- Delivered strong Q3 results with revenue and earnings above the
midpoint of guidance
- Generated $51.6 million in cash from operations and completed
$100.0 million accelerated share repurchase program
- Completed the sale of the PHY IP business, strengthening focus
on chips and digital IP
- Produced quarterly product revenue of $52.2 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 third quarter ended September 30, 2023. GAAP
revenue for the third quarter was $105.3 million, licensing
billings were $57.9 million, product revenue was $52.2 million, and
contract and other revenue was $24.2 million. The Company also
generated $51.6 million in cash provided by operating activities in
the third quarter.
“Rambus delivered a strong third quarter, as we continue to
execute on our strategy, drive the company's long-term profitable
growth and consistently return value to our stockholders amidst
challenging market conditions,” said Luc Seraphin, chief executive
officer of Rambus. “We are well positioned to address the
increasing memory performance requirements in the data center
fueled by AI and other advanced workloads."
Quarterly Financial Review -
GAAP
Three Months Ended
September 30,
(In millions, except for percentages
and per share amounts)
2023
2022
Revenue
Product revenue
$
52.2
$
58.6
Royalties
28.9
29.9
Contract and other revenue
24.2
23.7
Total revenue
105.3
112.2
Cost of product revenue
19.4
21.9
Cost of contract and other revenue
1.3
1.5
Amortization of acquired intangible assets
(included in total cost of revenue)
3.3
3.6
Total operating expenses (benefits)
(1)
(23.6
)
68.3
Operating income
$
104.9
$
16.9
Operating margin
100
%
15
%
Net income
$
103.2
$
0.9
Diluted net income per share
$
0.93
$
0.01
Net cash provided by operating
activities
$
51.6
$
80.0
_________________________________________
(1)
Includes amortization of acquired
intangible assets of approximately $0.3 million and $0.4 million
for the three months ended September 30, 2023 and 2022,
respectively.
Quarterly Financial Review -
Supplemental Information(1)
Three Months Ended
September 30,
(In millions)
2023
2022
Licensing billings (operational metric)
(2)
$
57.9
$
62.2
Product revenue (GAAP)
$
52.2
$
58.6
Contract and other revenue (GAAP)
$
24.2
$
23.7
Non-GAAP cost of product revenue
$
19.2
$
21.8
Cost of contract and other revenue
(GAAP)
$
1.3
$
1.5
Non-GAAP total operating expenses
$
52.4
$
54.6
Non-GAAP interest and other income
(expense), net
$
1.9
$
1.6
Diluted share count (GAAP)
111
112
_________________________________________
(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 $105.3 million. The Company
also had licensing billings of $57.9 million, product revenue of
$52.2 million, and contract and other revenue of $24.2 million. The
Company had total GAAP cost of revenue of $24.0 million and
operating benefits of $(23.6) million. The Company also had total
non-GAAP operating expenses of $72.9 million (including non-GAAP
cost of revenue of $20.5 million). The Company had GAAP diluted net
income per share of $0.93, largely driven by a net gain on
divestiture of $90.8 million from the sale of the Company's PHY IP
business in the third quarter. The Company’s basic share count was
108 million shares and its diluted share count was 111 million
shares.
Cash, cash equivalents, and marketable securities as of
September 30, 2023 were $375.5 million, an increase of $42.9
million from June 30, 2023, mainly due to $51.6 million in cash
provided by operating activities and the net proceeds from the PHY
IP business divestiture of $106.3 million, partly offset by $100.0
million paid in connection with an accelerated share repurchase
program.
2023 Fourth Quarter Outlook
The Company will discuss its full revenue guidance for the
fourth quarter of 2023 during its upcoming conference call. The
following table sets forth fourth quarter outlook for other
measures.
(In millions)
GAAP
Non-GAAP (1)
Licensing billings (operational metric)
(2)
$56 - $62
$56 - $62
Product revenue (GAAP)
$52 - $58
$52 - $58
Contract and other revenue (GAAP)
$17 - $23
$17 - $23
Total operating costs and expenses
$88 - $84
$73 - $69
Interest and other income (expense),
net
$2
$2
Diluted share count
110
110
_________________________________________
(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 fourth quarter of 2023, the Company expects licensing
billings to be between $56 million and $62 million. The Company
also expects royalty revenue to be between $42 million and $48
million, product revenue to be between $52 million and $58 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 $88 million and $84 million. Additionally, the Company
expects non-GAAP operating costs and expenses to be between $73
million and $69 million. These expectations also assume non-GAAP
interest and other income (expense), net, of $2 million, a tax rate
of 24% and diluted share count of 110 million, and exclude
stock-based compensation expense of $11 million, amortization of
acquired intangible assets of $4 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# 195743.
