Financial

Rambus Reports First Quarter 2019 Financial Results

First quarter revenue and billings in line with expectations; GAAP revenue of $48.4 million, with royalty revenue of $24.8 million and licensing billings of $75.4 million
$28.8 million in cash provided by operating activities
DDR4 server DIMM chipset revenue up nearly 40% year-over-year, fueled by continued market share growth
Record revenue for IP Cores business; expanded portfolio with 32G PHY for 5G infrastructure and 112G LR PHY in 7nm for 400G and 800G networking

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).

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# 9084526.

Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss) and, diluted net income (loss) per share. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company’s non-GAAP financial measures reflect adjustments based on the following items:

Stock-based compensation expense. These expenses primarily relate to employee stock options, employee stock purchase plans, and employee non-vested equity stock and non-vested stock units. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Additionally, given the fact that other companies may grant different amounts and types of equity awards and may use different option valuation assumptions, excluding stock-based compensation expense permits more accurate comparisons of the Company’s results with peer companies.

Acquisition-related transaction costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current periods’ portion of any retention bonus expense associated with the acquisitions. The Company excludes these expenses in order to provide better comparability between periods.

Restructuring charges. These charges may consist of severance, contractual retention payments, exit costs and other charges and are excluded because such charges are not directly related to ongoing business results and do not reflect expected future operating expenses.

Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.

Non-cash interest expense on convertible notes. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company’s results with other peer companies and to more accurately reflect the Company’s ongoing operations.

Income tax adjustments. 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 both 2019 and 2018, 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 years to assist the Company’s planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

On occasion in the future, there may be other items, such as significant gains or losses from contingencies that the Company may exclude in deriving its non-GAAP financial measures if it believes that doing so is consistent with the goal of providing useful information to investors and management.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus’ expectations regarding product and service offerings, future profit and growth and financial guidance for the second quarter of 2019, including operating costs and expenses, and estimated, fixed, long-term projected tax rates, both on a GAAP and non-GAAP basis as appropriate. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

	March 31, 2019		December 31, 2018
ASSETS

Current assets:
Cash and cash equivalents	$	143,016	$	115,924
Marketable securities	162,850		161,840
Accounts receivable	43,810		50,863
Unbilled receivables	170,287		176,613
Inventories	8,192		6,772
Prepaids and other current assets	16,857		15,738
Total current assets	545,012		527,750
Intangible assets, net	55,507		59,936
Goodwill	207,828		207,178
Property, plant and equipment, net	22,637		57,028
Operating lease right-of-use assets	19,458		—
Deferred tax assets	4,411		4,435
Unbilled receivables, long-term	459,148		497,003
Other assets	7,419		7,825
Total assets	$	1,321,420	$	1,361,155

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	8,274	$	7,392
Accrued salaries and benefits	13,666		16,938
Deferred revenue	15,774		19,374
Income taxes payable, short-term	16,364		16,390
Operating lease liabilities	9,351		—
Other current liabilities	5,847		9,191
Total current liabilities	69,276		69,285
Long-term liabilities:
Convertible notes, long-term	143,612		141,934
Long-term imputed financing obligation	—		36,297
Long-term operating lease liabilities	12,308		—
Long-term income taxes payable	73,365		77,280
Other long-term liabilities	22,972		24,247
Total long-term liabilities	252,257		279,758
Total stockholders’ equity	999,887		1,012,112
Total liabilities and stockholders’ equity	$	1,321,420	$	1,361,155

Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended March 31,
	2019		2018

Revenue:
Royalties	$	24,853	$	21,374
Product revenue	8,964		7,313
Contract and other revenue	14,567		17,739
Total revenue	48,384		46,426
Operating costs and expenses:
Cost of product revenue (1)	$	4,427	$	4,357
Cost of contract and other revenue	6,771		12,122
Research and development (1)	40,619		40,117
Sales, general and administrative (1)	27,645		30,198
Restructuring charges	331		3,245
Total operating costs and expenses	79,793		90,039
Operating loss	(31,409)		(43,613)
Interest income and other income (expense), net	7,413		9,116
Interest expense	(2,271)		(4,421)
Interest and other income (expense), net	5,142		4,695
Loss before income taxes	(26,267)		(38,918)
Provision for (benefit from) income taxes	309		(3,229)
Net loss	$	(26,576)	$	(35,689)
Net loss per share:
Basic	$	(0.24)	$	(0.33)
Diluted	$	(0.24)	$	(0.33)
Weighted average shares used in per share calculation
Basic	109,692		109,358
Diluted	109,692		109,358

_________

(1) Total stock-based compensation expense for the three months ended March 31, 2019 and 2018 is presented as follows:


	Three Months Ended March 31,
	2019		2018
Cost of product revenue	$	1	$	3
Research and development	$	3,210	$	3,192
Sales, general and administrative	$	3,978	$	4,319

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

	Three Months Ended March 31,
	2019		2018

Operating costs and expenses	$	79,793	$	90,039
Adjustments:
Stock-based compensation expense	(7,189)		(7,514)
Acquisition-related transaction costs and retention bonus expense	—		(30)
Amortization expense	(4,988)		(10,531)
Restructuring charges	(331)		(3,245)
Non-GAAP operating costs and expenses	$	67,285	$	68,719

Operating loss	$	(31,409)	$	(43,613)
Adjustments:
Stock-based compensation expense	7,189		7,514
Acquisition-related transaction costs and retention bonus expense	—		30
Amortization expense	4,988		10,531
Restructuring charges	331		3,245
Non-GAAP operating loss	$	(18,901)	$	(22,293)

Loss before income taxes	$	(26,267)	$	(38,918)
Adjustments:
Stock-based compensation expense	7,189		7,514
Acquisition-related transaction costs and retention bonus expense	—		30
Amortization expense	4,988		10,531
Restructuring charges	331		3,245
Non-cash interest expense on convertible notes	1,678		2,679
Non-GAAP loss before income taxes	$	(12,081)	$	(14,919)
GAAP provision for (benefit from) income taxes	309		(3,229)
Adjustment to GAAP provision for (benefit from) income taxes	(3,208)		(352)
Non-GAAP benefit from income taxes	(2,899)		(3,581)
Non-GAAP net loss	$	(9,182)	$	(11,338)

