- Delivered strong Q2 results with revenue in line and earnings
at the high end of guidance
- Generated $50.4 million in cash from operations
- Produced quarterly product revenue of $55.0 million driven by
memory interface chips
Rambus Inc. (NASDAQ:RMBS), a provider of industry-leading chips
and IP making data faster and safer, today reported financial
results for the second quarter ended June 30, 2023. GAAP revenue
for the second quarter was $119.8 million, licensing billings were
$60.2 million, product revenue was $55.0 million, and contract and
other revenue was $24.1 million. The Company also generated $50.4
million in cash provided by operating activities in the second
quarter.
“Rambus delivered a strong second quarter with solid results and
execution from the team as we continue to successfully navigate
through challenging market conditions,” said Luc Seraphin, chief
executive officer of Rambus. “By delivering the critical chips and
IP that address the growing demand in data center fueled by AI, we
are well positioned to drive the company’s long-term profitable
growth."
Quarterly Financial Review -
GAAP
Three Months Ended
June 30,
(In millions, except for percentages
and per share amounts)
2023
2022
Revenue
Product revenue
$
55.0
$
53.3
Royalties
40.7
48.0
Contract and other revenue
24.1
19.8
Total revenue
119.8
121.1
Cost of product revenue
18.7
20.4
Cost of contract and other revenue
1.3
1.0
Amortization of acquired intangible assets
(included in total cost of revenue)
3.6
3.4
Total operating expenses (1)
84.5
60.8
Operating income
$
11.7
$
35.5
Operating margin
10
%
29
%
Net income
$
168.9
$
35.0
Diluted net income per share
$
1.51
$
0.31
Net cash provided by operating
activities
$
50.4
$
56.5
_________________________________________
(1)
Includes amortization of acquired
intangible assets of approximately $0.4 million for each of the
three months ended June 30, 2023 and 2022.
Quarterly Financial Review -
Supplemental Information(1)
Three Months Ended
June 30,
(In millions)
2023
2022
Licensing billings (operational metric)
(2)
$
60.2
$
66.1
Product revenue (GAAP)
$
55.0
$
53.3
Contract and other revenue (GAAP)
$
24.1
$
19.8
Non-GAAP cost of product revenue
$
18.6
$
20.3
Cost of contract and other revenue
(GAAP)
$
1.3
$
1.0
Non-GAAP total operating expenses
$
55.9
$
54.9
Non-GAAP interest and other income
(expense), net
$
1.2
$
1.0
Diluted share count (GAAP)
112
113
_________________________________________
(1)
See “Supplemental Reconciliation
of GAAP to Non-GAAP Results” table included below.
(2)
Licensing billings is an
operational metric that reflects amounts invoiced to our licensing
customers during the period, as adjusted for certain differences
relating to advanced payments for variable licensing
agreements.
GAAP revenue for the quarter was $119.8 million. The Company
also had licensing billings of $60.2 million, product revenue of
$55.0 million, and contract and other revenue of $24.1 million. The
Company had total GAAP cost of revenue of $23.6 million and
operating expenses of $84.5 million. The Company also had total
non-GAAP operating expenses of $75.7 million (including non-GAAP
cost of revenue of $19.9 million). The Company had GAAP diluted net
income per share of $1.51, largely driven by a net benefit from
income taxes of $155.3 million from a release of the Company's
valuation allowance in the second quarter. The Company’s basic
share count was 109 million shares and its diluted share count was
112 million shares.
Cash, cash equivalents, and marketable securities as of June 30,
2023 were $332.6 million, an increase of $40.5 million from March
31, 2023, mainly due to $50.4 million in cash provided by operating
activities.
2023 Third Quarter Outlook
The Company will discuss its full revenue guidance for the third
quarter of 2023 during its upcoming conference call. The following
table sets forth third quarter outlook for other measures.
(In millions)
GAAP
Non-GAAP (1)
Licensing billings (operational metric)
(2)
$59 - $65
$59 - $65
Product revenue (GAAP)
$47 - $53
$47 - $53
Contract and other revenue (GAAP)
$17 - $23
$17 - $23
Total operating costs and expenses
$90 - $86
$75 - $71
Interest and other income (expense),
net
$1
$1
Diluted share count
112
112
_________________________________________
(1)
See “Reconciliation of GAAP
Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates”
table included below.
(2)
Licensing billings is an
operational metric that reflects amounts invoiced to our licensing
customers during the period, as adjusted for certain differences
relating to advanced payments for variable licensing
agreements.
