Rambus Reports First Quarter 2018 Financial Results

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(1) Total stock-based compensation expense for the three months ended March 31, 2018 and 2017 is presented as follows:


	Three Months Ended March 31,
	2018		2017
Cost of product revenue	$	3	$	14
Research and development	$	3,192	$	3,012
Sales, general and administrative	$	4,319	$	3,570

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

	Three Months Ended
	ASC 606			ASC 605
	March 31, 2018			March 31, 2018			March 31, 2017

Operating costs and expenses	$	90,039		$	90,039		$	83,917
Adjustments:
Stock-based compensation expense	(7,514		)	(7,514		)	(6,596		)
Acquisition-related transaction costs and retention bonus expense	(30		)	(30		)	(81		)
Amortization expense	(10,531		)	(10,531		)	(10,488		)
Restructuring charges	(3,245		)	(3,245		)	—
Non-GAAP operating costs and expenses	$	68,719		$	68,719		$	66,752

Operating income (loss)	$	(43,613	)	$	10,420		$	13,434
Adjustments:
Stock-based compensation expense	7,514			7,514			6,596
Acquisition-related transaction costs and retention bonus expense	30			30			81
Amortization expense	10,531			10,531			10,488
Restructuring charges	3,245			3,245			—
Non-GAAP operating income (loss)	$	(22,293	)	$	31,740		$	30,599

Income (loss) before income taxes	$	(38,918	)	$	7,601		$	10,382
Adjustments:
Stock-based compensation expense	7,514			7,514			6,596
Acquisition-related transaction costs and retention bonus expense	30			30			81
Amortization expense	10,531			10,531			10,488
Restructuring charges	3,245			3,245			—
Non-cash interest expense on convertible notes	2,679			2,679			1,749
Non-GAAP income (loss) before income taxes	$	(14,919	)	$	31,600		$	29,296
GAAP provision for (benefit from) income taxes	(1		)	1,488			7,376
Adjustment to GAAP provision for (benefit from) income taxes	(3,580		)	6,096			2,878
Non-GAAP provision for (benefit from) income taxes	(3,581		)	7,584			10,254
Non-GAAP net income (loss)	$	(11,338	)	$	24,016		$	19,042

Non-GAAP basic net income (loss) per share	$	(0.10	)	$	0.22		$	0.17
Non-GAAP diluted net income (loss) per share	$	(0.10	)	$	0.21		$	0.17
Weighted average shares used in non-GAAP per share calculation:
Basic	109,358			109,358			111,464
Diluted	109,358			112,968			115,325

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

	Three Months Ended March 31,
	ASC 606		ASC 605		ASC 605
	2018		2018		2017
GAAP effective tax rate	0	%	20	%	71	%
Adjustment to GAAP effective tax rate	24	%	4	%	(36	)%
Non-GAAP effective tax rate	24	%	24	%	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 24 percent for 2018 and 35 percent for 2017, 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,
	ASC 606			ASC 605						ASC 606			ASC 605
	2018			2018			2017			2018			2018			2017

Revenue (i)	$	46,426		$	100,459		$	97,351		$	46,426		$	100,459		$	97,351
Operating income (loss) (ii)	(43,613		)	10,420			13,434			(22,293		)	31,740			30,599
Operating margin (ii/i)	(94		)%	10		%	14		%	(48		)%	32		%	31		%


													Three Months Ended March 31,
													ASC 605
													2018			2017

Net income													$	6,113		$	3,006
Add back:
Interest and other income (expense), net													2,819			3,052
Provision for income taxes													1,488			7,376
Depreciation expense													2,942			3,392
Amortization expense													10,531			10,488
EBITDA (1)													$	23,893		$	27,314
Adjustments:
Stock-based compensation expense													7,514			6,596
Acquisition-related transaction costs and retention bonus expense													30			81
Restructuring charges													3,245			—
Adjusted EBITDA (2)													$	34,682		$	33,991

			(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. EBITDA is net income adjusted for net interest 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)

	ASC 606						ASC 605
	Three Months Ended June 30, 2018						Three Months Ended June 30, 2018
	Low			High			Low			High

Forward-looking operating costs and expenses	$	86.5		$	82.5		$	86.5		$	82.5
Adjustments:
Stock-based compensation expense	(7.5		)	(7.5		)	(7.5		)	(7.5		)
Amortization expense	(11.0		)	(11.0		)	(11.0		)	(11.0		)
Forward-looking Non-GAAP operating costs and expenses	$	68.0		$	64.0		$	68.0		$	64.0

Forward-looking operating income (loss)	$	(44.5	)	$	(34.5	)	$	7.5		$	17.5
Adjustments:
Stock-based compensation expense	7.5			7.5			7.5			7.5
Amortization expense	11.0			11.0			11.0			11.0
Forward-looking Non-GAAP operating income (loss)	$	(26.0	)	$	(16.0	)	$	26.0		$	36.0

Forward-looking income (loss) before income taxes	$	(48.9	)	$	(38.9	)	$	3.1		$	13.1
Adjustments:
Stock-based compensation expense	7.5			7.5			7.5			7.5
Amortization expense	11.0			11.0			11.0			11.0
Non-cash interest expense on convertible notes	2.7			2.7			2.7			2.7
Forward-looking Non-GAAP income (loss) before income taxes	$	(27.7	)	$	(17.7	)	$	24.3		$	34.3
Forward-looking GAAP provision for (benefit from) income taxes	(11.7		)	(9.3		)	0.7			3.1
Adjustment to Forward-looking GAAP provision for (benefit from) income taxes	5.1			5.1			5.1			5.2
Forward-looking Non-GAAP provision for (benefit from) income taxes	(6.6		)	(4.2		)	5.8			8.3
Forward-looking Non-GAAP net income (loss)	$	(21.1	)	$	(13.5	)	$	18.5		$	26.0

Forward-looking Non-GAAP basic net income (loss) per share	$	(0.20	)	$	(0.13	)	$	0.17		$	0.24
Forward-looking Non-GAAP diluted net income (loss) per share	$	(0.20	)	$	(0.13	)	$	0.17		$	0.23
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic	107.0			107.0			107.0			107.0
Diluted	107.0			107.0			111.0			111.0

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