Non-GAAP basic net loss per share	$	(0.08)	$	(0.10)
Non-GAAP diluted net loss per share	$	(0.08)	$	(0.10)
Weighted average shares used in non-GAAP per share calculation:
Basic	109,692		109,358
Diluted	109,692		109,358

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

	Three Months Ended March 31,
	2019	2018
GAAP effective tax rate	(1)%	8%
Adjustment to GAAP effective tax rate	25%	16%
Non-GAAP effective tax rate	24%	24%

(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 both 2019 and 2018, 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,
	2019		2018		2019		2018
Revenue (i)	$	48,384	$	46,426	$	48,384	$	46,426
Operating loss (ii)	(31,409)		(43,613)		(18,901)		(22,293)
Operating margin (ii/i)	(65)%		(94)%		(39)%		(48)%

Rambus Inc.
Reconciliation of GAAP Forward Looking Estimates to Non-GAAP Forward Looking Estimates
(In millions)
(Unaudited)

2019 Second Quarter Outlook	Three Months Ended June 30, 2019
	Low		High

Forward-looking operating costs and expenses	$	81.1	$	77.1
Adjustments:
Stock-based compensation expense	(7.2)		(7.2)
Amortization expense	(5.0)		(5.0)
Forward-looking Non-GAAP operating costs and expenses	$	68.9	$	64.9

Forward-looking interest and other income (expense), net	$	4.8	$	4.8
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements	(5.7)		(5.7)
Non-cash interest expense on convertible notes	1.7		1.7
Forward-looking Non-GAAP interest and other income (expense), net	$	0.8	$	0.8

Rambus Reports Fourth Quarter and Fiscal Year 2018 Financial Results

Fourth quarter GAAP revenue of $68.5 million; revenue under ASC 605 would have been $102.0 million, in line with expectations; $35.1 million in cash provided by operating activities
Record product revenue in 2018 for IP cores and server DIMM chips with wins at Tier 1 customers in data center and communications segments worldwide
CryptoManager platform selected to securely provision Authenta™ secure memory product line at Micron

SUNNYVALE, Calif. – January 28, 2019 – Rambus Inc. (NASDAQ:RMBS) today reported financial results for the fourth quarter ended December 31, 2018 under GAAP Accounting Standards Codification Topic 606 (“ASC 606”), which superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”) that was previously applicable. Rambus also reported financial results as they would have been presented under ASC 605. This ASC 605 presentation is required under the modified retrospective transition method that Rambus has chosen to adopt under ASC 606. Rambus notes that this presentation allows a more relevant comparability with prior results, which were all reported under ASC 605.

Luc Seraphin, chief executive officer of Rambus said, “Rambus had a strong fourth quarter and solid year overall, with continued execution from our product teams and record annual revenue for IP cores and server DIMM chips. As we refocus our product portfolio around our core strengths in semiconductor, improve operational efficiency, and continue to generate cash from operations, we align the company for profitable growth.”

Fourth Quarter and Fiscal Year 2018 Financial Highlights
(In millions, except per share amounts)	Three Months Ended December 31, 2018								Year Ended December 31, 2018
	ASC 606				ASC 605 (1)				ASC 606				ASC 605 (1)
	GAAP		Non-GAAP (2)		GAAP		Non-GAAP (2)		GAAP		Non-GAAP (2)		GAAP		Non-GAAP (2)
Revenue	$	68.5	$	68.5	$	102.0	$	102.0	$	231.2	$	231.2	$	401.1	$	401.1
Diluted net income (loss) per share	$	(0.02)	$	0.09	$	0.23	$	0.28	$	(1.46)	$	(0.06)	$	(0.14)	$	0.92

(1) As noted above, Rambus is presenting the financial results under ASC 606 along with the results that would have been applicable under ASC 605. The ASC 605 information should be considered in addition to, not as a substitute for, nor superior to or in isolation from, the financial information prepared in accordance with ASC 606

(2) 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.

Business Review

For the Rambus IP cores and Server DIMM chipset businesses, 2018 saw sustained technology leadership in the market, growing customer traction and record revenue. Our DDR4 server DIMM chip business met its revenue targets for the quarter and year and continues to gain market share. With an increasing number of OEM qualifications in the existing server platform and more than double for the upcoming advanced performance CPU refresh, the buffer chip remains poised for growth in 2019. In addition to the steady growth in DDR4, we maintain our leadership position for next-generation DDR5 memory buffer chips and are now shipping customer samples at the top-end speeds for both the RCD and DB chips.

Rambus high-speed IP cores business has been growing at an impressive compound annual growth rate of greater than 50% over the past four years. We continue to gain traction in high-growth, high-performance applications including artificial intelligence, machine learning, graphics, wired switches, and wireless infrastructure. We closed out the year with record revenue fueled by wins with Tier 1 customers in data center and communications segments worldwide. We continued our leadership position in high-end and high-bandwidth SerDes and memory IP cores in advanced process nodes with the tape out of the industry’s first GDDR6 memory PHY in a leading-edge process node. In Q4, we closed a substantial number of design wins with top tier customers worldwide, which sets us up nicely for healthy growth to continue in 2019.

Moving over to our Cryptography business, 2018 saw the importance of semiconductor device-level security grow in the industry, resulting in increased traction and opportunities for our embedded security cores and provisioning capabilities in market segments like IoT, automotive, networking and government. We launched the programmable CryptoManager Root of Trust, which combines our deep security expertise with a modern open architecture, RISC-V, to create an easy-to-consume, secure processing core and have numerous engagements in the semiconductor ecosystem. In Q4, we announced that our CryptoManager platform will be used to securely provision Micron Authenta™ based secure memory. This is a key milestone as it showcases our ability to combine our device-level provisioning solutions with 3rd-party cores to extend our market share and enable a new level of protection for connected devices.