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, restructuring and other
charges, expense on abandoned operating leases, facility
restoration costs, gain on divestiture, impairment of assets,
change in fair value of earn-out liability, gain on sale of equity
security, 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.
Gain on divestiture. Reflects the gain on the sale of the
Company's PHY IP business. The Company excludes these charges
(benefits) because such charges (benefits) are not directly related
to ongoing business results and do not reflect expected future
operating expenses (benefits).
Impairment of assets. These charges primarily consist of
non-cash charges to long-lived assets and other assets resulting
from the divestiture of the Company's PHY IP business, and are
excluded because such charges are non-recurring and do not reduce
the Company’s liquidity.
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.
Gain on sale of equity security. The Company has excluded gain
on sale of equity security as this is not a reflection of the
Company’s ongoing operations.
Loss on extinguishment of debt. The Company has excluded loss on
extinguishment of debt as this represents a cost of repurchasing
its existing convertible notes and is not a reflection of the
Company’s ongoing operations.
Loss on fair value adjustment of derivatives, net. The Company
has excluded its loss on fair value adjustment of derivatives, net,
as this represents cost and benefits of repurchasing its
convertible notes and is not a reflection of the Company's ongoing
operations.
Realized loss on sale of marketable securities sold for the
purpose of notes repurchase. The Company has excluded its realized
loss on sale of marketable securities sold for the purpose of
repurchasing its convertible notes as this is not a reflection of
the Company's ongoing operations.
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 solutions 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 fourth 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)
September 30,
2023
December 31,
2022
ASSETS
Current assets:
Cash and cash equivalents
$
131,957
$
125,334
Marketable securities
243,588
187,892
Accounts receivable
65,101
55,368
Unbilled receivables
64,252
125,698
Inventories
34,615
20,900
Prepaids and other current assets
11,112
12,022
Total current assets
550,625
527,214
Intangible assets, net
32,015
50,880
Goodwill
286,812
292,040
Property, plant and equipment, net
73,466
86,255
Operating lease right-of-use assets
20,964
24,143
Deferred tax assets
131,020
3,031
Unbilled receivables
3,479
25,222
Income taxes receivable
84,487
1,064
Other assets
1,463
2,745
Total assets
$
1,184,331
$
1,012,594
LIABILITIES &
STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
15,682
$
24,815
Accrued salaries and benefits
13,076
20,502
Convertible notes
—
10,378
Deferred revenue
17,459
23,861
Income taxes payable
8,638
18,137
Operating lease liabilities
4,174
5,024
Other current liabilities
25,167
23,992
Total current liabilities
84,196
126,709
Long-term liabilities:
Long-term operating lease liabilities
26,117
29,079
Long-term income taxes payable
77,655
5,892
Deferred tax liabilities
5,819
24,964
Other long-term liabilities
34,978
46,653
Total long-term liabilities
144,569
106,588
Total stockholders’ equity
955,566
779,297
Total liabilities and stockholders’
equity
$
1,184,331
$
1,012,594
Rambus Inc.
