Business and Financial Highlights
- Signed comprehensive license agreement
with Qualcomm for innovative memory, interface and security
technologies
- Unveiled CryptoManager™ secure feature
management platform with Qualcomm as lead customer
- Generated quarterly revenue of $76.5
million
- Quarterly GAAP diluted net income per
share of $0.04
- Quarterly non-GAAP diluted net income
per share of $0.16
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, 2014.
GAAP Financial Results:
Revenue for the second quarter of 2014 was $76.5 million, down
2% on a sequential basis from the first quarter of 2014 primarily
due to a one-time catch-up payment from the new license agreement
signed with Nanya Technology Corporation during the first quarter
of 2014. As compared to the second quarter of 2013, revenue was up
32% primarily due to the license agreements signed with SK hynix,
Micron Technology, Nanya Technology Corporation and Qualcomm,
offset by lower royalty revenue from Samsung.
Revenue for the six months ended June 30, 2014 was $154.8
million, which was up 24% over the prior year period, primarily due
to the license agreements signed with SK hynix, Micron Technology,
Nanya Technology Corporation and Qualcomm, offset by lower royalty
revenue from Samsung.
Total operating costs and expenses for the second quarter of
2014 were $56.4 million, 2% higher than the previous quarter and 8%
higher than the second quarter of 2013. Second quarter operating
costs and expenses of $56.4 million included $4.9 million of
stock-based compensation expenses, $6.8 million of amortization
expenses and $1.0 million of retention bonus expense from
acquisitions. In comparison, total operating costs and expenses for
the first quarter of 2014 of $55.1 million included $2.9 million of
stock-based compensation expenses, $6.8 million of amortization
expenses and $1.4 million of retention bonus expense from
acquisitions. Total operating costs and expenses for the second
quarter of 2013 were $52.2 million, which included a credit of $6.2
million of general litigation expenses (primarily due to the $8.5
million one-time reversal of accrued SK hynix related litigation
costs), $3.6 million of stock-based compensation expenses, $7.0
million of amortization expenses and $3.4 million of retention
bonus expense from acquisitions. The change in total operating
costs and expenses in the second quarter of 2014 as compared to the
first quarter of 2014 was primarily due to increased stock-based
compensation expenses partially offset by lower bonus accrual. The
change in total operating costs and expenses in the second quarter
of 2014 as compared to the second quarter of 2013 was as a result
of the one-time reversal of accrued SK hynix related litigation
costs in the second quarter of 2013 and higher cost of sales due to
the sale of lighting products offset by lower retention bonus
expense from acquisitions, bonus accrual and consulting
expenses.
Total operating costs and expenses for the six months ended June
30, 2014 were $111.5 million, 5% lower than the six months ended
June 30, 2013. The six months operating costs and expenses of
$111.5 million included $7.8 million of stock-based compensation
expenses, $13.6 million of amortization expenses and $2.5 million
of retention bonus expense from acquisitions. This is compared to
total operating costs and expenses for the six months ended June
30, 2013 of $117.6 million, which included $8.5 million of
stock-based compensation expenses, $14.0 million of amortization
expenses, $8.5 million one-time reversal of accrued SK hynix
related litigation costs, $7.4 million of retention bonus expense
from acquisitions and $2.2 million of restructuring charges. The
change in total operating costs and expenses was primarily
attributable to lower retention bonus expense from acquisitions,
bonus accrual and lower consulting costs offset by higher cost of
sales due to the sale of lighting products and as a result of the
one-time reversal of accrued SK hynix related litigation costs in
the second quarter of 2013.
Net income for the second quarter of 2014 was $5.0 million
as compared to net income of $7.8 million in the first quarter
of 2014 and net loss of $7.8 million in the second quarter of
2013. Diluted net income per share for the second quarter of 2014
was $0.04 as compared to diluted net income per share of $0.07 in
the first quarter of 2014 and diluted net loss per share of $0.07
in the second quarter of 2013.
Net income for the six months ended June 30, 2014 was $12.8
million as compared to a net loss of $18.2 million for the same
period of 2013. Diluted net income per share for the six months
ended June 30, 2014 was $0.11 as compared to a diluted net loss per
share of $0.16 for the same period of 2013.
Non-GAAP Financial Results (1):
Total non-GAAP operating costs and expenses in the second
quarter of 2014 were $43.8 million which was relatively flat as
compared to the prior quarter, and 6% lower than the second quarter
of 2013.
Total non-GAAP operating costs and expenses for the six months
ended June 30, 2014 were $87.7 million as compared to $93.4 million
in the same period of 2013 due primarily to lower bonus accrual,
lower general litigation expenses and lower consulting costs offset
by higher cost of sales due to the sale of lighting products.
Non-GAAP net income in the second quarter of 2014 was $18.9
million, 4% lower than the prior quarter and 273% higher than the
second quarter of 2013. Non-GAAP diluted net income per share was
$0.16 in the second quarter of 2014 as compared to $0.17 in the
prior quarter and $0.04 in the second quarter of 2013.
