Rambus Beats on Q1 Earnings; Outlook Tepid - Analyst Blog
April 22 2014 - 10:00AM
Zacks
Rambus Inc. (RMBS) posted first-quarter 2014
adjusted earnings per share of 16 cents, comprehensively beating
the Zacks Consensus Estimate of a penny. Earnings increased from 6
cents reported in the year-ago quarter.
Adjusted earnings on a proportionate tax basis exclude
amortization, restructuring charges, acquisition costs and other
one-time items but include stock-based compensation expenses.
Nonetheless, tepid revenue guidance outlook took its toll on the
stock and shares were down 7.72% in after-hours trade on
Monday.
Quarter Details
Revenues came in at $78.3 million which not only increased 17.1%
on a year-over-year basis but were also ahead of the Zacks
Consensus Estimate of $73 million. Licensing agreements with
Micron Technology (MU), SK Hynix and Nanya
Technology positively impacted revenues which more than offset
lower royalty payments received from Samsung.
The company reported revenues from Memory and Interfaces
Division (MID), Cryptography Research (CRI) and LED divisions of
$61.2 million (up 2.5% year over year), $12.9 million (up 87.5%
year over year) and $4.2 million (above 1,000% year-over-year
increase) respectively.
Adjusted operating expenses (including stock-based compensation)
in the first quarter were $46.8 million, down 9.3% from the
year-ago quarter primarily due to lower-than-expected legal
expenses and slow recruitment during the quarter. Operating
expenses, as a percentage of revenues, contracted from 77.2% to
59.8% on a year-over-year basis.
Adjusted operating income came in at $31.5 million compared with
$15.2 million in the year-ago quarter. Operating margin was 40.2%
compared with 22.8% reported in the year-ago quarter.
Rambus’ adjusted net income increased from $7.2 million or 6
cents per share to $18.6 million or 16 cents. Adjusted net income
amortization, restructuring charges, acquisition costs and other
one-time items but include stock-based compensation expenses.
Rambus exited the quarter with cash, cash equivalents and
marketable securities of approximately $403.4 million, up from
$387.7 million in the prior quarter. During the quarter, the
company generated cash from operations of $17.0 million.
Guidance
Rambus expects its second-quarter results to be impacted by
lower royalty revenues from PSV shipments and payment related
issues from certain CRI clients. Thus, the company expects
second-quarter revenues to range between $69 million and $74
million (mid-point $71.5 million), lower than the Zacks Consensus
Estimate of $75 million.
Moreover, the company expects pro-forma operating expenses to be
between $44.0 million and $47.0 million. Pro-forma net income is
expected in the range of $12.0 to $17.0 million.
Nonetheless, the company reiterated the fiscal 2014 outlook. For
fiscal 2014, the company expects customer licensing income to be
between $295.0 million and $305.0 million. Moreover, the company
expects pro-forma operating expenses to be between $180.0 million
and $185.0 million and cash flow from operations are expected in
the $75 to $85 million range.
Our Take
We are encouraged by Rambus’ first-quarter results as both the
top and bottom lines surpassed the Zacks Consensus Estimate.
However, the company provided tepid revenue guidance due to
seasonality in payments schedule of customers.
Rambus is going through a restructuring phase and we expect it
to yield favorable results in the coming quarters. The company has
resolved several of its legal disputes which lowered litigation
expenses which in turn positively impacted the operating results.
Additionally, the licensing agreements — the result of successful
monetizing of its patents — remain a recurring revenue source for
Rambus.
Moreover, with the rising popularity of energy-efficient
lighting, LED products are finding place in the latest
architectural, retail, commercial and residential lighting
fixtures. We find Rambus in a favorable position to capitalize on
this opportunity.
However, competition from Semiconductor Manufacturing
International Corp. (SMI) and Advanced Micro
Devices (AMD) as well as the oversupply
in the semiconductor market are concerns.
Currently, Rambus sports a Zacks Rank #1 (Strong Buy).
ADV MICRO DEV (AMD): Free Stock Analysis Report
MICRON TECH (MU): Free Stock Analysis Report
RAMBUS INC (RMBS): Free Stock Analysis Report
SEMICON MFG-ADR (SMI): Free Stock Analysis Report
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