Rambus Reports Third Quarter 2022 Financial Results

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  • Exceeded guidance for Q3 revenue and earnings
  • Delivered record quarterly product revenue driven by memory interface chips
  • Generated $80 million in cash from operations
  • Initiated $100 million accelerated share repurchase program

SAN JOSE, Calif.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, 2022. GAAP revenue for the third quarter was $112.2 million, licensing billings were $62.2 million, product revenue was $58.6 million, and contract and other revenue was $23.7 million. The Company also generated $80 million in cash provided by operating activities in the third quarter.

“Rambus had an excellent performance in the third quarter, exceeding guidance and delivering record cash and product revenue,” said Luc Seraphin, chief executive officer of Rambus. “Our strategic focus and strong execution in data center, combined with a diverse portfolio of offerings, drive the company’s long-term profitable growth and enable consistent capital returns to our stockholders.”

Quarterly Financial Review - GAAP

 

Three Months Ended
September 30,

(In millions, except for percentages and per share amounts)

 

 

2022

 

 

 

2021

 

Revenue

 

 

 

 

Product revenue

 

$

58.6

 

 

$

36.7

 

Royalties

 

 

29.9

 

 

 

33.1

 

Contract and other revenue

 

 

23.7

 

 

 

11.5

 

Total revenue

 

 

112.2

 

 

 

81.3

 

Cost of product revenue

 

 

21.9

 

 

 

13.1

 

Cost of contract and other revenue

 

 

1.5

 

 

 

1.5

 

Amortization of acquired intangible assets (included in total cost of revenue)

 

 

3.6

 

 

 

3.8

 

Total operating expenses (1)

 

 

68.3

 

 

 

58.2

 

Operating income

 

$

16.9

 

 

$

4.7

 

Operating margin

 

 

15

%

 

 

6

%

Net income

 

$

0.9

 

 

$

3.7

 

Diluted net income per share

 

$

0.01

 

 

$

0.03

 

Net cash provided by operating activities

 

$

80.0

 

 

$

46.0

 

_________________________________________
(1)

Includes amortization of acquired intangible assets of approximately $0.4 million for each of the three months ended September 30, 2022 and 2021.

 

Quarterly Financial Review - Supplemental Information(1)

 

Three Months Ended
September 30,

(In millions)

 

 

2022

 

 

2021

 

Licensing billings (operational metric) (2)

 

$

62.2

 

$

66.1

 

Product revenue (GAAP)

 

$

58.6

 

$

36.7

 

Contract and other revenue (GAAP)

 

$

23.7

 

$

11.5

 

Non-GAAP cost of product revenue

 

$

21.8

 

$

13.1

 

Cost of contract and other revenue (GAAP)

 

$

1.5

 

$

1.5

 

Non-GAAP total operating expenses

 

$

54.6

 

$

48.2

 

Non-GAAP interest and other income (expense), net

 

$

1.6

 

$

(0.2

)

Diluted share count (GAAP)

 

 

112

 

 

114

 

_______________________________________

(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 $112.2 million. The Company also had licensing billings of $62.2 million, product revenue of $58.6 million, and contract and other revenue of $23.7 million. The Company had GAAP cost of revenue of $27.0 million and operating expenses of $68.3 million. The Company also had total non-GAAP operating expenses of $77.9 million (including non-GAAP cost of revenue). The Company’s basic share count was 110 million shares and its diluted share count was 112 million shares.

Cash, cash equivalents, and marketable securities as of September 30, 2022 were $264.8 million, a decrease of $86.8 million from June 30, 2022, mainly due to $100 million paid in connection with an accelerated share repurchase program, $58.9 million paid in connection with the repayment of 2023 senior notes, $14.4 million paid in connection with the settlement of warrants, partially offset by $80 million in cash generated by operating activities and proceeds of $19.3 million from the settlement of senior convertible note hedges.

2022 Fourth Quarter Outlook

The Company will discuss its full revenue guidance for the fourth quarter of 2022 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)

 

$59 - $65

 

$59 - $65

Product revenue (GAAP)

 

$63 - $69

 

$63 - $69

Contract and other revenue (GAAP)

 

$21 - $27

 

$21 - $27

Total operating costs and expenses

 

$100 - $96

 

$86 - $82

Interest and other income (expense), net

 

$0

 

($1)

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 2022, the Company expects licensing billings to be between $59 million and $65 million. The Company also expects royalty revenue to be between $29 million and $35 million, product revenue to be between $63 million and $69 million and contract and other revenue to be between $21 million and $27 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 $100 million and $96 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $86 million and $82 million. These expectations also assume non-GAAP interest and other income (expense), net, of ($1 million), tax rate of 24% and diluted share count of 110 million, and exclude stock-based compensation expense ($10 million), amortization expense ($4 million), non-cash interest expense ($0.1 million) and interest income related to the significant financing component from fixed-fee patent and technology licensing arrangements ($1 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 (+44) 204-525-0658 (international) with ID# 714912.

