) posted first quarter 2013 adjusted earnings per share (EPS) of
9 cents, comprehensively beating the Zacks Consensus Estimate of
a loss of 3 cents per share. Adjusted EPS excludes other patent
royalties received, acquisition costs and retention bonus,
amortization, costs of restatement and related legal activities
but includes stock-based compensation expenses.
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Rambus reported total revenue of $66.9 million in the first
quarter, up 6.4% from $62.9 million a year ago and above the
company's guided range. The year-over-year growth was mainly due
to a one-time royalty received from chip maker
). However, the quarter's revenues were slightly below the Zacks
Consensus Estimate of $67.0 million.
Royalty revenues grew 6.7% year over year to $66.2 million.
Revenues from Contracts were $0.6 million, down 21.5% from the
comparable quarter last year. However, the decline moderated from
the fourth quarter of 2012.
Total operating expenses in the first quarter were $65.4 million,
down 18.6% from $80.4 million in the year-earlier quarter. The
decline in operating expenses was due to higher cost
rationalization, with a major cut in marketing, general &
administrative expenses and research and development expenses.
Reported operating income in the quarter was $1.4 million
compared to an operating loss of $17.6 million in the year-ago
quarter. Operating margin was 2.2% compared with (27.9%) in the
Reported net loss was $10.4 million or 9 cents per share compared
with a net loss of $27.9 million or 25 cents in the comparable
quarter last year. Excluding the impact of other patent royalties
received; acquisition costs and retention bonus, amortization,
costs of restatement and related legal activities and non-cash
interest expense on convertible notes but including stock-based
compensation expenses, adjusted EPS came in at 9 cents versus 1
cent loss per share in the year-ago quarter.
Rambus exited the quarter with cash, cash equivalents and
marketable securities of approximately $214.8 million, up from
$203.3 million in the prior quarter. The improvement was mainly
due to positive cash flows from operating activities.
For the second quarter of 2013, the company expects customer
licensing income to be between $56.0 million and $61.0 million
and revenues between $53.0 million and $58.0 million. The
sequential decline in revenues is typical due to lower royalty
Pro forma operating expenses, which exclude restructuring
charges, stock-based compensation, amortization of intangible
assets and retention bonuses, are expected to be between $48.0
million and $53.0 million. These amounts include an estimate for
litigation expenses between $2.0 million and $3.0 million. Pro
forma net income is expected to be breakeven to $6.0 million
The company also announced that it will be developing a portfolio
of customized semiconductors for renowned semiconductor foundry
GLOBALFOUNDRIES' edge process technology. During the process,
GLOBALFOUNDRIES will make an upfront payment for the design and
eventually make royalty payments with the technology being
integrated into the manufacturing process. Rambus expects the
royalty payments to start from the second half of 2013 and
continue throughout 2014.
Apart from this, management asserted that it will continue
focusing on reducing expenses by $30.0-$35.0 million annually.
Zacks Consensus Estimates for second quarter and fiscal 2013 are
pegged at 7 cents loss per share and 14 cents loss per share.
We are encouraged by Rambus' first quarter results as the bottom
line surpassed the Zacks Consensus Estimate. The company provided
a dull guidance for the second quarter 2013 given lower royalty
receipts. However, we see a better second half given Rambus'
association with GLOBALFOUNDRIES and ongoing cost optimization
The company has a restructuring strategy in place and we expect
it yield favorable results. However, the continued loss of legal
suits against its top customers such as
) and sluggish demand from the semiconductor companies are
We are encouraged by Rambus' decision to divest its Display
patent assets to Acacia Research Corp. and to focus wholly on the
Lighting space, given enormous growth prospects in the LED (light
emitting diode) arena.
Currently, Rambus has a Zacks Rank #1 (Strong Buy).