Rambus Reports First Quarter 2020 Financial Results

SUNNYVALE, Calif. – May 4, 2020 – Rambus Inc. (NASDAQ:RMBS), a premier silicon IP and chip provider making data faster and safer, today reported financial results for the first quarter ended March 31, 2020. GAAP revenue for the first quarter was above expectations at $64.0 million; licensing billings were $67.1 million, product revenue was $30.7 million, and contract and other revenue was $13.6 million. The Company also generated $37.3 million in cash provided by operating activities.

“Rambus had an exceptional first quarter with record revenue from both our silicon IP and chip businesses, driven by excellent execution and continued gains in market share,” said Luc Seraphin, chief executive officer of Rambus. “The dedication of our team and resilience of our business model under the current circumstances, combined with accelerated demand for our products across the critical markets of data center, networking and 5G, give us confidence in our ongoing ability to generate cash, further strengthen our balance sheet and emerge a stronger company.”

Business Review

The dramatic global shift towards working from home and virtual collaboration caused by COVID-19 has put an enormous strain on global data infrastructure, increasing demands for bandwidth, capacity and security in data center, cloud and 5G applications to rapidly scale remote access. As a result, customer demand remains strong in these critical markets, despite significant uncertainty in the macro environment. The Company’s focus on our core strength in semiconductor, emphasis on operational efficiency and strong cash generation have built an enduring foundation for growth that enables our product teams to provide uninterrupted delivery on our commitments to customers. With predictable patent licensing and a strong balance sheet, the Rambus business model is naturally resilient to the economic uncertainty resulting from COVID-19, and our innovations and products are well aligned to both near and long-term customer demand.

The Rambus silicon IP business delivered record revenue in the first quarter, augmented by multiple tier-1 SoC design wins and strong execution from last year’s acquisitions. The Company strengthened its position in the critical markets of data center, cloud, communications, HPC, AI and 5G, with additions to both the high-speed interface and security IP portfolios. Our industry-leading, silicon-proven 112G XSR die-to-die and chiplet interface and complete HBM2E memory solution, featuring an integrated PHY and digital controller, provide the critical interconnects for moving data in next-generation high-performance applications. The tremendous growth in the amount of data being generated is also increasing requirements to secure data while at-rest and in-motion. The team continues to drive growth in security with multiple tier-1 SoC design wins for root of trust and secure protocol solutions. We extended our industry leadership with the recent launch of an 800G MACsec solution to protect data in motion in cloud, networking, AI and 5G applications.

The Company’s memory interface chip business delivered record revenue for the fourth consecutive quarter, driven by continued gains in market share and bolstered by the increased demand for memory in data center and cloud. Emphasizing excellence in quality and delivery, data center and OEM qualifications continue to increase for the DDR4 memory interface chipset, and the Company remains well positioned as a first mover for the industry transition to DDR5.

Quarterly Financial Review – GAAP	Three Months Ended March 31,
(In millions, except for percentages and per share amounts)	2020	2019
Revenue
Royalties	$19.7	$24.8
Product revenue	30.7	9.0
Contract and other revenue	13.6	14.6
Total revenue	$64.0	$48.4
Cost of product revenue	$10.3	$4.4
Cost of contract and other revenue	$1.2	$2.9
Amortization of acquired intangible assets (included in total cost of revenue)	$4.4	$3.9
Total operating expenses (1)	$58.9	$68.6
Operating loss	$(10.8)	$(31.4)
Operating margin	(17)%	(65)%
Net loss	$(8.0)	$(26.6)
Diluted net loss per share	$(0.07)	$(0.24)
Net cash provided by operating activities	$37.3	$28.8

(1) Includes amortization of acquired intangible assets of approximately $0.3 million and $1.1 million for the three months ended March 31, 2020 and 2019, respectively.

Quarterly Financial Review – Non-GAAP (including operational metric) (1)	Three Months Ended March 31,
(In millions)	2020	2019
Licensing billings (2)	$67.1	$75.4
Product revenue	$30.7	$9.0
Contract and other revenue	$13.6	$14.6
Cost of product revenue	$10.3	$4.4
Cost of contract and other revenue	$1.2	$2.9
Total operating expenses	$51.9	$60.0
Interest and other income (expense), net	$1.2	$1.1
Diluted share count	115	111

(1) See “Supplemental Reconciliation of GAAP to Non-GAAP Results” table included below. Note that the applicable non-GAAP measures are presented and that revenue, cost of product revenue and cost of contract and other revenue are solely presented on a GAAP basis.

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

Revenue for the quarter was $64.0 million, above the high end of our expectations primarily due to our strong performance in our memory interface chip business. We also had licensing billings of $67.1 million, product revenue of $30.7 million, and contract and other revenue of $13.6 million. We had total GAAP cost of revenue of $15.9 million and operating expenses of $58.9 million. We also had total non-GAAP operating expenses of $51.9 million, at the low end of our expectations through our cost management actions. Due to our strong revenue performance and cost management actions, our profit was above the high end of our expectations. We had GAAP diluted net loss per share of $0.07. Our basic share count was 113 million shares and our diluted share count would have been 115 million shares.

Cash, cash equivalents, and marketable securities as of March 31, 2020 were $435.4 million, an increase of $27.8 million from December 31, 2019, mainly due to $37.3 million in cash provided by operating activities.

2020 Second Quarter Outlook

The Company will discuss its full revenue guidance for the second quarter of 2020 during its upcoming conference call. The following table sets forth second quarter outlook for other measures.

(In millions)	GAAP	Non-GAAP (1)
Licensing billings (2)	$57 – $63	$57 – $63
Product revenue	$27 – $33	$27 – $33
Contract and other revenue	$8 – $14	$8 – $14
Total operating costs and expenses	$77 – $73	$66 – $62
Interest and other income (expense), net	$3	$1
Diluted share count	116	116

(1) See “Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates” table included below. Note that the applicable non-GAAP measures are presented, and that revenue is solely presented on a GAAP basis.

(2) Licensing billings is an operational metric that reflects amounts invoiced to our licensing customers during the period, as adjusted for certain differences. This metric is the same for both GAAP and non-GAAP presentations.

For the second quarter of 2020, the Company expects licensing billings to be between $57 million and $63 million. The Company also expects royalty revenue to be between $9 million and $15 million, product revenue to be between $27 million and $33 million and contract and other revenue to be between $8 million and $14 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for various product sales, solutions licensing among other matters.

The Company also expects operating costs and expenses to be between $77 million and $73 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $66 million and $62 million. These expectations also assume non-GAAP interest and other income (expense), net, of $1 million, tax rate of 24% and diluted share count of 116 million, and exclude stock-based compensation expense ($6 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 ($4 million).

Conference Call:

Rambus management will discuss the results of the quarter during a conference call scheduled for 2:00pm PT today. The call, audio and slides will be available online at investor.rambus.com and a replay will be available for the next week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID# 9761889.