Condensed Consolidated
Statements of Operations
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(In thousands, except per share
amounts)
2023
2022
2023
2022
Revenue:
Product revenue
$
52,181
$
58,619
$
170,934
$
159,890
Royalties
28,857
29,878
97,698
108,380
Contract and other revenue
24,260
23,747
70,260
64,156
Total revenue
105,298
112,244
338,892
332,426
Cost of revenue:
Cost of product revenue
19,388
21,953
64,554
60,767
Cost of contract and other revenue
1,295
1,455
4,280
3,053
Amortization of acquired intangible
assets
3,349
3,576
10,472
10,375
Total cost of revenue
24,032
26,984
79,306
74,195
Gross profit
81,266
85,260
259,586
258,231
Operating expenses (benefits):
Research and development
37,368
39,295
120,842
118,648
Sales, general and administrative
25,333
26,198
82,484
79,409
Amortization of acquired intangible
assets
258
433
1,022
1,259
Restructuring and other charges
(recoveries)
(100
)
—
9,394
—
Gain on divestiture
(90,843
)
—
(90,843
)
—
Impairment of assets
10,045
—
10,045
—
Change in fair value of earn-out
liability
(5,666
)
2,411
8,134
(1,889
)
Total operating expenses (benefits)
(23,605
)
68,337
141,078
197,427
Operating income
104,871
16,923
118,508
60,804
Interest income and other income
(expense), net
2,715
2,838
7,112
6,936
Gain on fair value of equity security
—
3,547
—
3,547
Loss on extinguishment of debt
—
(17,129
)
—
(83,626
)
Loss on fair value adjustment of
derivatives, net
—
(2,302
)
(240
)
(10,585
)
Interest expense
(356
)
(437
)
(1,113
)
(1,390
)
Interest and other income (expense),
net
2,359
(13,483
)
5,759
(85,118
)
Income (loss) before income taxes
107,230
3,440
124,267
(24,314
)
Provision for (benefit from) income
taxes
4,032
2,501
(151,092
)
5,945
Net income (loss)
$
103,198
$
939
$
275,359
$
(30,259
)
Net income (loss) per share:
Basic
$
0.95
$
0.01
$
2.54
$
(0.27
)
Diluted
$
0.93
$
0.01
$
2.48
$
(0.27
)
Weighted average shares used in per share
calculation
Basic
108,317
109,968
108,412
110,102
Diluted
110,775
111,962
111,179
110,102
Rambus Inc.
Supplemental Reconciliation of
GAAP to Non-GAAP Results
(Unaudited)
Three Months Ended
September 30,
(In thousands)
2023
2022
Cost of product revenue
$
19,388
$
21,953
Adjustment:
Stock-based compensation expense
(149
)
(142
)
Non-GAAP cost of product
revenue
$
19,239
$
21,811
Total operating expenses (benefits)
$
(23,605
)
$
68,337
Adjustments:
Stock-based compensation expense
(9,889
)
(8,730
)
Acquisition-related costs and retention
bonus expense
(37
)
(1,627
)
Amortization of acquired intangible
assets
(258
)
(433
)
Restructuring and other recoveries
100
—
Expense on abandoned operating leases
(40
)
(520
)
Facility restoration costs
3
—
Severance costs
(373
)
—
Gain on divestiture
90,843
—
Impairment of assets
(10,045
)
—
Change in fair value of earn-out
liability
5,666
(2,411
)
Non-GAAP total operating
expenses
$
52,365
$
54,616
Interest and other income (expense),
net
$
2,359
$
(13,483
)
Adjustments:
Interest income related to significant
financing component from fixed-fee patent and technology licensing
arrangements
(426
)
(1,248
)
Non-cash interest expense on convertible
notes
—
33
Gain on sale of equity security
—
(3,547
)
Loss on extinguishment of debt
—
17,129
Loss on fair value adjustment of
derivatives, net
—
2,302
Realized loss on sale of marketable
securities sold for the purpose of notes repurchase
—
450
Non-GAAP interest and other income
(expense), net
$
1,933
$
1,636
Rambus Inc.
Reconciliation of GAAP
Forward-Looking Estimates to Non-GAAP Forward-Looking
Estimates
(Unaudited)
2023 Fourth Quarter Outlook
Three Months Ended
December 31, 2023
(In millions)
Low
High
Forward-looking operating costs and
expenses
$
87.5
$
83.5
Adjustments:
Stock-based compensation expense
(11.0
)
(11.0
)
Amortization of acquired intangible
assets
(3.5
)
(3.5
)
Forward-looking Non-GAAP operating
costs and expenses
$
73.0
$
69.0
Forward-looking interest and other income
(expense), net
$
2.2
$
2.2
Adjustments:
Interest income related to significant
financing component from fixed-fee patent and technology licensing
arrangements
(0.2
)
(0.2
)
Forward-looking Non-GAAP interest and
other income (expense), net
$
2.0
$
2.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030282420/en/
Desmond Lynch Senior Vice President, Finance and Chief Financial
Officer (408) 462-8000 dlynch@rambus.com
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