Non-GAAP net income for the six months ended June 30, 2014 was
$38.6 million as compared to $15.9 million in the same period of
2013. Non-GAAP diluted net income per share was $0.33 for the six
months ended June 30, 2014 as compared to non-GAAP diluted net
income per share of $0.14 for the six months ended June 30,
2013.
Other Financial Highlights:
Cash, cash equivalents, and marketable securities as of June 30,
2014 were $246.4 million, a decrease of $157.0 million from
March 31, 2014. During the second quarter of 2014, the Company
paid upon maturity $172.5 million of the 5% convertible senior
notes due June 2014.
During the second quarter of 2014, the Company recorded an
income tax provision of approximately $6.4 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.
Third Quarter 2014 Outlook:
For the third quarter of 2014, the Company expects revenue to be
between $68 million and $73 million. Revenue is not without risk
and includes expectations that the Company will sign new customers
for patent as well as solutions licensing.
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 or for
one week at the following numbers: (855) 859-2056 (domestic) or
(404) 537-3406 (international) with ID#70409115.
(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: 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: 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:
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. These adjustments are a
one-time litigation cost reversal of prior litigation costs accrued
related to previously awarded costs that the Company was required
to pay in connection with the SK hynix and Micron Technology
litigation. The Company excludes these reversals from its non-GAAP
measures because the Company believes that these reversals have no
direct correlation to the core operations of the Company’s business
and they are 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, 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 and deferred tax
asset valuation allowance. Accordingly, the Company has applied the
36 percent tax rate to its non-GAAP financial results for all
periods to assist the Company’s planning for future periods. The
Company has provided below a reconciliation of its GAAP provision
for income taxes and GAAP effective tax rate to the assumed
non-GAAP provision for income taxes and non-GAAP effective tax
rate.
On occasion in the future, there may be other items, such as
impairment charges and 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.
Forward-Looking Statements
This release contains forward-looking statements under the
Private Securities Litigation Reform Act of 1995 including relating
to Rambus’ expectations regarding revenue for the third quarter of
2014 and estimated, fixed, long-term projected tax rates. 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. Rambus
undertakes no obligation to update forward-looking statements to
reflect events or circumstances after the date hereof.
About Rambus Inc.
Rambus brings invention to market. Our customizable IP cores,
architecture licenses, tools, services, and training improve the
competitive advantage of our customers’ products while accelerating
their time-to-market. Rambus products and innovations capture,
secure and move data. For more information, visit rambus.com.
RMBSFN
Rambus Inc.
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
June 30, 2014 December 31, 2013 ASSETS
Current assets: Cash and cash equivalents $ 99,571 $ 338,696
Marketable securities 146,859 48,966 Accounts receivable 12,503
2,251 Prepaids and other current assets 7,283 8,253 Deferred taxes
1,069 205 Total current assets 267,285 398,371 Intangible assets,
net 102,435 117,172 Goodwill 116,899 116,899 Property, plant and
equipment, net 67,411 72,642 Deferred taxes, long-term 571 4,797
Other assets 3,090 3,498 Total assets $ 557,691 $ 713,379
LIABILITIES & STOCKHOLDERS’ EQUITY Current
liabilities: Accounts payable $ 5,465 $ 7,001 Accrued salaries and
benefits 14,410 33,448 Convertible notes, short-term — 164,047
Other accrued liabilities 10,310 8,346 Total current liabilities
30,185 212,842 Long-term liabilities: Convertible notes, long-term
112,316 109,629 Long-term imputed financing obligation 39,232
39,349 Other long-term liabilities 9,652 11,330 Total long-term
liabilities 161,200 160,308 Total stockholders’ equity 366,306
340,229 Total liabilities and stockholders’ equity $ 557,691 $
713,379
Rambus Inc.
Condensed Consolidated Statements of
Operations
(In thousands, except per share
amounts)
(Unaudited)
Three Months EndedJune
30,
Six Months EndedJune 30,
2014 2013 2014 2013
Revenue: Royalties $ 69,741 $ 57,009 $ 143,378 $ 123,231
Contract and other revenue 6,777 910 11,428
1,554 Total revenue 76,518 57,919 154,806
124,785 Operating costs and expenses: Cost of revenue
(1) 10,637 7,365 20,659 13,899 Research and development (1) 27,668
30,777 54,566 63,625 Marketing, general and administrative (1)
18,619 14,136 37,439 39,258 Restructuring charges — — 39 2,206 Gain
from sale of intellectual property — (103 ) (170 ) (1,388 ) Gain
from settlement (510 ) — (1,020 ) — Total operating
costs and expenses 56,414 52,175 111,513
117,600 Operating income 20,104 5,744 43,293 7,185 Interest
income and other income (expense), net 104 (1,419 ) 117 (1,439 )
Interest expense (8,770 ) (7,426 ) (18,696 ) (14,738 ) Interest and
other income (expense), net (8,666 ) (8,845 ) (18,579 ) (16,177 )
Income (loss) before income taxes 11,438 (3,101 ) 24,714 (8,992 )
Provision for income taxes 6,395 4,743 11,867
9,254 Net income (loss) $ 5,043 $ (7,844 ) $ 12,847
$ (18,246 ) Net income (loss) per share: Basic $ 0.04
$ (0.07 ) $ 0.11 $ (0.16 ) Diluted $ 0.04 $ (0.07 ) $
0.11 $ (0.16 ) Weighted average shares used in per share
calculation Basic 114,116 112,183 113,854
111,892 Diluted 117,398 112,183 116,733
111,892
_________
(1) Total stock-based compensation expense
for the three and six months ended June 30, 2014 and 2013 are
presented as follows:
Three Months EndedJune
30,
Six Months EndedJune 30,
2014 2013 2014 2013 Cost of revenue $
15 $ 5 $ 22 $ 5 Research and development $ 2,615 $ 1,660 $ 3,926 $
3,536 Marketing, general and administrative $ 2,225 $ 1,909 $ 3,806
$ 4,981
Rambus Inc.