Quarterly Financial Review – GAAP	Three Months Ended December 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
Revenue
Royalties	$	45.4	$	31.3	$	76.7	$	77.9
Product revenue	11.5		0.4		11.9		8.5
Contract and other revenue	11.6		1.8		13.4		15.5
Total revenue	$	68.5	$	33.5	$	102.0	$	101.9
Total operating costs and expenses	$	72.8	$	—	$	72.8	$	86.2
Operating income (loss)	$	(4.3)	$	33.5	$	29.2	$	15.7
Operating margin	(6)%		35%		29%		15%
Net income (loss)	$	(2.0)	$	27.2	$	25.2	$	(36.2)
Diluted net income (loss) per share	$	(0.02)	$	0.25	$	0.23	$	(0.33)

Licensing billings (2)	$	76.7	$	—	$	76.7	$	76.6

Net cash provided by operating activities	$	35.1	$	—	$	35.1	$	59.8

(1) As noted above, Rambus is presenting the ASC 606 results together with the adjustments made to reconcile the ASC 606 presentation to the results that would have been applicable under ASC 605. The ASC 605 information should be considered in addition to, not as a substitute for, nor superior to or in isolation from, the financial information prepared in accordance with ASC 606.

(2) 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 December 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
Revenue
Royalties	$	45.4	$	31.3	$	76.7	$	77.9
Product revenue	11.5		0.4		11.9		8.5
Contract and other revenue	11.6		1.8		13.4		15.5
Total revenue	$	68.5	$	33.5	$	102.0	$	101.9
Total operating costs and expenses	$	61.6	$	—	$	61.6	$	68.4
Operating income	$	6.9	$	33.5	$	40.4	$	33.5
Operating margin	10%		30%		40%		33%
Net income	$	9.6	$	20.7	$	30.3	$	21.2
Diluted net income per share	$	0.09	$	0.19	$	0.28	$	0.19

(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) See note (1) under “Quarterly Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Revenue for the quarter was $68.5 million, above the high end of our expectations, due to the structure of our licensing agreements signed within the quarter. Revenue under ASC 605 would have been $102.0 million, at the mid-point of our expectations. Revenue for the year ended December 31, 2018 under ASC 605 was 6% higher than a year ago excluding the impact of the Lighting Division which was wound down in the first quarter of 2018. We had GAAP total operating costs and expenses of $72.8 million and non-GAAP total operating costs and expenses of $61.6 million, at the bottom of our expectations due to our refocus on our core semiconductor business. We also had GAAP and non-GAAP diluted net income (loss) per share of ($0.02) and $0.09, respectively. Total GAAP and non-GAAP diluted net income per share under ASC 605 would have been $0.23 and $0.28, respectively, at the high end of our expectations.

For the year ended December 31, 2018, we had GAAP diluted net loss per share under ASC 605 of $0.14. We also had non-GAAP diluted net income per share under ASC 605 of $0.92, which was 35% higher than a year ago.

Cash, cash equivalents, and marketable securities as of December 31, 2018 were $277.8 million, an increase of $29.6 million from September 30, 2018, mainly due to $35.1 million in cash provided by operating activities. Adjusted EBITDA under ASC 605 for the quarter would have been $43.0 million.

2019 First Quarter Outlook

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

(In millions)	GAAP	Non-GAAP (1)
Total operating costs and expenses	$78 – $74	$66 – $62
Interest and other income (expense), net	$3	($1)
Diluted share count	110	110

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

For the first quarter of 2019, the Company expects operating costs and expenses to be between $78 million and $74 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% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 110 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($2 million).

Conference Call:

Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss) and, diluted net income (loss) per share, presented both under ASC 606 and as they would have been presented under ASC 605. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company’s non-GAAP financial measures reflect adjustments based on the following items:

Loss on extinguishment of debt. The Company has excluded loss on extinguishment of debt as this represents a cost of refinancing its existing convertible notes and is not a reflection of the Company’s ongoing operations.

Income tax adjustments. 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 both 2019 and 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 years to assist the Company’s planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus’ expectations regarding product and service offerings, future profit and growth and financial guidance for the first quarter of 2019, including operating costs and expenses, and estimated, fixed, long-term projected tax rates, both on a GAAP and non-GAAP basis as appropriate. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)

	December 31,		December 31,
	2018		2017
ASSETS

Current assets:
Cash and cash equivalents	$	115,924	$	225,844
Marketable securities	161,840		103,532
Accounts receivable	50,863		25,326
Unbilled receivables	176,613		566
Inventories	6,772		5,159
Prepaids and other current assets	15,738		11,317
Total current assets	527,750		371,744
Intangible assets, net	59,936		91,722
Goodwill	207,178		209,661
Property, plant and equipment, net	57,028		54,303
Deferred tax assets	4,435		159,099
Unbilled receivables, long-term	497,003		—
Other assets	7,825		4,543
Total assets	$	1,361,155	$	891,072

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable	$	7,392	$	9,614
Accrued salaries and benefits	16,938		17,091
Deferred revenue	19,374		18,272
Income taxes payable, short-term	16,390		258
Convertible notes, short-term	—		78,451
Other current liabilities	9,191		9,156
Total current liabilities	69,285		132,842
Long-term liabilities:
Convertible notes, long-term	141,934		135,447
Long-term imputed financing obligation	36,297		37,262
Long-term income taxes payable	77,280		3,344
Deferred tax liabilities	18,960		9,830
Other long-term liabilities	5,287		763
Total long-term liabilities	279,758		186,646
Total stockholders’ equity	1,012,112		571,584
Total liabilities and stockholders’ equity	$	1,361,155	$	891,072

Rambus Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)

	Three Months Ended December 31,				Year Ended December 31,
	2018		2017		2018		2017

