Rambus Reports First Quarter 2019 Financial Results

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 product and service offerings, future profit and growth and financial guidance for the second quarter of 2019, including operating costs and expenses, and estimated, fixed, long-term projected tax rates, both 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. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.


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

	March 31, 2019		December 31, 2018
ASSETS

Current assets:
Cash and cash equivalents	$	143,016	$	115,924
Marketable securities	162,850		161,840
Accounts receivable	43,810		50,863
Unbilled receivables	170,287		176,613
Inventories	8,192		6,772
Prepaids and other current assets	16,857		15,738
Total current assets	545,012		527,750
Intangible assets, net	55,507		59,936
Goodwill	207,828		207,178
Property, plant and equipment, net	22,637		57,028
Operating lease right-of-use assets	19,458		—
Deferred tax assets	4,411		4,435
Unbilled receivables, long-term	459,148		497,003
Other assets	7,419		7,825
Total assets	$	1,321,420	$	1,361,155

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	8,274	$	7,392
Accrued salaries and benefits	13,666		16,938
Deferred revenue	15,774		19,374
Income taxes payable, short-term	16,364		16,390
Operating lease liabilities	9,351		—
Other current liabilities	5,847		9,191
Total current liabilities	69,276		69,285
Long-term liabilities:
Convertible notes, long-term	143,612		141,934
Long-term imputed financing obligation	—		36,297
Long-term operating lease liabilities	12,308		—
Long-term income taxes payable	73,365		77,280
Other long-term liabilities	22,972		24,247
Total long-term liabilities	252,257		279,758
Total stockholders’ equity	999,887		1,012,112
Total liabilities and stockholders’ equity	$	1,321,420	$	1,361,155


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

	Three Months Ended March 31,
	2019			2018

Revenue:
Royalties	$	24,853		$	21,374
Product revenue		8,964			7,313
Contract and other revenue		14,567			17,739
Total revenue		48,384			46,426
Operating costs and expenses:
Cost of product revenue (1)	$	4,427		$	4,357
Cost of contract and other revenue		6,771			12,122
Research and development (1)		40,619			40,117
Sales, general and administrative (1)		27,645			30,198
Restructuring charges		331			3,245
Total operating costs and expenses		79,793			90,039
Operating loss		(31,409	)		(43,613	)
Interest income and other income (expense), net		7,413			9,116
Interest expense		(2,271	)		(4,421	)
Interest and other income (expense), net		5,142			4,695
Loss before income taxes		(26,267	)		(38,918	)
Provision for (benefit from) income taxes		309			(3,229	)
Net loss	$	(26,576	)	$	(35,689	)
Net loss per share:
Basic	$	(0.24	)	$	(0.33	)
Diluted	$	(0.24	)	$	(0.33	)
Weighted average shares used in per share calculation
Basic		109,692			109,358
Diluted		109,692			109,358

_________ (1) Total stock-based compensation expense for the three months ended March 31, 2019 and 2018 is presented as follows:

	Three Months Ended March 31,
	2019			2018
Cost of product revenue	$	1		$	3
Research and development	$	3,210		$	3,192
Sales, general and administrative	$	3,978		$	4,319


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

	Three Months Ended March 31,
	2019			2018

Operating costs and expenses	$	79,793		$	90,039
Adjustments:
Stock-based compensation expense	(7,189		)	(7,514		)
Acquisition-related transaction costs and retention bonus expense	—			(30		)
Amortization expense	(4,988		)	(10,531		)
Restructuring charges	(331		)	(3,245		)
Non-GAAP operating costs and expenses	$	67,285		$	68,719

Operating loss	$	(31,409	)	$	(43,613	)
Adjustments:
Stock-based compensation expense	7,189			7,514
Acquisition-related transaction costs and retention bonus expense	—			30
Amortization expense	4,988			10,531
Restructuring charges	331			3,245
Non-GAAP operating loss	$	(18,901	)	$	(22,293	)

Loss before income taxes	$	(26,267	)	$	(38,918	)
Adjustments:
Stock-based compensation expense	7,189			7,514
Acquisition-related transaction costs and retention bonus expense	—			30
Amortization expense	4,988			10,531
Restructuring charges	331			3,245
Non-cash interest expense on convertible notes	1,678			2,679
Non-GAAP loss before income taxes	$	(12,081	)	$	(14,919	)
GAAP provision for (benefit from) income taxes	309			(3,229		)
Adjustment to GAAP provision for (benefit from) income taxes	(3,208		)	(352		)
Non-GAAP benefit from income taxes	(2,899		)	(3,581		)
Non-GAAP net loss	$	(9,182	)	$	(11,338	)

Non-GAAP basic net loss per share	$	(0.08	)	$	(0.10	)
Non-GAAP diluted net loss per share	$	(0.08	)	$	(0.10	)
Weighted average shares used in non-GAAP per share calculation:
Basic	109,692			109,358
Diluted	109,692			109,358


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

	Three Months Ended March 31,
	2019	2018
GAAP effective tax rate	(1)%	8%
Adjustment to GAAP effective tax rate	25 %	16%
Non-GAAP effective tax rate	24 %	24%

					(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 24 percent for both 2019 and 2018, 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 for future periods.


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

	GAAP						Non-GAAP
	Three Months Ended March 31,						Three Months Ended March 31,
	2019			2018			2019			2018
Revenue (i)	$	48,384		$	46,426		$	48,384		$	46,426
Operating loss (ii)	(31,409		)	(43,613		)	(18,901		)	(22,293		)
Operating margin (ii/i)	(65		)%	(94		)%	(39		)%	(48		)%


Rambus Inc. Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates (In millions) (Unaudited)

2019 Second Quarter Outlook	Three Months Ended June 30, 2019
	Low			High

Forward-looking operating costs and expenses	$	81.1		$	77.1
Adjustments:
Stock-based compensation expense	(7.2		)	(7.2		)
Amortization expense	(5.0		)	(5.0		)
Forward-looking Non-GAAP operating costs and expenses	$	68.9		$	64.9

Forward-looking interest and other income (expense), net	$	4.8		$	4.8
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements	(5.7		)	(5.7		)
Non-cash interest expense on convertible notes	1.7			1.7
Forward-looking Non-GAAP interest and other income (expense), net	$	0.8		$	0.8

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