    $ 57,416    $ 133,414   $ 122,693
licensing income
                                                                                
Operating costs and   $ 52,175    $ 65,425    $ 77,964    $ 117,600   $ 158,385
expenses
Adjustments:
Other patent            965         1,285       —           2,250       —
royalties received
Stock-based             (3,574  )   (4,948  )   (6,215  )   (8,522  )   (12,941 )
compensation
Acquisition-related
transaction costs       (3,385  )   (4,012  )   (7,699  )   (7,397  )   (17,050 )
and retention
bonuses
Amortization            (6,997  )   (7,040  )   (7,943  )   (14,037 )   (15,559 )
Reversal of
one-time litigation     8,482       —           —           8,482       —
costs
Restructuring           —           (2,206  )   —           (2,206  )   —
charges
Severance costs         —           (514    )   —           (514    )   —
Costs of
restatement and         (2      )   (17     )   (83     )   (19     )   (113    )
related legal
activities
Non-GAAP operating    $ 47,664    $ 47,973    $ 56,024    $ 95,637    $ 112,722
costs and expenses
                                                                                
Operating income      $ 5,744     $ 1,441     $ (21,749 ) $ 7,185     $ (39,307 )
(loss)
Adjustments:
Other patent            2,427       3,952       1,201       6,379       3,615
royalties received
Stock-based             3,574       4,948       6,215       8,522       12,941
compensation
Acquisition-related
transaction costs       3,385       4,012       7,699       7,397       17,050
and retention
bonuses
Amortization            6,997       7,040       7,943       14,037      15,559
Reversal of
one-time litigation     (8,482  )   —           —           (8,482  )   —
costs
Restructuring           —           2,206       —           2,206       —
charges
Severance costs         —           514         —           514         —
Costs of
restatement and         2           17          83          19          113
related legal
activities
Non-GAAP operating    $ 13,647    $ 24,130    $ 1,392     $ 37,777    $ 9,971
income
                                                                                
Loss before income    $ (1,701  ) $ (5,891  ) $ (28,379 ) $ (7,592  ) $ (52,419 )
taxes
Adjustments:
Other patent            2,427       3,952       1,201       6,379       3,615
royalties received
Stock-based             3,574       4,948       6,215       8,522       12,941
compensation
Acquisition-related
transaction costs       3,385       4,012       7,699       7,397       17,050
and retention
bonuses
Amortization            6,997       7,040       7,943       14,037      15,559
Reversal of
one-time litigation     (8,482  )   —           —           (8,482  )   —
costs
Restructuring           —           2,206       —           2,206       —
charges
Severance costs         —           514         —           514         —
Costs of
restatement and         2           17          83          19          113
related legal
activities
Non-cash interest
expense on              4,145       4,089       3,557       8,234       7,067
convertible notes
Non-GAAP income
(loss) before         $ 10,347    $ 20,887    $ (1,681  ) $ 31,234    $ 3,926
income taxes
Non-GAAP provision
for (benefit from)      3,725       7,519       (606    )   11,244      1,413
income taxes
Non-GAAP net income   $ 6,622     $ 13,368    $ (1,075  ) $ 19,990    $ 2,513
(loss)
                                                                                
Non-GAAP basic net
income (loss) per     $ 0.06      $ 0.12      $ (0.01   ) $ 0.18      $ 0.02
share
Non-GAAP diluted
net income (loss)     $ 0.06      $ 0.11      $ (0.01   ) $ 0.17      $ 0.02
per share
Weighted average
shares used in
non-GAAP per share
calculation:
Basic                   112,183     111,599     110,553     111,892     110,456
Diluted                 116,162     118,021     110,553     116,009     116,909

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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