Revenue:
Royalties	$	45,430	$	77,861	$	130,452	$	289,594
Product revenue	11,537		8,543		38,690		36,509
Contract and other revenue	11,596		15,487		62,059		66,993
Total revenue	68,563		101,891		231,201		393,096
Operating costs and expenses:
Cost of product revenue (1)	4,367		5,901		18,299		23,783
Cost of contract and other revenue	6,239		12,090		35,402		55,364
Research and development (1)	37,395		39,417		158,339		149,135
Sales, general and administrative (1)	24,768		28,818		103,911		110,940
Restructuring charges (recoveries)	(6)		—		2,217		—
Gain from sale of intellectual property	—		(54)		—		(533)
Total operating costs and expenses	72,763		86,172		318,168		338,689
Operating income (loss)	(4,200)		15,719		(86,967)		54,407
Interest income and other income (expense), net	7,248		893		32,621		1,384
Loss on extinguishment of debt	—		(1,082)		—		(1,082)
Interest expense	(3,251)		(3,966)		(16,282)		(13,720)
Interest and other income (expense), net	3,997		(4,155)		16,339		(13,418)
Income (loss) before income taxes	(203)		11,564		(70,628)		40,989
Provision for income taxes	1,815		47,732		87,329		63,851
Net loss	$	(2,018)	$	(36,168)	$	(157,957)	$	(22,862)
Net loss per share:
Basic	$	(0.02)	$	(0.33)	4	(1.46)	$	(0.21)
Diluted	$	(0.02)	$	(0.33)	$	(1.46)	$	(0.21)
Weighted average shares used in per share calculation
Basic	108,826		109,737		108,450		110,198
Diluted	108,826		109,737		108,450		110,198

_________

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


	Three Months Ended December 31,				Year Ended December 31,
	2018		2017		2018		2017
Cost of product revenue	$	1	$	25	$	8	$	78
Research and development	$	2,920	$	3,137	$	12,582	$	12,185
Sales, general and administrative	$	3,224	$	4,072	$	9,146	$	15,140

Rambus Inc.
Supplemental Annual Financial Review
(In millions, except per share amounts)
(Unaudited)

Annual Financial Review – GAAP	Year Ended December 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
Revenue	$	231.2	$	169.9	$	401.1	$	393.1
Total operating costs and expenses	$	318.2	$	—	$	318.2	$	338.7
Operating income (loss)	$	(87.0)	$	169.9	$	82.9	$	54.4
Operating margin	(38)%		58%		21%		14%
Net income (loss)	$	(157.9)	$	142.6	$	(15.3)	$	(22.9)
Diluted net income (loss) per share	$	(1.46)	$	1.32	$	(0.14)	$	(0.21)

Net cash provided by operating activities	$	87.1	$	—	$	87.1	$	117.4

(1) See note (1) under “Quarterly Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Annual Financial Review – Non-GAAP (1)	Year Ended December 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
Revenue	$	231.2	$	169.9	$	401.1	$	393.1
Total operating costs and expenses	$	264.8	$	—	$	264.8	$	269.1
Operating income (loss)	$	(33.6)	$	169.9	$	136.3	$	124.0
Operating margin	(15)%		49%		34%		32%
Net income (loss)	$	(6.1)	$	108.4	$	102.3	$	77.5
Diluted net income (loss) per share	$	(0.06)	$	0.98	$	0.92	$	0.68

(2) See note (1) under “Quarterly Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Rambus Inc.
Supplemental Revenue and Licensing Billings
(In thousands)
(Unaudited)

2018 Revenue under ASC 606
	Quarter ended								Year ended
	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2018
Revenue
Royalties	$	45,430	$	33,599	$	30,049	$	21,374	$	130,452
Product revenue	11,537		11,753		8,087		7,313		38,690
Contract and other revenue	11,596		14,402		18,322		17,739		62,059
Total revenue	$	68,563	$	59,754	$	56,458	$	46,426	$	231,201

2018 Revenue under ASC 605 and Licensing Billings
	Quarter ended								Year ended
	December 31, 2018		September 30, 2018		June 30, 2018		March 31, 2018		December 31, 2018
Revenue
Royalties	$	76,717	$	75,704	$	73,626	$	77,174	$	303,221
Product revenue	11,867		11,753		8,221		7,556		39,397
Contract and other revenue	13,398		12,383		16,973		15,729		58,483
Total revenue	$	101,982	$	99,840	$	98,820	$	100,459	$	401,101

Licensing billings (1)	$	76,717	$	75,374	$	73,210	$	75,924	$	301,225

2017 Revenue under ASC 605 and Licensing Billings
	Quarter ended								Year ended
	December 31, 2017		September 30, 2017		June 30, 2017		March 31, 2017		December 31, 2017
Revenue
Royalties	$	77,861	$	72,787	$	69,990	$	68,956	$	289,594
Product revenue	8,543		8,661		8,401		10,904		36,509
Contract and other revenue	15,487		17,686		16,329		17,491		66,993
Total revenue	$	101,891	$	99,134	$	94,720	$	97,351	$	393,096

Licensing billings (1)	$	76,611	$	71,537	$	72,890	$	68,556	$	289,594

2016 Revenue under ASC 605 and Licensing Billings
	Quarter ended								Year ended
	December 31, 2016		September 30, 2016		June 30, 2016		March 31, 2016		December 31, 2016
Revenue
Royalties	$	70,604	$	68,298	$	62,835	$	62,877	$	264,614
Product revenue	11,746		7,092		3,902		3,312		26,052
Contract and other revenue	15,209		14,465		9,764		6,493		45,931
Total revenue	$	97,559	$	89,855	$	76,501	$	72,682	$	336,597

Licensing billings (1)	$	64,854	$	71,548	$	66,604	$	61,683	$	264,689

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

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

	Three Months Ended December 31,						Year Ended December 31,
	ASC 606		ASC 605				ASC 606		ASC 605
	2018		2018		2017		2018		2018		2017

Operating costs and expenses	$	72,763	$	72,763	$	86,172	$	318,168	$	318,168	$	338,689
Adjustments:
Stock-based compensation expense	(6,145)		(6,145)		(7,234)		(21,736)		(21,736)		(27,403)
Acquisition-related transaction costs and retention bonus expense	—		—		(30)		(70)		(70)		(248)
Amortization expense	(4,989)		(4,989)		(10,526)		(29,341)		(29,341)		(41,962)
Restructuring charges (recoveries)	6		6		—		(2,217)		(2,217)		—
Non-GAAP operating costs and expenses	$	61,635	$	61,635	$	68,382	$	264,804	$	264,804	$	269,076

Operating income (loss)	$	(4,200)	$	29,219	$	15,719	$	(86,967)	$	82,933	$	54,407
Adjustments:
Stock-based compensation expense	6,145		6,145		7,234		21,736		21,736		27,403
Acquisition-related transaction costs and retention bonus expense	—		—		30		70		70		248
Amortization expense	4,989		4,989		10,526		29,341		29,341		41,962
Restructuring charges (recoveries)	(6)		(6)		—		2,217		2,217		—
Non-GAAP operating income (loss)	$	6,928	$	40,347	$	33,509	$	(33,603)	$	136,297	$	124,020