For the third quarter of 2023, the Company expects licensing
billings to be between $59 million and $65 million. The Company
also expects royalty revenue to be between $26 million and $32
million, product revenue to be between $47 million and $53 million
and contract and other revenue to be between $17 million and $23
million. Revenue is not without risk and achieving revenue in this
range will require that the Company sign customer agreements for
various product sales and solutions licensing, among other
matters.
The Company also expects operating costs and expenses to be
between $90 million and $86 million. Additionally, the Company
expects non-GAAP operating costs and expenses to be between $75
million and $71 million. These expectations also assume non-GAAP
interest and other income (expense), net, of $1 million, a tax rate
of 24% and diluted share count of 112 million, and exclude
stock-based compensation expense of $12 million, amortization of
acquired intangible assets of $3 million, and interest income
related to the significant financing component from fixed-fee
patent and technology licensing arrangements of $0 million.
Conference Call
The Company’s management will discuss the results of the quarter
during a conference call scheduled for 2:00 p.m. 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: (866) 813-9403 (domestic) or (+1)
929-458-6194 (international) with ID# 439534.
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: cost of product revenue,
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,
amortization of acquired intangible assets, expense on abandoned
operating leases, facility restoration costs, change in fair value
of earn-out liability, loss on extinguishment of debt, loss on fair
value adjustment of derivatives, net, realized loss on sale of
marketable securities sold for the purpose of notes repurchase,
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. A 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/divestiture costs and retention bonus
expense. These expenses include all direct costs of certain
acquisitions, divestitures 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 as they are related to acquisitions
and divestitures and have no direct correlation to the Company’s
operations.
Amortization of acquired intangible assets. 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.
Restructuring and other 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.
Expense on abandoned operating leases. Reflects the expense on
building leases that were abandoned. The Company excludes these
charges because such charges are not directly related to ongoing
business results and do not reflect expected future operating
expenses.
Facility restoration costs. These charges consist of exit costs
associated with our leased office space and are excluded because
such charges are not directly related to ongoing business results
and do not reflect expected future operating expenses.
Change in fair value of earn-out liability. This change is due
to adjustments to acquisition purchase consideration. The Company
excludes these adjustments because such adjustments are not
directly related to ongoing business results and do not reflect
expected future operating expenses.
Non-cash interest expense on convertible notes. The Company
incurred non-cash interest expense related to its convertible notes
through the first quarter of 2023, at which point the remaining
convertible notes matured. 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 2023 and 2022, 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 provider of industry-leading chips and silicon IP
making data faster and safer. With over 30 years of advanced
semiconductor experience, we are a pioneer in high-performance
memory subsystems that solve the bottleneck between memory and
processing for data-intensive systems. Whether in the cloud, at the
edge or in your hand, real-time and immersive applications depend
on data throughput and integrity. Rambus products and innovations
deliver the increased bandwidth, capacity and security required to
meet the world’s data needs and drive ever-greater end-user
experiences. 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 business opportunities,
the Company’s ability to deliver long-term, profitable growth,
product and investment strategies, and the Company’s outlook and
financial guidance for the third quarter of 2023 and related
drivers, and the Company’s ability to effectively manage supply
chain and other market challenges. Such forward-looking statements
are based on current expectations, estimates and projections,
management’s beliefs and certain assumptions made by the Company’s
management. Actual results may differ materially. The Company’s
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 potential adverse
impacts related to, or arising from, COVID-19 and its variants. The
Company undertakes no obligation to update forward-looking
statements to reflect events or circumstances after the date
hereof.
Rambus Inc.