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, 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 costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current period’s 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 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.

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.

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 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 2022 and 2021, 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 fourth quarter of 2022 and related drivers, and the Company’s ability to effectively manage supply chain shortages. 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 the potential adverse impacts related to, or arising from, the 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,
2022

 

December 31,
2021

ASSETS

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

141,559

 

$

107,891

Marketable securities

 

 

123,289

 

 

377,718

Accounts receivable

 

 

38,547

 

 

44,065

Unbilled receivables

 

 

142,037

 

 

135,608

Inventories

 

 

14,161

 

 

8,482

Prepaids and other current assets

 

 

14,584

 

 

10,600

Total current assets

 

 

474,177

 

 

684,364

Intangible assets, net

 

 

54,856

 

 

58,420

Goodwill

 

 

292,038

 

 

278,810

Property, plant and equipment, net

 

 

78,563

 

 

56,035

Operating lease right-of-use assets

 

 

25,232

 

 

23,712

Deferred tax assets

 

 

2,803

 

 

4,047

Unbilled receivables

 

 

37,914

 

 

123,018

Other assets

 

 

3,473

 

 

4,240

Total assets

 

$

969,056

 

$

1,232,646

 

 

 

 

 

LIABILITIES & STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

20,405

 

$

11,279

Accrued salaries and benefits

 

 

16,654

 

 

20,945

Convertible notes

 

 

10,368

 

 

163,687

Deferred revenue

 

 

23,460

 

 

24,755

Income taxes payable

 

 

20,024

 

 

20,607

Operating lease liabilities

 

 

5,435

 

 

5,992

Other current liabilities

 

 

20,085

 

 

20,002

Total current liabilities

 

 

116,431

 

 

267,267

Long-term liabilities:

 

 

 

 

Long-term operating lease liabilities

 

 

30,093

 

 

29,099

Long-term income taxes payable

 

 

7,818

 

 

21,424

Deferred tax liabilities

 

 

25,746

 

 

23,985

Other long-term liabilities

 

 

39,084

 

 

28,475

Total long-term liabilities

 

 

102,741

 

 

102,983

Total stockholders’ equity

 

 

749,884

 

 

862,396

Total liabilities and stockholders’ equity

 

$

969,056

 

$

1,232,646

 

Rambus Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

(In thousands, except per share amounts)

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

Product revenue

 

$

58,619

 

 

$

36,710

 

 

$

159,890

 

 

$

98,661

 

Royalties

 

 

29,878

 

 

 

33,044

 

 

 

108,380

 

 

 

103,813

 

Contract and other revenue

 

 

23,747

 

 

 

11,528

 

 

 

64,156

 

 

 

34,049

 

Total revenue

 

 

112,244

 

 

 

81,282

 

 

 

332,426

 

 

 

236,523

 

Cost of revenue:

 

 

 

 

 

 

 

 

Cost of product revenue

 

 

21,953

 

 

 

13,157

 

 

 

60,767

 

 

 

35,989

 

Cost of contract and other revenue

 

 

1,455

 

 

 

1,456

 

 

 

3,053

 

 

 

4,029

 

Amortization of acquired intangible assets

 

 

3,576

 

 

 

3,813

 

 

 

10,375

 

 

 

12,638

 

Total cost of revenue

 

 

26,984

 

 

 

18,426

 

 

 

74,195

 

 

 

52,656

 

Gross profit

 

 

85,260

 

 

 

62,856

 

 

 

258,231

 

 

 

183,867

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

39,295

 

 

 

35,592

 

 

 

118,648

 

 

 

99,415

 

Sales, general and administrative

 

 

26,198

 

 

 

22,210

 

 

 

79,409

 

 

 

67,956

 

Amortization of acquired intangible assets

 

 

433

 

 

 

359

 

 

 

1,259

 

 

 

817

 

Restructuring charges

 

 

 

 

 

 

 

 

 

 

 

368

 

Change in fair value of earn-out liability

 