Income (loss) before income taxes	$	(203)	$	27,068	$	11,564	$	(70,628)	$	72,037	$	40,989
Adjustments:
Stock-based compensation expense	6,145		6,145		7,234		21,736		21,736		27,403
Acquisition-related transaction costs and retention bonus expense	—		—		30		70		70		248
Amortization expense	4,989		4,989		10,526		29,341		29,341		41,962
Restructuring charges (recoveries)	(6)		(6)		—		2,217		2,217		—
Loss on extinguishment of debt	—		—		1,082		—		—		1,082
Non-cash interest expense on convertible notes	1,655		1,655		2,255		9,242		9,242		7,579
Non-GAAP income (loss) before income taxes	$	12,580	$	39,851	$	32,691	$	(8,022)	$	134,643	$	119,263
GAAP provision for income taxes	1,815		1,815		47,732		87,329		87,329		63,851
Adjustment to GAAP provision for income taxes	1,204		7,749		(36,290)		(89,255)		(55,015)		(22,109)
Non-GAAP provision for (benefit from) income taxes	3,019		9,564		11,442		(1,926)		32,314		41,742
Non-GAAP net income (loss)	$	9,561	$	30,287	$	21,249	$	(6,096)	$	102,329	$	77,521

Non-GAAP basic net income (loss) per share	$	0.09	$	0.28	$	0.19	$	(0.06)	$	0.94	$	0.70
Non-GAAP diluted net income (loss) per share	$	0.09	$	0.28	$	0.19	$	(0.06)	$	0.92	$	0.68
Weighted average shares used in non-GAAP per share calculation:
Basic	108,826		108,826		109,737		108,450		108,450		110,198
Diluted	109,618		109,618		114,341		108,450		110,837		113,899

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

	Three Months Ended December 31,			Year Ended December 31,
	ASC 606	ASC 605		ASC 606	ASC 605
	2018	2018	2017	2018	2018	2017
GAAP effective tax rate	(894)%	7%	413%	(124)%	121%	156%
Adjustment to GAAP effective tax rate	918%	17%	(378)%	148%	(97)%	(121)%
Non-GAAP effective tax rate	24%	24%	35%	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 December 31,						Three Months Ended December 31,
	ASC 606		ASC 605				ASC 606		ASC 605
	2018		2018		2017		2018		2018		2017

Revenue (i)	$	68,563	$	101,982	$	101,891	$	68,563	$	101,982	$	101,891
Operating income (loss) (ii)	(4,200)		29,219		15,719		6,928		40,347		33,509
Operating margin (ii/i)	(6)%		29%		15%		10%		40%		33%

	GAAP						Non-GAAP
	Year Ended December 31,						Year Ended December 31,
	ASC 606		ASC 605				ASC 606		ASC 605
	2018		2018		2017		2018		2018		2017

Revenue (i)	$	231,201	$	401,101	$	393,096	$	231,201	$	401,101	$	393,096
Operating income (loss) (ii)	(86,967)		82,933		54,407		(33,603)		136,297		124,020
Operating margin (ii/i)	(38)%		21%		14%		(15)%		34%		32%

	Three Months Ended December 31,
	ASC 605
	2018		2017

Net income (loss)	$	25,253	$	(36,168)
Add back:
Interest and other income (expense), net	2,151		4,155
Provision for income taxes	1,815		47,732
Depreciation expense	2,638		3,304
Amortization expense	4,989		10,526
EBITDA (1)	$	36,846	$	29,549
Adjustments:
Stock-based compensation expense	6,145		7,234
Acquisition-related transaction costs and retention bonus expense	—		30
Restructuring recoveries	(6)		—
Adjusted EBITDA (2)	$	42,985	$	36,813

(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 (loss). EBITDA is net income (loss) adjusted for net interest and other income (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)
(Unaudited)

2019 First Quarter Outlook	Three Months Ended March 31, 2019
	Low		High

Forward-looking operating costs and expenses	$	78.1	$	74.1
Adjustments:
Stock-based compensation expense	(6.6)		(6.6)
Amortization expense	(5.0)		(5.0)
Forward-looking Non-GAAP operating costs and expenses	$	66.5	$	62.5

Forward-looking interest and other income (expense), net	$	3.4	$	3.4
Adjustments:
Interest income related to significant financing component from fixed-fee patent and technology licensing arrangements	(5.7)		(5.7)
Non-cash interest expense on convertible notes	1.7		1.7
Forward-looking Non-GAAP interest and other income (expense), net	$	(0.6)	$	(0.6)

Rambus Reports Third Quarter 2018 Financial Results

Third quarter GAAP revenue of $59.8 million; revenue under ASC 605 would have been $99.8 million, in line with expectations; $31.6 million in cash provided by operating activities
Third quarter GAAP royalty revenue of $33.6 million, royalty revenue under ASC 605 would have been $75.7 million and licensing billings of $75.4 million
New and renewed licenses closed with Socionext, Phison, Infineon and Nvidia
Continued commercial traction with new customers and partners including Coles, ScotRail, Visa, American Express and Riscure

SUNNYVALE, Calif. – October 29, 2018 – Rambus Inc. (NASDAQ:RMBS) today reported financial results for the third quarter ended September 30, 2018 under GAAP Accounting Standards Codification Topic 606 (“ASC 606”), which superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”) that was previously applicable. Rambus also reported financial results as they would have been presented under ASC 605. This ASC 605 presentation is required under the modified retrospective transition method that Rambus has chosen to adopt under ASC 606. Rambus notes that this presentation allows a more relevant comparability with prior results, which were all reported under ASC 605.

Luc Seraphin, chief executive officer of Rambus said, “This was a strong quarter that continued to reinforce our confidence in our strategy and execution to plan. As we continue to roll out products, improve operational efficiency and generate cash, we are creating the foundation for future profitable growth.”

