Rambus Reports First Quarter 2019 Financial Results

SUNNYVALE, Calif. – April 22, 2019 – Rambus Inc. (NASDAQ:RMBS) today reported financial results for the first quarter ended March 31, 2019. Total revenue for the first quarter was in line with expectations at $48.4 million, with royalty revenue of $24.8 million and licensing billings of $75.4 million. The company also generated $28.8 million in cash provided by operating activities.

“Rambus had a solid first quarter, with continued execution from our product teams and a strong balance sheet fueled by cash generation from operations. We have refocused and augmented our product portfolio around our core strengths in semiconductor, to enable new design wins and increased market share,” said Luc Seraphin, chief executive officer of Rambus.

Business Review

Rambus product businesses made solid progress in the first quarter, with the addition of new products and design wins at leading chip and system manufacturers worldwide. We target performance-driven, high-growth markets including data center and networking, artificial intelligence and machine learning, IoT and automotive, where demand for data and security are at their highest.

The server DIMM chipset business had a positive quarter. Buffer chipset revenue was up nearly 40% from the same period last year, despite declines in the overall memory market due to near-term inventory corrections. Through steady increases in the number of OEM and data center qualifications, we are making continued gains in market share for DDR4 buffer chips. In addition to the growth in DDR4, we have established a first-mover position for next-generation DDR5 memory buffer chips and continue shipping samples at the top-end speeds for both the RCD and DB chips.

Our high-speed IP Cores business delivered record revenue and remains on a trajectory of approximately 50% compounded annual growth rate. We closed several new SoC design wins for data center, networking and artificial intelligence, including multiple new ASIC designs at a Tier 1 SoC customer. In addition to the tape out of the industry’s first commercial GDDR6 memory PHY on TSMC 7nm, we expanded our high-performance SerDes portfolio with a leadership 32G SerDes PHY to enable 5G infrastructure and a 112G SerDes PHY to enable next-generation 400G and 800G communications systems.

The Rambus Cryptography business saw the importance of semiconductor device-level security continue to grow in the industry. We increased our traction and opportunities for secure silicon IP, with a new design win at a major OEM and expanded agreements for our provisioning services. We continue to build momentum for our CryptoManager Root of Trust in our key verticals of artificial intelligence and data center.

Quarterly Financial Review – GAAP	Three Months Ended March 31,
(In millions, except for percentages and per share amounts)	2019	2018
Revenue
Royalties	$24.8	$21.4
Product revenue	9.0	7.3
Contract and other revenue	14.6	17.7
Total revenue	$48.4	$46.4
Total operating costs and expenses	$79.8	$90.0
Operating loss	$(31.4)	$(43.6)
Operating margin	(65)%	(94)%
Net loss	$(26.6)	$(35.7)
Diluted net loss per share	$(0.24)	$(0.33)
Licensing billings (1)	$75.4	$75.9
Net cash provided by operating activities	$28.8	$16.8

(1) Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the period, as adjusted for certain differences.

Quarterly Financial Review – Non-GAAP (1)	Three Months Ended March 31,
(In millions, except for percentages and per share amounts)	2019	2018
Revenue
Royalties	$24.8	$21.4
Product revenue	9.0	7.3
Contract and other revenue	14.6	17.7
Total revenue	$48.4	$46.4
Total operating costs and expenses	$67.3	$68.7
Operating loss	$(18.9)	$(22.3)
Operating margin	(39)%	(48)%
Net loss	$(9.2)	$(11.3)
Diluted net loss per share	$(0.08)	$(0.10)

(1) See “Supplemental Reconciliation of GAAP to Non-GAAP Results” and “Reconciliation of Other GAAP to Non-GAAP Items” tables included below. Note that the applicable non-GAAP measures are presented and that revenue is solely presented on a GAAP basis.

Revenue for the quarter was $48.4 million, with royalty revenue of $24.8 million and licensing billings of $75.4 million, in line with expectations. We had GAAP total operating costs and expenses of $79.8 million and non-GAAP total operating costs and expenses of $67.3 million, slightly above the high end of our expectations primarily related to increased facilities costs directly offset by a corresponding decrease in interest expense, as a result of the adoption of Accounting Standards Update (ASU) No. 2016-02, Topic 842, “Leases.” We also had GAAP and non-GAAP diluted net loss per share of $0.24 and $0.08, respectively. Our basic share count was 109.7 million shares and our diluted share count would have been 110.6 million shares.

Cash, cash equivalents, and marketable securities as of March 31, 2019 were $305.9 million, an increase of $28.1 million from December 31, 2018, mainly due to $28.8 million in cash provided by operating activities.

2019 Second Quarter Outlook

The Company will discuss revenue guidance for the second quarter of 2019 during its upcoming conference call. The following table sets forth second quarter outlook for other measures.

(In millions)	GAAP	Non-GAAP (1)
Total operating costs and expenses	$81 – $77	$69 – $65
Interest and other income (expense), net	$5	$1
Diluted share count	111	111

(1) See “Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates” tables included below.

For the second quarter of 2019, the Company expects operating costs and expenses to be between $81 million and $77 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $69 million and $65 million. These expectations also assume non-GAAP interest and other income (expense), net, of $1 million, tax rate of 24% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 111 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million), non-cash interest expense on convertible notes ($2 million) and interest income related to the significant financing component from fixed-fee patent and technology licensing arrangements ($6 million).

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