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
June 30, 2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
122,190
$
125,334
Marketable securities
210,437
187,892
Accounts receivable
63,929
55,368
Unbilled receivables
94,553
125,698
Inventories
33,527
20,900
Prepaids and other current assets
11,829
12,022
Total current assets
536,465
527,214
Intangible assets, net
42,992
50,880
Goodwill
292,040
292,040
Property, plant and equipment, net
87,167
86,255
Operating lease right-of-use assets
21,598
24,143
Deferred tax assets
140,405
3,031
Unbilled receivables
3,298
25,222
Other assets
3,151
3,809
Total assets
$
1,127,116
$
1,012,594
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
17,643
$
24,815
Accrued salaries and benefits
22,251
20,502
Convertible notes
—
10,378
Deferred revenue
16,779
23,861
Income taxes payable
12,942
18,137
Operating lease liabilities
4,098
5,024
Other current liabilities
27,731
23,992
Total current liabilities
101,444
126,709
Long-term liabilities:
Long-term operating lease liabilities
27,160
29,079
Long-term income taxes payable
1,973
5,892
Deferred tax liabilities
5,819
24,964
Other long-term liabilities
45,162
46,653
Total long-term liabilities
80,114
106,588
Total stockholders’ equity
945,558
779,297
Total liabilities and stockholders’
equity
$
1,127,116
$
1,012,594
Rambus Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
(In thousands, except per share
amounts)
2023
2022
2023
2022
Revenue:
Product revenue
$
54,978
$
53,302
$
118,753
$
101,271
Royalties
40,672
48,038
68,841
78,502
Contract and other revenue
24,182
19,792
46,000
40,409
Total revenue
119,832
121,132
233,594
220,182
Cost of revenue:
Cost of product revenue
18,743
20,417
45,166
38,814
Cost of contract and other revenue
1,294
974
2,985
1,598
Amortization of acquired intangible
assets
3,561
3,421
7,123
6,799
Total cost of revenue
23,598
24,812
55,274
47,211
Gross profit
96,234
96,320
178,320
172,971
Operating expenses:
Research and development
41,576
39,538
83,474
79,353
Sales, general and administrative
26,187
26,305
57,151
53,211
Amortization of acquired intangible
assets
382
417
764
826
Restructuring and other charges
9,494
—
9,494
—
Change in fair value of earn-out
liability
6,900
(5,500
)
13,800
(4,300
)
Total operating expenses
84,539
60,760
164,683
129,090
Operating income
11,695
35,560
13,637
43,881
Interest income and other income
(expense), net
2,236
2,738
4,397
4,098
Loss on extinguishment of debt
—
—
—
(66,497
)
Loss on fair value adjustment of
derivatives, net
—
—
(240
)
(8,283
)
Interest expense
(376
)
(348
)
(757
)
(953
)
Interest and other income (expense),
net
1,860
2,390
3,400
(71,635
)
Income (loss) before income taxes
13,555
37,950
17,037
(27,754
)
Provision for (benefit from) income
taxes
(155,325
)
2,930
(155,124
)
3,444
Net income (loss)
$
168,880
$
35,020
$
172,161
$
(31,198
)
Net income (loss) per share:
Basic
$
1.55
$
0.32
$
1.59
$
(0.28
)
Diluted
$
1.51
$
0.31
$
1.55
$
(0.28
)
Weighted average shares used in per share
calculation
Basic
109,039
110,447
108,561
110,170
Diluted
111,601
112,715
111,373
110,170
Rambus Inc.
Supplemental Reconciliation of
GAAP to Non-GAAP Results
(Unaudited)
Three Months Ended
June 30,
(In thousands)
2023
2022
Cost of product revenue
$
18,743
$
20,417
Adjustment:
Stock-based compensation expense
(151
)
(132
)
Non-GAAP cost of product
revenue
$
18,592
$
20,285
Total operating expenses
$
84,539
$
60,760
Adjustments:
Stock-based compensation expense
(11,224
)
(8,504
)
Acquisition-related costs and retention
bonus expense
(478
)
(1,949
)
Amortization of acquired intangible
assets
(382
)
(417
)
Restructuring and other charges
(9,494
)
—
Expense on abandoned operating leases
(195
)
(531
)
Facility restoration costs
(10
)
—
Change in fair value of earn-out
liability
(6,900
)
5,500
Non-GAAP total operating
expenses
$
55,856
$
54,859
Interest and other income (expense),
net
$
1,860
$
2,390
Adjustments:
Interest income related to significant
financing component from fixed-fee patent and technology licensing
arrangements
(627
)
(1,455
)
Non-cash interest expense on convertible
notes
—
45
Non-GAAP interest and other income
(expense), net
$
1,233
$
980
Rambus Inc.
Reconciliation of GAAP
Forward-Looking Estimates to Non-GAAP Forward-Looking
Estimates
(Unaudited)
2023 Third Quarter Outlook
Three Months Ended
September 30, 2023
(In millions)
Low
High
Forward-looking operating costs and
expenses
$
90.1
$
86.1
Adjustments:
Stock-based compensation expense
(11.7
)
(11.7
)
Amortization of acquired intangible
assets
(3.4
)
(3.4
)
Forward-looking Non-GAAP operating
costs and expenses
$
75.0
$
71.0
Forward-looking interest and other income
(expense), net
$
1.4
$
1.4
Adjustments:
Interest income related to significant
financing component from fixed-fee patent and technology licensing
arrangements
(0.4
)
(0.4
)
Forward-looking Non-GAAP interest and
other income (expense), net
$
1.0
$
1.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230731862705/en/
Desmond Lynch Senior Vice President, Finance and Chief Financial
Officer (408) 462-8000 dlynch@rambus.com
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