Rambus Reports Fourth Quarter and Fiscal Year 2017 Financial

Rambus Reports Fourth Quarter and Fiscal Year 2017 Financial Results

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(1) Total stock-based compensation expense for the three months and years ended December 31, 2017 and 2016 are presented as follows:


	Three Months Ended December 31,				Year Ended December 31,
	2017		2016		2017		2016
Cost of product revenue	$	25	$	14	$	78	$	56
Research and development	$	3,137	$	2,639	$	12,185	$	9,165
Sales, general and administrative	$	4,072	$	3,004	$	15,140	$	11,792

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

	Three Months Ended									Year Ended
	December 31, 2017			September 30, 2017			December 31, 2016			December 31, 2017			December 31, 2016

Operating costs and expenses	$	86,172		$	82,124		$	97,035		$	338,689		$	302,955
Adjustments:
Stock-based compensation expense	(7,234		)	(6,964		)	(5,657		)	(27,403		)	(21,013		)
Acquisition-related transaction costs and retention bonus expense	(30		)	(47		)	(197		)	(248		)	(3,235		)
Purchase accounting adjustment for inventory fair value step-up	—			—			(1,136		)	—			(2,304		)
Amortization expense	(10,526		)	(10,498		)	(11,093		)	(41,962		)	(37,138		)
Impairment of long-lived assets	—			—			(18,300		)	—			(18,300		)
Change in contingent consideration	—			—			6,845			—			6,845
Non-GAAP operating costs and expenses	$	68,382		$	64,615		$	67,497		$	269,076		$	227,810

Operating income	$	15,719		$	17,010		$	524		$	54,407		$	33,642
Adjustments:
Stock-based compensation expense	7,234			6,964			5,657			27,403			21,013
Acquisition-related transaction costs and retention bonus expense	30			47			197			248			3,235
Purchase accounting adjustment for inventory fair value step-up	—			—			1,136			—			2,304
Amortization expense	10,526			10,498			11,093			41,962			37,138
Impairment of long-lived assets	—			—			18,300			—			18,300
Change in contingent consideration	—			—			(6,845		)	—			(6,845		)
Non-GAAP operating income	$	33,509		$	34,519		$	30,062		$	124,020		$	108,787

Income (loss) before income taxes	$	11,564		$	13,931		$	(2,506	)	$	40,989		$	22,637
Adjustments:
Stock-based compensation expense	7,234			6,964			5,657			27,403			21,013
Acquisition-related transaction costs and retention bonus expense	30			47			197			248			3,235
Purchase accounting adjustment for inventory fair value step-up	—			—			1,136			—			2,304
Amortization expense	10,526			10,498			11,093			41,962			37,138
Impairment of long-lived assets	—			—			18,300			—			18,300
Change in contingent consideration	—			—			(6,845		)	—			(6,845		)
Loss on extinguishment of debt	1,082			—			—			1,082			—
Non-cash interest expense on convertible notes	2,255			1,801			1,723			7,579			6,749
Non-GAAP income before income taxes	$	32,691		$	33,241		$	28,755		$	119,263		$	104,531
GAAP provision for income taxes	43,331			6,236			939			59,450			15,817
Adjustment to GAAP provision for income taxes	(31,889		)	5,398			9,125			(17,708		)	20,769
Non-GAAP provision for income taxes	11,442			11,634			10,064			41,742			36,586
Non-GAAP net income	$	21,249		$	21,607		$	18,691		$	77,521		$	67,945

Non-GAAP basic net income per share	$	0.19		$	0.20		$	0.17		$	0.70		$	0.62
Non-GAAP diluted net income per share	$	0.19		$	0.19		$	0.16		$	0.68		$	0.60
Weighted average shares used in non-GAAP per share calculation:
Basic	109,737			109,555			110,788			110,198			110,162
Diluted	114,341			113,119			114,060			113,899			113,140

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

	Three Months Ended						Year Ended
	December 31, 2017		September 30, 2017		December 31, 2016		December 31, 2017		December 31, 2016

GAAP effective tax rate	375	%	45	%	(38	)%	145	%	70	%
Adjustment to GAAP effective tax rate	(340	)%	(10	)%	73	%	(110	)%	(35	)%
Non-GAAP effective tax rate	35	%	35	%	35	%	35	%	35	%

			(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 35 percent for both 2017 and 2016, 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 year to assist the Company’s planning.

