SUNNYVALE, Calif., Nov. 5, 2019 — Rambus Inc. today reported financial results for the third quarter ended September 30, 2019. Total revenue for the third quarter was above expectations at $57.4 million; licensing billings were $63.1 million, product revenue was $21.4 million, and contract and other revenue was $16.6 million. The Company also generated $25.6 million in cash provided by operating activities in the third quarter of 2019. The Company has generated $93.1 million in cash provided by operating activities through the nine months ended September 30, 2019, greater than what was generated during the full fiscal year of 2018.

“Rambus delivered a great third quarter. We made tremendous progress toward the strategic objectives critical to our future and successfully realigned the Company around our core strengths in semiconductor,” said Luc Seraphin, chief executive officer of Rambus. “With record revenue from our memory interface chip business and continued silicon IP design wins at tier-one SoC customers, we exceeded our commitments to the market.”

Business Review

Consistent with the Company’s areas of focus and mission to deliver data faster and safer, Rambus completed a number of significant M&A activities over the course of the third quarter. The Company closed the sale of its payments and ticketing business to Visa, redefining its perimeter in the semiconductor market. Rambus also announced two silicon IP acquisitions to enhance its offerings and amplify its market position in interfaces and security for data center, artificial intelligence (AI), automotive and government. The first was the completed acquisition of digital controller company, Northwest Logic, and the second was an agreement to acquire the secure silicon IP and protocols businesses of Verimatrix, formerly Inside Secure, which we expect to close by the end of the year.

Rambus continued to drive sustained silicon IP revenue growth with key design wins for both its interface and security IP solutions. The Company closed four tier-1 SoC design wins across the portfolio for data center, edge, IoT and government and announced a combined interface and security IP win at SEAKR for aerospace and satellite communications. The team expanded its portfolio with leading-edge interface solutions for GDDR6, HBM2 and 112G to deliver the critical building blocks for AI, data center, 5G and automotive. And finally, Rambus announced the industry’s fastest complete memory subsystem solution for GDDR6, including the PHY and controller, capable of running at 18 Gbps to meet the demands of performance-intensive applications.

Finally, the Company’s memory interface chip business achieved a second consecutive quarter of record revenue and is on track to almost double year over year. This is driven by increased OEM and data center qualifications, leading to steady gains in DDR4 memory interface chip market share. The Company also remains well positioned as a first mover for the industry transition to DDR5.

Quarterly Financial Review – GAAP	Three Months Ended September 30,
(In millions, except for percentages and per share amounts)	2019				2018
Revenue
Royalties	$	19.4			$	33.6
Product revenue	21.4				11.8
Contract and other revenue	16.6				14.4
Total revenue	$	57.4			$	59.8
Total operating costs and expenses	$	80.3			$	78.9
Operating loss	$	(22.9	)		$	(19.1	)
Operating margin	(40		)%		(32		)%
Net loss	$	(17.3	)		$	(104.9	)
Diluted net loss per share	$	(0.16	)		$	(0.97	)
Net cash provided by operating activities	$	25.6			$	31.6

Quarterly Financial Review – Non-GAAP (including operational metric) (1)	Three Months Ended September 30,
(In millions)	2019				2018
Licensing billings (2)	$	63.1			$	75.4
Product revenue	$	21.4			$	11.8
Contract and other revenue	$	16.6			$	14.4
Total operating costs and expenses	$	67.1			$	67.6
Interest and other income (expense), net	$	6.0			$	6.2
Diluted share count	114				110

(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.
(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 $57.4 million, with licensing billings of $63.1 million, product revenue of $21.4 million, and contract and other revenue of $16.6 million. We had GAAP total operating costs and expenses of $80.3 million. We also had non-GAAP total operating costs and expenses of $67.1 million, above the high end of our guidance due to higher cost of product revenue related to increased buffer chip sales. We also recorded $5.1 million in revenue and $6.8 million in operating costs and expenses associated with our payments and ticketing business in the third quarter. We had GAAP diluted net loss per share of $0.16. Our basic share count was 111 million shares and our diluted share count would have been 114 million shares.

Cash, cash equivalents, and marketable securities as of September 30, 2019 were $338.0 million, which was flat as compared to June 30, 2019, mainly due to $25.6 million in cash provided by operating activities, offset by $21.9 million in cash paid for the acquisition of Northwest Logic. Cash provided by operating activities for the nine months ended September 30, 2019 was $93.1 million, an increase of $41.0 million from the same period in the prior year.

2019 Fourth Quarter Outlook

The Company will discuss its full revenue guidance for the fourth quarter of 2019 during its upcoming conference call. The following table sets forth fourth quarter outlook for other measures and excludes our Payments and Ticketing business which was sold to Visa in the fourth quarter of 2019.

(In millions)	GAAP		Non-GAAP (1)
Licensing billings (2)	$60 – $66		$60 – $66
Product revenue	$19 – $25		$19 – $25
Contract and other revenue	$10 – $16		$10 – $16
Total operating costs and expenses	$74 – $70		$63 – $59
Interest and other income (expense), net	$4		$1
Diluted share count	115		115

(1)	See “Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates” tables 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 fourth quarter of 2019, the Company expects licensing billings to be between $60 million and $66 million. The Company also expects royalty revenue to be between $15 million and $21 million, product revenue to be between $19 million and $25 million and contract and other revenue to be between $10 million and $16 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 $74 million and $70 million. Additionally, the Company expects non-GAAP operating costs and expenses to be between $63 million and $59 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 115 million, and exclude stock-based compensation expense ($7 million), amortization expense ($3 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 ($5 million).

About Rambus Inc.

Rambus is a premier Silicon IP and chip provider that makes data faster and safer. With 30 years of innovation, we continue to develop the foundational technology for all modern computing systems. Leveraging our semiconductor expertise, Rambus solutions speed performance, expand capacity and improve security for today’s most demanding applications. From data center and edge to artificial intelligence and automotive, our interface and security IP, and memory interface chips enable SoC and system designers to deliver their vision of the future. For more information, visit rambus.com.

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Source:  Rambus