Third Quarter 2018 Financial Highlights	Three Months Ended September 30, 2018
(In millions, except for percentages and per share amounts)	ASC 606				ASC 605 (1)
	GAAP		Non-GAAP (2)		GAAP		Non-GAAP(2)
	GAAP		Non-GAAP (2)		GAAP		Non-GAAP(2)

Revenue (3)		$59.8		$59.8		$99.8		$99.8
Diluted net income (loss) per share		(0.97)		(0.01)		(0.65)		.22

(3) Total revenue for the quarter ended September 30, 2018 under ASC 605 is 5% higher than a year ago excluding the impact of the Lighting Division which was wound down in the first quarter.

Business Review

For the Memory and Interface division, Q3 was a positive quarter with broad OEM and cloud customer qualifications ongoing in chips and steady revenue for IP cores. Our DDR4 server DIMM chip business continues to hit its revenue targets with steady market growth in market share and remains on track to meet our targets for 2018. For the next-generation DDR5 memory buffer chips, we maintain our leadership position as the first and only supplier with working silicon that supports the top-end speeds for both the Register Clock Driver (RCD) and Data Buffer (DB) chips, and we continue to engage with our customers and the ecosystem. Following the record revenue from our high-speed IP Cores in the first half, we continue our leadership with further development of high-end and high-bandwidth SerDes and memory IP cores in advanced process nodes. We see increased traction from a growing number of customers across multiple high-performance applications including AI, automotive, data center and networking.

Our Security Division, which consists of our Cryptography, Ticketing and Payments groups, had a solid quarter with new customer, partner and product announcements across the groups. The Cryptography group systematically increased its product portfolio as part of the ongoing effort to make it simple and fast for our customers to implement security by design. We now offer the general availability of our RISC-V-based programmable CryptoManager Hardware Root of Trust, a full suite of DPA-resistant crypto cores for commercial and government applications, and an enhanced DPA Workstation with expanded side-channel attack testing capabilities through partnership with Riscure. For the Ticketing and Payments groups, market traction and product development for tokenization continue to progress. We have expanded our tokenization solutions from mobile payments and retail, to account-based payments, e-commerce and now the blockchain. This quarter saw announcements from both groups, introducing new customers, partners and products including ScotRail for mobile ticketing, and Coles, Visa and American Express for Payments, and the launch of Vaultify Trade, providing bank-grade tokenization for blockchain.

Our strategy of leveraging innovation and IP to develop differentiated products for high-growth markets remains. While we are pleased with the progress in our software-based Payments and Ticketing programs and see increasing market traction for tokenization solutions, we acknowledge that these businesses are far from our core in the semiconductor space. With that, we are exploring strategic options to maximize the market opportunity and success of these businesses.

Financial Review – GAAP	Three Months Ended September 30,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605

Revenue
Royalties		$33.6		$42.1		$75.7		$72.8
Product Revenue		11.8		(0.1)		11.7		8.7
Contract and other revenue		14.4		(2.0)		12.4		17.6
Total revenue		$59.8		$40.0		$99.8		$99.1
Total operating costs and expenses		$78.9		$—		$78.9		$82.1
Operating income (loss)		$(19.1)		$40.0		$20.9		$17.0
Operating margin		(32)%		53%		21%		17%
Net income (loss)		$(104.2)		$33.5		$(70.7)		$7.7
Diluted net income (loss) per share		$(0.97)		$0.32		$(0.65)		$0.07

Licensing billings (2)		$75.4		$—		$75.4		$71.5

Net cash provided by operating activities		$31.6		$—		$31.6		$15.1

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

Financial Review – Non-GAAP (1)	Three Months Ended September 30,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605

Revenue
Royalties		$33.6		$42.1		$75.7		$72.8
Product revenue		11.8		(0.1)		11.7		8.7
Contract and other revenue		14.4		(2.0)		12.4		17.6
Total revenue		$59.8		$40.0		$99.8		$99.1
Total operating costs and expenses		$67.6		$—		$67.6		$64.6
Operating income (loss)		$(7.8)		$40.0		$32.2		$34.5
Operating margin		(13)%		45%		32%		35%
Net income (loss)		$(1.3)		$25.5		$24.2		$21.6
Diluted net income (loss) per share		$(0.01)		$0.23		$0.22		$0.19

(2) See note (1) under “Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Revenue for the quarter was $59.8 million, above the high end of our expectations, due to the structure of our licensing agreements signed within the quarter. Revenue under ASC 605 would have been $99.8 million, in line with our expectations. We had GAAP total operating costs and expenses of $78.9 million and non-GAAP total operating costs and expenses of $67.6 million. We also had GAAP and non-GAAP diluted net loss per share of $0.97 and $0.01, respectively. Total GAAP and non-GAAP diluted net income (loss) per share under ASC 605 would have been ($0.65) and $0.22, respectively.

Cash, cash equivalents, and marketable securities as of September 30, 2018 were $248.2 million, a decrease of $50.2 million from June 30, 2018, mainly due to the $81.2 million payment of the remaining balance of our 2018 convertible notes, offset by $31.6 million in cash provided by operating activities. Adjusted EBITDA under ASC 605 for the quarter would have been $34.8 million.

2018 Fourth Quarter Outlook

Effective January 1, 2018, the Company adopted ASC 606 which materially impacted the timing of revenue recognition for the Company’s fixed-fee intellectual property licensing arrangements. The adoption of ASC 606 did not have a material impact on the Company’s other revenue streams, net cash provided by operating activities or its underlying financial position.

The Company has provided its fourth quarter outlook under ASC 606 and ASC 605 in order to provide additional transparency. The Company believes that providing this additional disclosure in the short term will help its investors and analysts understand the impact of the change in revenue recognition standards, especially given the material difference in the timing of revenue recognition for its fixed-fee licensing arrangements as mentioned above. Note that the presentation under ASC 605 is not a substitute for the new ASC 606 revenue recognition rules under current GAAP.

