Document

SAN JOSE, Calif. - August 3, 2020 - Rambus Inc. (NASDAQ:RMBS), a premier silicon IP and chip provider making data faster and safer, today reported financial results for the second quarter ended June 30, 2020. GAAP revenue for the second quarter was $59.9 million; licensing billings were $60.7 million, product revenue was $31.7 million, and contract and other revenue was $11.2 million. The Company also generated $62.0 million in cash provided by operating activities.

“Rambus had a superb second quarter with cash generated from operations at a 10-year high and our chip business delivering its fifth consecutive quarter of record revenue,” said Luc Seraphin, chief executive officer of Rambus. “This tremendous performance was enabled by our sustained focus on quality and execution, demonstrating our ability to consistently deliver.”

The Company’s memory interface chip business continued its growth trajectory, with a fifth consecutive quarter of record revenue. This performance was driven by a combination of increased data center and OEM qualifications, and an overall increase in market demand. With the recent industry publication of the DDR5 memory specification, Rambus remains poised as a market leader to support our customers’ next-generation systems.

The Rambus Silicon IP business maintained its momentum with design wins for interface and security IP at tier-1 SoC makers across data center, AI and 5G. With the availability of the cutting-edge 112G XSR SerDes for chiplets and co-packaged optics, the Company continues to deliver solutions that enable leading-edge architectures and capabilities for high-performance systems.


Quarterly Financial Review - GAAP	Three Months Ended June 30,
(In millions, except for percentages and per share amounts)	2020			2019
Revenue
Royalties	$	17.0		$	27.1
Product revenue	31.7			16.0
Contract and other revenue	11.2			15.2
Total revenue	$	59.9		$	58.3
Cost of product revenue	$	10.3		$	6.3
Cost of contract and other revenue	$	1.5		$	2.9
Amortization of acquired intangible assets (included in total cost of revenue)	$	4.3		$	3.8
Total operating expenses (1)	$	56.2		$	82.3
Operating loss	$	(12.5)		$	(37.0)
Operating margin	(21)		%	64		%
Net loss	$	(10.8)		$	(37.0)
Diluted net loss per share	$	(0.09)		$	(0.33)
Net cash provided by operating activities	$	62.0		$	38.7


Quarterly Financial Review - Non-GAAP (including operational metric) (1)	Three Months Ended June 30,
(In millions)	2020		2019
Licensing billings (2)	$	60.7	$	64.9
Product revenue	$	31.7	$	16.0
Contract and other revenue	$	11.2	$	15.2
Cost of product revenue	$	10.3	$	6.3
Cost of contract and other revenue	$	1.5	$	2.9
Total operating expenses	$	47.7	$	54.9
Interest and other income (expense), net	$	0.1	$	0.9
Diluted share count	115		113

GAAP revenue for the quarter was $59.9 million, at the high end of expectations due to the Company's strong performance in its memory interface chip business. The Company also had licensing billings of $60.7 million, product revenue of $31.7 million, and contract and other revenue of $11.2 million. Rambus had total GAAP cost of revenue of $16.1 million and operating expenses of $56.2 million. The Company also had total non-GAAP operating expenses of $59.5 million (which includes non-GAAP cost of revenue), below the low end of its expectations through its cost management actions. Due to the Company's strong performance and cost management actions, its revenue and profit were at the high end of its expectations. The Company had GAAP diluted net loss per share of $0.09. The Company's basic share count was 114 million shares and its diluted share count would have been 115 million shares.

For the third quarter of 2020, the Company expects licensing billings to be between $55 million and $61 million. The Company also expects royalty revenue to be between $9 million and $15 million, product revenue to be between $29 million and $35 million and contract and other revenue to be between $10 million and $16 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for various product sales, solutions licensing among other matters.

The Company also expects operating costs and expenses to be between $76 million and $72 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $64 million and $60 million. These expectations also assume non-GAAP interest and other income (expense), net, of $0 million, tax rate of 24% and diluted share count of 116 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million), non-cash interest expense on convertible notes ($2 million) and interest income related to the significant financing component from fixed-fee patent and technology licensing arrangements ($3 million).

Rambus management will discuss the results of the quarter during a conference call scheduled for 2:00pm 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: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID# 1788075.

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 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, restructuring charges, impairment of assets held for sale, amortization expense, escrow settlement refund, 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.

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 costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the reported 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 have no direct correlation to the Company’s operations.

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 operation of the Company’s core business.

Escrow settlement refund. The Company received a refund from an escrow settlement related to a prior acquisition. The Company excludes these items because these receipts are not reflective of ongoing operating results. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

Non-cash interest expense on convertible notes. 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.

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 2020 and 2019, 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.

Rambus is a premier Silicon IP and chip provider that makes data faster and safer. With 30 years of innovation, we continue to develop the foundational technology for all modern computing systems. Leveraging our semiconductor expertise, Rambus solutions speed performance, expand capacity and improve security for today’s most demanding applications. From data center and edge to artificial intelligence and automotive, our interface and security IP, and memory interface chips enable SoC and system designers to deliver their vision of the future. For more information, visit rambus.com.

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995, including those relating to Rambus’ expectations regarding operating results and business opportunities, growth in product and service offerings and product revenue, expected benefits of our merger, acquisition and divestiture activity and related integration, and financial guidance for the third quarter of 2020, including licensing billings and revenue estimates, operating costs and expenses, interest

and other income (expense), net and estimated, fixed, long-term projected tax rates on a GAAP and non-GAAP basis, as appropriate. 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, as well as the potential adverse impacts related to, or arising from, the Novel Coronavirus (COVID-19). Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.