 

2,411

 

 

 

 

 

 

(1,889

)

 

 

 

Total operating expenses

 

 

68,337

 

 

 

58,161

 

 

 

197,427

 

 

 

168,556

 

Operating income

 

 

16,923

 

 

 

4,695

 

 

 

60,804

 

 

 

15,311

 

Interest income and other income (expense), net

 

 

6,385

 

 

 

2,726

 

 

 

10,483

 

 

 

8,088

 

Loss on extinguishment of debt

 

 

(17,129

)

 

 

 

 

 

(83,626

)

 

 

 

Loss on fair value adjustment of derivatives, net

 

 

(2,302

)

 

 

 

 

 

(10,585

)

 

 

 

Interest expense

 

 

(437

)

 

 

(2,672

)

 

 

(1,390

)

 

 

(7,969

)

Interest and other income (expense), net

 

 

(13,483

)

 

 

54

 

 

 

(85,118

)

 

 

119

 

Income (loss) before income taxes

 

 

3,440

 

 

 

4,749

 

 

 

(24,314

)

 

 

15,430

 

Provision for income taxes

 

 

2,501

 

 

 

1,073

 

 

 

5,945

 

 

 

3,201

 

Net income (loss)

 

$

939

 

 

$

3,676

 

 

$

(30,259

)

 

$

12,229

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

0.03

 

 

$

(0.27

)

 

$

0.11

 

Diluted

 

$

0.01

 

 

$

0.03

 

 

$

(0.27

)

 

$

0.11

 

Weighted average shares used in per share calculation

 

 

 

 

 

 

 

 

Basic

 

 

109,968

 

 

 

108,989

 

 

 

110,102

 

 

 

111,103

 

Diluted

 

 

111,962

 

 

 

113,661

 

 

 

110,102

 

 

 

114,954

 

 

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(Unaudited)

 

 

 

Three Months Ended
September 30,

(In thousands)

 

 

2022

 

 

 

2021

 

Cost of product revenue

 

$

21,953

 

 

$

13,157

 

Adjustment:

 

 

 

 

Stock-based compensation expense

 

 

(142

)

 

 

(101

)

Non-GAAP cost of product revenue

 

$

21,811

 

 

$

13,056

 

 

 

 

 

 

Total operating expenses

 

$

68,337

 

 

$

58,161

 

Adjustments:

 

 

 

 

Stock-based compensation expense

 

 

(8,730

)

 

 

(7,381

)

Acquisition-related costs and retention bonus expense

 

 

(1,627

)

 

 

(1,658

)

Amortization of acquired intangible assets

 

 

(433

)

 

 

(359

)

Expense on abandoned operating leases

 

 

(520

)

 

 

(521

)

Change in fair value of earn-out liability

 

 

(2,411

)

 

 

 

Non-GAAP total operating expenses

 

$

54,616

 

 

$

48,242

 

 

 

 

 

 

Interest and other income (expense), net

 

$

(13,483

)

 

$

54

 

Adjustments:

 

 

 

 

Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements

 

 

(1,248

)

 

 

(2,163

)

Non-cash interest expense on convertible notes

 

 

33

 

 

 

1,927

 

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

 

$

1,636

 

 

$

(182

)

Rambus Inc.

Reconciliation of GAAP Forward-Looking Estimates to Non-GAAP Forward-Looking Estimates

(Unaudited)

 

2022 Fourth Quarter Outlook

 

Three Months Ended
December 31, 2022

(In millions)

 

Low

 

High

Forward-looking operating costs and expenses

 

$

100.3

 

 

$

96.3

 

Adjustments:

 

 

 

 

Stock-based compensation expense

 

 

(10.3

)

 

 

(10.3

)

Amortization of acquired intangible assets

 

 

(4.0

)

 

 

(4.0

)

Forward-looking Non-GAAP operating costs and expenses

 

$

86.0

 

 

$

82.0

 

 

 

 

 

 

Forward-looking interest and other income (expense), net

 

$

0.4

 

 

$

0.4

 

Adjustments:

 

 

 

 

Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements

 

 

(1.0

)

 

 

(1.0

)

Non-cash interest expense

 

 

0.1

 

 

 

0.1

 

Forward-looking Non-GAAP interest and other income (expense), net

 

$

(0.5

)

 

$

(0.5

)

 

Desmond Lynch
Senior Vice President, Finance and Chief Financial Officer
(408) 462-8000
dlynch@rambus.com

Source: Rambus Inc.