2018 Fourth Quarter Outlook (ASC 606)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$56 – $62	$56 – $62
Total operating costs and expenses	$77 – $73	$65 – $61
Operating income (loss)	($21) – ($11)	($9) – $1
Diluted net income (loss) per share	($0.13) – ($0.06)	($0.03) – $0.04

For the fourth quarter of 2018, the Company expects revenue under ASC 606 to be between $56 million and $62 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects operating costs and expenses to be between $77 million and $73 million, and diluted net loss per share to be between $0.13 and $0.06. Additionally, the Company expects non-GAAP operating costs and expenses to be between $65 million and $61 million, and non-GAAP diluted net income (loss) per share to be between ($0.03) and $0.04. These expectations also assume non-GAAP interest and other income and expense of ($5 million), tax rate of 24% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 110 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($3 million).

2018 Fourth Quarter Outlook (ASC 605)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$99 – $105	$99 – $105
Total operating costs and expenses	$77 – $73	$65 – $61
Operating income	$22 – $32	$34 – $44
Diluted net income per share	$0.12 – $0.19	$0.23 – $0.29

For the fourth quarter of 2018, the Company expects that revenue under ASC 605 would be between $99 million and $105 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects that operating costs and expenses would be between $77 million and $73 million, and diluted net income per share would be between $0.12 and $0.19. Additionally, the Company expects that non-GAAP operating costs and expenses would be between $65 million and $61 million, and non-GAAP diluted net income per share would be between $0.23 and $0.29. These expectations also assume non-GAAP interest and other income and expense of $1 million, tax rate of 24% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 110 million, and exclude stock-based compensation expense ($7 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($3 million).

Conference Call:

Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss) and, diluted net income (loss) per share, presented both under ASC 606 and as they would have been presented under ASC 605. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company’s non-GAAP financial measures reflect adjustments based on the following items:

Income tax adjustments. 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 years to assist the Company’s planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus’ expectations regarding our new product and service offerings, growth for 2018 and financial guidance for the fourth quarter of 2018, including revenue, operating costs and expenses, earnings per share and estimated, fixed, long-term projected tax rates, both on a GAAP and non-GAAP basis as appropriate. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	September 30, 2018		December 31, 2017
ASSETS

Current assets:
Cash and cash equivalents		134,534		$225,844
Marketable securities	113,637		103,532
Accounts receivable	42,674		25,326
Unbilled receivables	164,487		566
Inventories	6,272		5,159
Prepaids and other current assets	14,434		11,317
Total current assets	476,038		371,744
Intangible assets, net	65,411		91,722
Goodwill	208,116		209,661
Property, plant and equipment, net	49,174		54,303
Deferred tax assets	3,930		159,099
Unbilled receivables, long-term	535,422		—
Other assets	5,879		4,543
Total assets		$1,343,970		$891,072

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable		$8,572		$9,614
Accrued salaries and benefits	14,353		17,091
Deferred revenue	12,727		18,272
Income taxes payable, short-term	17,784		258
Convertible notes, short-term	—		78,451
Other current liabilities	5,942		9,156
Total current liabilities	59,378		132,842
Long-term liabilities:
Convertible notes, long-term	140,279		135,447
Long-term imputed financing obligation	36,558		37,262
Long-term income taxes payable	81,400		3,344
Other long-term liabilities	17,351		10,593
Total long-term liabilities	275,588		186,646
Total stockholders’ equity	1,009,004		571,584
Total liabilities and stockholders’ equity		$1,343,970		$891,072

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended September 30				Nine Months Ended September 30
	2018		2017		2018		2017
Revenue
Royalties		$33,599		$72,787		$85,022		$211,733
Product revenue	11,753		8,661		27,153		27,966
Contract and other revenue	14,402		17,686		50,463		51,506
Total revenue	59,754		99,134		162,638		291,205
Operating costs and expenses:
Cost of product revenue (1)		$5,376		$5,152		$13,932		$17,882
Cost of contract and other revenue		5,952		14,456		29,163		43,274
Research and development (1)		43,131		36,196		120,944		109,718
Sales, general and administrative (1)		24,462		26,799		79,143		82,122
Gain from sale of intellectual property		–		(479)		–		479
Restructuring charges	–		—		2,223		—
Total operating costs and expenses	78,921		82,124		245,405		252,517
Operating income (loss)		(19,167)		17,010		(82,767)		38,688
Interest income and other income (expense), net		8,088		208		25,373		491
Interest expense	(3,976)		(3,287)		(13,031)		(9,754)
Interest and other income (expense), net	4,032		(3,079)		12,342		(9,263)
Income (loss) before income taxes		(15,135)		13,931		(70,425)		29,425
Provision for income taxes	89,069		6,236		84,825		16,119
Net income (loss)	$(104,204)		$7,695		$(155,250)		$13,306
Net income (loss) per share:
Basic	$(0.97)		$0.07		$(1.43)		$0.12
Diluted	$(0.97)		$0.07		$(1.43)		$0.12
Weighted average shares used in per share calculation
Basic	107,897		109,555		108,324		110,353
Diluted	107,897		113,119		108,324		113,861

_________

(1) Total stock-based compensation expense for the three and nine months ended September 30, 2018 and 2017 is presented as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Cost of product revenue		$2		$20		$7		$53
Research and development		$3,184		$2,969		$9,662		$9,048
Sales, general and administrative		$3,003		$3,975		$5,922		$11,068

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(In thousands)

(Unaudited)

	Three Months Ended September 30,
	ASC 606		ASC 605
	2018		2018		2017

Operating costs and expenses		$78,921		$78,921		$82,124
Adjustments:
Stock-based compensation expense	(6,189)		(6,189)		(6,964)
Acquisition-related transaction costs and retention bonus expense	(10)		(10)		(47)
Amortization expense	(5,083)		(5,083)		(10,498)
Non-GAAP operating costs and expenses		$67,639		$67,639		$64,615

Operating income (loss)		$(19,167)		$20,919		$17,010
Adjustments:
Stock-based compensation expense	6,189		6,189		6,964
Acquisition-related transaction costs and retention bonus expense	10		10		47
Amortization expense	5,083		5,083		10,498
Non-GAAP operating income (loss)		$(7,885)		$32,201		$34,519