	June 30, 2020		December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	103,275	$	102,176
Marketable securities	382,802		305,488
Accounts receivable	35,198		44,039
Unbilled receivables	155,448		184,366
Inventories	11,554		10,086

Prepaids and other current assets	17,970		18,524
Total current assets	706,247		664,679
Intangible assets, net	45,624		54,900
Goodwill	183,222		183,465
Property, plant and equipment, net	50,858		44,714
Operating lease right-of-use assets	31,407		37,020
Deferred tax assets	5,350		4,574
Unbilled receivables, long-term	289,044		343,703
Other assets	4,895		5,931
Total assets	$	1,316,647	$	1,338,986

LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	14,016	$	9,549
Accrued salaries and benefits	16,170		20,291
Deferred revenue	10,841		11,947
Income taxes payable, short-term	20,044		19,142
Operating lease liabilities	4,463		6,357


Other current liabilities	17,924		18,893
Total current liabilities	83,458		86,179
Long-term liabilities:
Convertible notes, long-term	152,359		148,788

Long-term operating lease liabilities	37,626		39,889
Long-term income taxes payable	50,472		60,094
Deferred tax liabilities	14,724		13,846
Other long-term liabilities	12,818		19,272
Total long-term liabilities	267,999		281,889
Total stockholders’ equity	965,190		970,918
Total liabilities and stockholders’ equity	$	1,316,647	$	1,338,986


	Three Months Ended June 30,						Six Months Ended June 30,
	2020		2019		2020		2019
Revenue:
Royalties	$	16,957	$	27,050	$	36,651	$	51,903
Product revenue	31,725		16,031		62,453		24,995
Contract and other revenue	11,248		15,216		24,815		29,783
Total revenue	59,930		58,297		123,919		106,681
Cost of revenue:
Cost of product revenue (1)	10,277		6,310		20,620		10,737
Cost of contract and other revenue	1,535		2,910		2,733		5,818
Amortization of acquired intangible assets	4,336		3,807		8,680		7,670
Total cost of revenue	16,148		13,027		32,033		24,225
Gross profit	43,782		45,270		91,886		82,456
Operating expenses:
Research and development (1)	34,688		37,890		71,352		78,509
Sales, general and administrative (1)	21,310		23,794		44,205		50,314
Amortization of acquired intangible assets	248		1,114		596		2,239
Restructuring charges	—		2,528		836		2,859
Change in fair value of earn-out liability	—		—		(1,800)		—
Impairment of assets held for sale	—		16,990		—		16,990


Total operating expenses	56,246		82,316		115,189		150,911
Operating loss	(12,464)		(37,046)		(23,303)		(68,455)
Interest income and other income (expense), net	4,597		6,972		10,971		14,385
Interest expense	(2,580)		(2,534)		(5,135)		(4,805)
Interest and other income (expense), net	2,017		4,438		5,836		9,580
Loss before income taxes	(10,447)		(32,608)		(17,467)		(58,875)
Provision for income taxes	334		4,372		1,297		4,681
Net loss	$	(10,781)	$	(36,980)	$	(18,764)	$	(63,556)
Net loss per share:
Basic	$	(0.09)	$	(0.33)	$	(0.17)	$	(0.58)
Diluted	$	(0.09)	$	(0.33)	$	(0.17)	$	(0.58)
Weighted average shares used in per share calculation
Basic	113,572		110,875		113,240		110,287
Diluted	113,572		110,875		113,240		110,287


	Three Months Ended June 30,
	2020		2019





Total operating expenses	$	56,246	$	82,316
Adjustments:
Stock-based compensation expense	(6,707)		(7,080)
Acquisition-related costs and retention bonus expense	(1,577)		—
Amortization of acquired intangible assets	(248)		(1,114)
Restructuring charges	—		(2,528)
Impairment of assets held for sale	—		(16,990)
Escrow settlement refund	—		296

Non-GAAP total operating expenses	$	47,714	$	54,900

Interest and other income (expense), net	$	2,017	$	4,438
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements	(3,697)		(5,288)
Non-cash interest expense on convertible notes	1,798		1,702
Non-GAAP interest and other income (expense), net	$	118	$	852


2020 Third Quarter Outlook	Three Months Ended September 30, 2020
	Low		High





Forward-looking operating costs and expenses	$	75.6	$	71.6
Adjustments:
Stock-based compensation expense	(7.0)		(7.0)
Amortization of acquired intangible assets	(4.5)		(4.5)




Forward-looking Non-GAAP operating costs and expenses	$	64.1	$	60.1

Forward-looking interest and other income (expense), net	$	1.5	$	1.5
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements	(3.3)		(3.3)
Non-cash interest expense on convertible notes	1.8		1.8
Forward-looking Non-GAAP interest and other income (expense), net	$	0.0	$	0.0



(In millions)	GAAP	Non-GAAP (1)
Licensing billings (2)	$55 - $61	$55 - $61
Product revenue	$29 - $35	$29 - $35
Contract and other revenue	$10 - $16	$10 - $16


Total operating costs and expenses	$76 - $72	$64 - $60
Interest and other income (expense), net	$2	$0
Diluted share count	116	116