TMCnet News
Rambus Reports Fourth Quarter and Fiscal Year 2017 Financial ResultsRambus Inc. (NASDAQ:RMBS) today reported financial results for the fourth quarter ended December 31, 2017. Total revenue for the quarter was $101.9 million, 4% higher than a year ago, with GAAP diluted net loss per share of $0.29 and non-GAAP diluted net income per share of $0.19. Total revenue for the year ended December 31, 2017 was $393.1 million, 17% higher than a year ago. "Rambus has transitioned to focus on two key high-growth markets - the data center and the mobile edge - with a product roadmap that leverages our core competencies and key ingredient technologies to both differentiate and accelerate our position in complementary markets," said Dr. Ron Black, chief executive officer of Rambus. "Our progress throughout 2017, with strong execution on key product programs, positions us well to deliver growth in 2018." Business Review The Rambus Memory and Interface division augmented its suite of IP cores for the data center throughout the year with the announcements of 56G SerDes and High Bandwidth Memory Gen2 (HBM2) PHYs as part of our broad portfolio for data center and networking. In addition, the team announced the GDDR6 Memory PHY for Artificial Intelligence (AI), automotive and networking, with a comprehensive solution to be offered in conjunction with Micron, Northwest Logic and Avery Designs. Our chip product offering grew with the launch of the DDR4 non-volatile DIMM (NVDIMM) buffer chip and the industry's first functional silicon of a server DIMM buffer chipset capable of achieving the speeds expected for next-generation DDR5. Our Security division, which consists of our cryptography, mobile payments and smart ticketing businesses, extended its product and service portfolio with the launch of our Host Card Emulation (HCE) Ticket Wallet Service and white-label mobile application, the Unified Payment Platform, bringing bank-level security to retail "scan-and-go", and the CryptoManager IoT Security Service, protecting and monitoring IoT endpoints. We continue to gain commercial traction across our products and services with committed transport pilots and retail deployments, as well as Cybertrust Japan, a subsidiary of Softbank Technology Corp, selecting the CryptoManager IoT Security Service protect their Secure IoT Platform®.
Revenue for the quarter was $101.9 million due to continued strength in our licensing program. As a result of our execution in both businesses, revenue for our Memory and Interface Division was up 8% year over year and revenue for our Security Division was up 3% year over year. We had GAAP operating income of $54.4 million for the year, an increase of 62% year over year. In the fourth quarter, we had GAAP net loss per share of $0.29, related primarily to a revaluation of our deferred tax assets in conjunction with U.S. tax legislation passed in December 2017. In the fourth quarter, we had non-GAAP net income per share of $0.19, at the mid-point of our expectations. Cash, cash equivalents, and marketable securities as of December 31, 2017 were $329.4 million, an increase of $145.7 million from September 30, 2017, mainly due to the issuance of $172.5 million aggregate principal amount of the 2023 convertible notes during the quarter and cash generated from operating activities of approximately $59.8 million, offset by the $56.8 million paid to extinguish a portion of our existing 2018 convertible notes. Adjusted EBITDA for the quarter was $36.8 million. 2018 First Quarter Outlook Effective January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers in Accounting Standards Codification Topic 606 ("ASC 606"), which supersedes the revenue recognition requirements in ASC Topic 605, Revenue Recognition ("ASC 605"). The Company expects the adoption of ASC 606 to materially impact the timing of revenue recognition for its fixed-fee intellectual property licensing arrangements. The Company does not expect the adoption of ASC 606 to have a material impact on its other revenue streams, cashflow from operations, or the underlying financial position of the Company. The Company has provided its first quarter outlook under both ASC 606 and ASC 605 in order to provide additional transparency. The Company believes that providing this additional disclosure in the short term will help our investors and analysts understand the impact of the change in revenue recognition standards, especially given the material difference expected in the timing of revenue recognition for our fixed-fee licensing arrangements as mentioned above. Note that the presentation under ASC 605 is not a substitute for the new ASC 606 revenue recognition standard under GAAP applicable for the first quarter of 2018. Additionally, the guidance below under ASC 606 and ASC 605 excludes results from our lighting division. Given that the lighting division has been roughly breakeven for the Company, this exclusion does not impact the Company's outlook on profitability, though it does reduce revenue outlook by roughly $4.0 million for the first quarter of 2018.
