Rambus Reports Second Quarter Financial Results

On occasion in the future, there may be other items, such as impairments 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 2015 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 www.rambus.com.

RMBSFN

Rambus Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)

	June 30, 2015		December 31, 2014
ASSETS

Current assets:
Cash and cash equivalents	$	201,477	$	154,126
Marketable securities	146,649		145,983
Accounts receivable	6,745		6,001
Prepaids and other current assets	9,690		8,541
Deferred taxes	1,113		187
Total current assets	365,674		314,838
Intangible assets, net	76,694		89,371
Goodwill	116,899		116,899
Property, plant and equipment, net	60,689		64,023
Deferred taxes, long-term	454		536
Other assets	3,345		2,612
Total assets	$	623,755	$	588,279

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	5,187	$	6,962
Accrued salaries and benefits	11,857		14,840
Other accrued liabilities	14,325		12,856
Total current liabilities	31,369		34,658
Long-term liabilities:
Convertible notes, long-term	117,949		115,089
Long-term imputed financing obligation	38,874		39,063
Other long-term liabilities	10,818		7,847
Total long-term liabilities	167,641		161,999
Total stockholders’ equity	424,745		391,622
Total liabilities and stockholders’ equity	$	623,755	$	588,279

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)

	Three Months Ended June 30,							Six Months Ended June 30,
	2015			2014				2015				2014

Revenue:
Royalties	$	62,387		$	69,741			$	129,350			$	143,378
Contract and other revenue	10,425			6,777				16,376				11,428
Total revenue	72,812			76,518				145,726				154,806
Operating costs and expenses:
Cost of revenue (1)	12,137			10,637				22,893				20,659
Research and development (1)	29,188			27,668				57,722				54,566
Sales, general and administrative (1)	17,339			18,619				35,841				37,439
Gain from sale of intellectual property	(896		)	—				(3,156			)	(170			)
Gain from settlement	(510		)	(510			)	(1,020			)	(1,020			)
Restructuring charges	—			—				—				39
Total operating costs and expenses	57,258			56,414				112,280				111,513
Operating income	15,554			20,104				33,446				43,293
Interest income and other income (expense), net	203			104				335				117
Interest expense	(3,091		)	(8,770			)	(6,174			)	(18,696			)
Interest and other income (expense), net	(2,888		)	(8,666			)	(5,839			)	(18,579			)
Income before income taxes	12,666			11,438				27,607				24,714
Provision for income taxes	5,805			6,395				11,244				11,867
Net income	$	6,861		$	5,043			$	16,363			$	12,847
Net income per share:
Basic	$	0.06		$	0.04			$	0.14			$	0.11
Diluted	$	0.06		$	0.04			$	0.14			$	0.11
Weighted average shares used in per share calculation
Basic	116,027			114,116				115,683				113,854
Diluted	120,939			117,398				119,225				116,733

_________ (1) Total stock-based compensation expense for the three and six months ended June 30, 2015 and 2014 are presented as follows:

	Three Months Ended June 30,								Six Months Ended June 30,
	2015				2014				2015				2014
Cost of revenue	$	27			$	15			$	39			$	22
Research and development	$	1,988			$	2,615			$	3,755			$	3,926
Sales, general and administrative	$	2,400			$	2,225			$	4,387			$	3,806

Rambus Inc. Supplemental Reconciliation of GAAP to Non-GAAP Results (In thousands) (Unaudited)

	Three Months Ended									Six Months Ended
	June 30, 2015			March 31, 2015			June 30, 2014			June 30, 2015			June 30, 2014

Operating costs and expenses	$	57,258		$	55,022		$	56,414		$	112,280		$	111,513
Adjustments:
Stock-based compensation expense	(4,415		)	(3,766		)	(4,855		)	(8,181		)	(7,754		)
Acquisition-related transaction costs and retention bonus expense	—			(2		)	(1,028		)	(2		)	(2,463		)
Amortization expense	(6,323		)	(6,323		)	(6,757		)	(12,646		)	(13,554		)
Restructuring charges	—			—			—			—			(39		)
Non-GAAP operating costs and expenses	$	46,520		$	44,931		$	43,774		$	91,451		$	87,703

Operating income	$	15,554		$	17,892		$	20,104		$	33,446		$	43,293
Adjustments:
Stock-based compensation expense	4,415			3,766			4,855			8,181			7,754
Acquisition-related transaction costs and retention bonus expense	—			2			1,028			2			2,463
Amortization expense	6,323			6,323			6,757			12,646			13,554
Restructuring charges	—			—			—			—			39
Non-GAAP operating income	$	26,292		$	27,983		$	32,744		$	54,275		$	67,103

Income before income taxes	$	12,666		$	14,941		$	11,438		$	27,607		$	24,714
Adjustments:
Stock-based compensation expense	4,415			3,766			4,855			8,181			7,754
Acquisition-related transaction costs and retention bonus expense	—			2			1,028			2			2,463
Amortization expense	6,323			6,323			6,757			12,646			13,554
Restructuring charges	—			—			—			—			39
Non-cash interest expense on convertible notes	1,581			1,559			5,469			3,140			11,711
Non-GAAP income before income taxes	$	24,985		$	26,591		$	29,547		$	51,576		$	60,235
GAAP provision for income taxes	5,805			5,439			6,395			11,244			11,867
Adjustment to GAAP provision for income taxes	3,190			4,134			4,242			7,324			9,818
Non-GAAP provision for income taxes	8,995			9,573			10,637			18,568			21,685
Non-GAAP net income	$	15,990		$	17,018		$	18,910		$	33,008		$	38,550

Non-GAAP basic net income per share	$	0.14		$	0.15		$	0.17		$	0.29		$	0.34
Non-GAAP diluted net income per share	$	0.13		$	0.14		$	0.16		$	0.28		$	0.33
Weighted average shares used in non-GAAP per share calculation:
Basic	116,027			115,336			114,116			115,683			113,854
Diluted	120,939			117,442			117,398			119,225			116,733

Supplemental Reconciliation of GAAP to Non-GAAP Effective Tax Rate (1)

	Three Months Ended						Six Months Ended
	June 30, 2015		March 31, 2015		June 30, 2014		June 30, 2015		June 30, 2014

GAAP effective tax rate	46	%	36	%	56	%	41	%	48	%
Adjustment to GAAP effective tax rate	(10	)%	—	%	(20	)%	(5	)%	(12	)%
Non-GAAP effective tax rate	36	%	36	%	36	%	36	%	36	%

(1)

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 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.

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