Supplemental Reconciliation of GAAP to
Non-GAAP Results
(In thousands)
(Unaudited)
Three Months Ended Six Months
Ended June 30, 2014 March 31, 2014
June 30, 2013 June 30, 2014 June 30,
2013 Operating costs and expenses $ 56,414 $ 55,099 $
52,175 $ 111,513 $ 117,600 Adjustments: Stock-based compensation
(4,855 ) (2,899 ) (3,574 ) (7,754 ) (8,522 ) Acquisition-related
transaction costs and retention bonuses (1,028 ) (1,435 ) (3,385 )
(2,463 ) (7,397 ) Amortization (6,757 ) (6,797 ) (6,997 ) (13,554 )
(14,037 ) Reversal of one-time litigation costs — — 8,482 — 8,482
Restructuring charges — (39 ) — (39 ) (2,206 ) Severance costs — —
— — (514 ) Costs of restatement and related legal activities —
— (2 ) — (19 )
Non-GAAP operating costs and
expenses $ 43,774 $ 43,929
$ 46,699 $ 87,703
$ 93,387 Operating income $ 20,104 $
23,189 $ 5,744 $ 43,293 $ 7,185 Adjustments: Stock-based
compensation 4,855 2,899 3,574 7,754 8,522 Acquisition-related
transaction costs and retention bonuses 1,028 1,435 3,385 2,463
7,397 Amortization 6,757 6,797 6,997 13,554 14,037 Reversal of
one-time litigation costs — — (8,482 ) — (8,482 ) Restructuring
charges — 39 — 39 2,206 Severance costs — — — — 514 Costs of
restatement and related legal activities — — 2
— 19
Non-GAAP operating income $
32,744 $ 34,359 $
11,220 $ 67,103 $
31,398 Income (loss) before income taxes $
11,438 $ 13,276 $ (3,101 ) $ 24,714 $ (8,992 ) Adjustments:
Stock-based compensation 4,855 2,899 3,574 7,754 8,522
Acquisition-related transaction costs and retention bonuses 1,028
1,435 3,385 2,463 7,397 Amortization 6,757 6,797 6,997 13,554
14,037 Reversal of one-time litigation costs — — (8,482 ) — (8,482
) Restructuring charges — 39 — 39 2,206 Severance costs — — — — 514
Costs of restatement and related legal activities — — 2 — 19
Impairment of investment — — 1,400 — 1,400 Non-cash interest
expense on convertible notes 5,469 6,242 4,145
11,711 8,234 Non-GAAP income before income taxes $
29,547 $ 30,688 $ 7,920 $ 60,235 $ 24,855 GAAP provision for income
taxes 6,395 5,472 4,743 11,867 9,254 Adjustment to GAAP provision
for income taxes 4,242 5,576 (1,892 ) 9,818
(307 ) Non-GAAP provision for income taxes 10,637 11,048
2,851 21,685 8,947
Non-GAAP net
income $ 18,910 $ 19,640
$ 5,069 $ 38,550
$ 15,908 Non-GAAP basic net income
per share $ 0.17 $ 0.17 $ 0.05 $ 0.34 $ 0.14
Non-GAAP
diluted net income per share $ 0.16 $ 0.17 $ 0.04 $ 0.33 $ 0.14
Weighted average shares used in non-GAAP per share calculation:
Basic 114,116 113,590 112,183 113,854 111,892 Diluted 117,398
116,629 116,162 116,733 116,009
Supplemental Reconciliation of GAAP to
Non-GAAP Effective Tax Rate (1)
Three Months Ended Six Months
Ended June 30, 2014 March 31, 2014
June 30, 2013 June 30, 2014 June 30,
2013 GAAP effective tax rate
56% 41% 153% 48% 103% Adjustment to GAAP effective tax rate
(20)%
(5)%
(117)%
(12)%
(67)%
Non-GAAP effective tax rate 36% 36% 36% 36% 36% (1)
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, 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 and deferred tax asset valuation
allowance. Accordingly, the Company has applied the 36 percent tax
rate to its non-GAAP financial results for all periods to assist
the Company’s planning for future periods.
Rambus Inc.Carolyn Robinson, 408-462-8717Corporate
Communicationscrobinson@rambus.comNicole Noutsios,
408-462-8050Investor Relationsnnoutsios@rambus.com
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