Rambus Inc. Reconciliation of Other GAAP to Non-GAAP Items (In thousands, except percentages) (Unaudited)

	GAAP						Non-GAAP
	Three Months Ended December 31,						Three Months Ended December 31,
	2017			2016			2017				2016
Revenue (i)	$	101,891		$	97,559		$	101,891			$	97,559
Operating income (ii)		15,719		524			33,509				30,062
Operating margin (ii/i)		15	%	1		%	33			%	31			%

	GAAP						Non-GAAP
	Year Ended December 31,						Year Ended December 31,
	2017			2016			2017				2016
Revenue (i)	$	393,096		$	336,597		$	393,096			$	336,597
Operating income (ii)		54,407		33,642			124,020				108,787
Operating margin (ii/i)		14	%	10		%	32			%	32			%

							Three Months Ended December 31,
							2017				2016

Net loss							$	(31,767	)		$	(3,445	)
Add back:
Interest and other income (expense), net							4,155				3,030
Provision for income taxes							43,331				939
Depreciation expense							3,304				3,577
Amortization expense							10,526				11,093
EBITDA (1)							$	29,549			$	15,194
Adjustments:
Stock-based compensation expense							7,234				5,657
Acquisition-related transaction costs and retention bonus expense							30				197
Purchase accounting adjustment for inventory fair value step-up							—				1,136
Impairment of long-lived assets							—				18,300
Change in contingent consideration							—				(6,845		)
Adjusted EBITDA (2)							$	36,813			$	33,639

			(1)		EBITDA is a non-GAAP measure that management uses to evaluate the cash generating capacity of the company. The most directly comparable GAAP measure is net income (loss). EBITDA is net income (loss) adjusted for net interest and other income (expense), income taxes, and depreciation and amortization. It should not be considered as an alternative to net income computed under GAAP.
			(2)		Adjusted EBITDA excludes the impact of other non-GAAP adjustments indicated in the above tables.

Rambus Inc. Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates (In millions, except per share amounts) (Unaudited)

2018 First Quarter Outlook under ASC 606	Three Months Ended March 31, 2018
	Low			High

Forward-looking operating costs and expenses	$	85.5		$	81.5
Adjustments:
Stock-based compensation expense	(7.5		)	(7.5		)
Amortization expense	(11.0		)	(11.0		)
Forward-looking Non-GAAP operating costs and expenses	$	67.0		$	63.0

Forward-looking operating loss	$	(44.5	)	$	(34.5	)
Adjustments:
Stock-based compensation expense	7.5			7.5
Amortization expense	11.0			11.0
Forward-looking Non-GAAP operating loss	$	(26.0	)	$	(16.0	)

Forward-looking loss before income taxes	$	(48.9	)	$	(38.9	)
Adjustments:
Stock-based compensation expense	7.5			7.5
Amortization expense	11.0			11.0
Non-cash interest expense on convertible notes	2.7			2.7
Forward-looking Non-GAAP loss before income taxes	$	(27.7	)	$	(17.7	)
Forward-looking GAAP benefit from income taxes	(11.7		)	(9.3		)
Adjustment to forward-looking GAAP benefit from income taxes	5.1			5.1
Forward-looking Non-GAAP benefit from income taxes	(6.6		)	(4.2		)
Forward-looking Non-GAAP net loss	$	(21.1	)	$	(13.5	)

Forward-looking Non-GAAP basic net loss per share	$	(0.19	)	$	(0.12	)
Forward-looking Non-GAAP diluted net loss per share	$	(0.19	)	$	(0.12	)
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic	110.0			110.0
Diluted	110.0			110.0

2018 First Quarter Outlook under ASC 605 (1)	Three Months Ended March 31, 2018
	Low			High

Forward-looking operating costs and expenses	$	85.5		$	81.5
Adjustments:
Stock-based compensation expense	(7.5		)	(7.5		)
Amortization expense	(11.0		)	(11.0		)
Forward-looking Non-GAAP operating costs and expenses	$	67.0		$	63.0

Forward-looking operating income	$	8.5		$	18.5
Adjustments:
Stock-based compensation expense	7.5			7.5
Amortization expense	11.0			11.0
Forward-looking Non-GAAP operating income	$	27.0		$	37.0

Forward-looking income before income taxes	$	4.1		$	14.1
Adjustments:
Stock-based compensation expense	7.5			7.5
Amortization expense	11.0			11.0
Non-cash interest expense on convertible notes	2.7			2.7
Forward-looking Non-GAAP income before income taxes	$	25.3		$	35.3
Forward-looking GAAP provision for income taxes	1.0			3.4
Adjustment to forward-looking GAAP provision for income taxes	5.1			5.1
Forward-looking Non-GAAP provision for income taxes	6.1			8.5
Forward-looking Non-GAAP net income	$	19.2		$	26.8

Forward-looking Non-GAAP basic net income per share	$	0.17		$	0.24
Forward-looking Non-GAAP diluted net income per share	$	0.17		$	0.23
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic	110.0			110.0
Diluted	114.4			114.4

(1)

See “2018 First Quarter Outlook” above for an explanation of the presentation of this ASC 605 outlook.

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