For the first quarter of 2018, the Company expects revenue under ASC 606 to be between $41 million and $47 million. The Company expects royalty revenue to be between $21 million and $27 million, and roughly $20 million from product, contract and other revenue. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters. The Company also expects operating costs and expenses to be between $86 million and $82 million, and diluted net loss per share to be between $0.34 and $0.27. Additionally, the Company expects non-GAAP operating costs and expenses to be between $67 million and $63 million, and non-GAAP diluted net loss per share to be between $0.19 and $0.12. These expectations also assume non-GAAP interest and other income and expense of $2 million, tax rate of 24% (refer to non-GAAP financial information below - income tax adjustments) and diluted share count of 110 million, and exclude stock-based compensation expense ($8 million), amortization expense ($11 million), and non-cash interest expense on convertible notes ($3 million).
For the first quarter of 2018, the Company expects revenue under ASC 605 to be between $94 million and $100 million. The Company expects royalty revenue to be between $74 million and $80 million, and roughly $20 million from product, contract and other revenue. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters. The Company also expects operating costs and expenses to be between $86 million and $82 million, and diluted net income per share to be between $0.03 and $0.09. Additionally, the Company expects non-GAAP operating costs and expenses to be between $67 million and $63 million, and non-GAAP diluted net income per share to be between $0.17 and $0.23. These expectations also assume non-GAAP interest and other income and expense of $2 million, tax rate of 24% (refer to non-GAAP financial information below - income tax adjustments) and diluted share count of 114 million, and exclude stock-based compensation expense ($8 million), amortization expense ($11 million), and non-cash interest expense on convertible notes ($3 million). Conference Call: The Company will host a conference call at 2:00 p.m. PT today to discuss its financial results. The call, audio and slides will be available online at investor.rambus.com. A replay will be available following the call as a webcast on the Rambus Investor Relations website and for one week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID#8596527. (1) 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: operating costs and expenses, operating margin, operating income (loss), net income (loss), diluted net income (loss) per share and Adjusted EBITDA. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, loss on extinguishment of debt, 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. 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 transaction costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current periods' portion of any retention bonus expense associated with the acquisitions. The Company excludes these expenses in order to provide better comparability between periods. Purchase accounting adjustment for inventory fair value step-up. These adjustments are the result of accounting for certain business acquisitions and are excluded because such adjustments are non-recurring. Additionally, the Company excludes these expenses in order to provide better comparability between periods. 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. Impairment of long-lived assets. These charges consist of non-cash charges to long-lived assets and are excluded because such charges are non-recurring and do not reduce the Company's liquidity. Change in contingent consideration. This change is due to a reduction of acquisition purchase consideration. This is a non-recurring benefit that has no direct correlation to the operation of the Company's business and no cash flow impact. Loss on extinguishment of debt. The Company has excluded loss on extinguishment of debt as this represents a cost of refinancing its existing convertible notes and 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 35 percent for both 2017 and 2016, and 24 percent for 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 years to assist the Company's planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate. 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. Dedicated to making data faster and safer, Rambus creates innovative hardware, software and services that drive technology advancements from the data center to the mobile edge. Our architecture licenses, IP cores, chips, software, and services span memory and interfaces, security, and emerging technologies to positively impact the modern world. We collaborate with the industry, partnering with leading chip and system designers, foundries, and service providers. Integrated into tens of billions of devices and systems, our products power and secure diverse applications, including Big Data, Internet of Things (IoT) security, mobile payments, and smart ticketing. 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 our new product and service offerings, growth for 2018 and financial guidance for the first quarter of 2018, including revenue, operating costs and expenses, earnings per share 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.
_________ (1) Total stock-based compensation expense for the three months and years ended December 31, 2017 and 2016 are presented as follows:
View source version on businesswire.com: http://www.businesswire.com/news/home/20180129006151/en/ |