Income (loss) before income taxes		$(15,135)		$18,419		$13,931
Adjustments:
Stock-based compensation expense	6,189		6,189		6,964
Acquisition-related transaction costs and retention bonus expense	10		10		47
Amortization expense	5,083		5,083		10,498
Non-cash interest expense on convertible notes	2,191		2,191		1,801
Non-GAAP income (loss) before income taxes		$(1,662)		$31,892		$33,241
GAAP provision for income taxes	89,069		89,069		6,236
Adjustment to GAAP provision for income taxes	(89,468)		(81,415)		5,398
Non-GAAP provision for (benefit from) income taxes	(399)		7,654		11,634
Non-GAAP net income (loss)		$(1,263)		$24,238		$21,607

Non-GAAP basic net income (loss) per share		$(0.01)		$0.22		$0.20
Non-GAAP diluted net income (loss) per share		$(0.01)		$0.22		$0.19
Weighted average shares used in non-GAAP per share calculation:
Basic	107,897		107,897		109,555
Diluted	107,897		109,780		113,119

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

	Three Months Ended September 30,
	ASC 606	ASC 605	ASC 605
	2018	2018	2017
GAAP effective tax rate	(589)%	484%	45%
Adjustment to GAAP effective tax rate	613%	(460)%	(10)%
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 September 30,						Three Months Ended September 30,
	ASC 606		ASC 605				ASC 606		ASC 605
	2018		2018		2017		2018		2018		2017

Revenue (i)		$59,754		$99,840		$99,134		$59,754		$99,840		$99,134
Operating income (loss) (ii)	(19,167)		20,919		17,010		(7,885)		32,201		34,519
Operating margin (ii/i)	(32)%		21%		17%		(13)%		32%		35%

	Three Months Ended September 30,
	ASC 605
	2018		2017

Net income (loss)		$(70,650)		$7,695
Add back:
Interest and other income (expense), net	2,500		3,079
Provision for income taxes	89,069		6,236
Depreciation expense	2,578		3,249
Amortization expense	5,083		10,498
EBITDA (1)		$28,580		$30,757
Adjustments:
Stock-based compensation expense	6,189		6,964
Acquisition-related transaction costs and retention bonus expense	10		47
Adjusted EBITDA (2)		$34,779		$37,768

(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 December 31, 2018				Three Months Ended December 31, 2018
	Low		High		Low		High

Forward-looking operating costs and expenses		$77.4		$73.4		$77.4		$73.4
Adjustments:
Stock-based compensation expense	(7.0)		(7.0)		(7.0)		(7.0)
Amortization expense	(5.4)		(5.4)		(5.4)		(5.4)
Forward-looking Non-GAAP operating costs and expenses		$65.0		$61.0		$65.0		$61.0

Forward-looking operating income (loss)		$(21.4)		$(11.4)		$21.6		$31.6
Adjustments:
Stock-based compensation expense	7.0		7.0		7.0		7.0
Amortization expense	5.4		5.4		5.4		5.4
Forward-looking Non-GAAP operating income (loss)		$(9.0)		$1.0		$34.0		$44.0

Forward-looking income (loss) before income taxes		$(19.1)		$(9.1)		$17.5		$27.5
Adjustments:
Stock-based compensation expense	7.0		7.0		7.0		7.0
Amortization expense	5.4		5.4		5.4		5.4
Non-cash interest expense on convertible notes	2.7		2.7		2.7		2.7
Forward-looking Non-GAAP income (loss) before income taxes		$(4.0)		$6.0		$32.6		$42.6
Forward-looking GAAP provision for (benefit from) income taxes	(4.6)		(2.2)		4.2		6.6
Adjustment to Forward-looking GAAP provision for (benefit from) income taxes	3.6		3.6		3.6		3.6
Forward-looking Non-GAAP provision for (benefit from) income taxes	(1.0)		1.4		7.8		10.2
Forward-looking Non-GAAP net income (loss)		$(3.0)		$4.6		$24.8		$32.4

Forward-looking Non-GAAP basic net income (loss) per share		$(0.03)		$(0.04)		$0.23		$0.30
Forward-looking Non-GAAP diluted net income (loss) per share		$(0.03)		$(0.04)		$0.23		$0.29
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic	108.0		108.0		108.0		108.0
Diluted	108.0		110.0		110.0		110.0

Rambus Reports Second Quarter 2018 Financial Results

Second quarter GAAP revenue of $56.5 million; revenue under ASC 605 would have been $98.8 million, in line with expectations
Second quarter GAAP royalty revenue of $30.1 million, royalty revenue under ASC 605 would have been $73.6 million and licensing billings of $73.2 million
Record number of licensing deals closed in Q2, including IBM and Socionext

SUNNYVALE, Calif. – July 30, 2018 – Rambus Inc. (NASDAQ:RMBS) today reported financial results for the second quarter ended June 30, 2018 under GAAP Accounting Standards Codification Topic 606 (“ASC 606”), which superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”) that was previously applicable. Total revenue for the quarter under ASC 606 was $56.5 million, with GAAP diluted net loss per share of $0.14 and non-GAAP diluted net loss per share of $0.03.

Rambus also reported financial results as they would have been presented under ASC 605. This ASC 605 presentation is required under the modified retrospective transition method that Rambus has chosen to adopt under ASC 606. Rambus notes that this presentation allows a more relevant comparability with prior results, which were all reported under ASC 605. Total revenue for the quarter ended June 30, 2018 under ASC 605 would have been $98.8 million, 9% higher than a year ago excluding the impact of the Lighting Division which was wound down in the first quarter, with GAAP diluted net income per share of $0.13 and non-GAAP diluted net income per share of $0.21.

“With a record number of licensing deals this quarter and record revenue in the first half of the year for our Memory and Interface IP Cores, we continue to execute on key strategic programs for the data center and mobile edge,” said Luc Seraphin, interim chief executive officer of Rambus. “We are also seeing growing traction for our Security products with recent customer announcements for our Unified Payment Platform and HCE Ticketing.”

Business Review

For the Memory and Interface division, Q2 was a positive quarter with broad OEM and cloud customer qualifications in chips and record first half revenue for IP cores. For server DIMM chipsets, our DDR4 memory buffer chip business continues to grow with steady gains in market share and revenue growth remains on track to meet our targets for 2018. For the next-generation DDR5 memory buffer chips, we maintain our leadership position as the first and only supplier with working silicon that supports the top-end speeds for both the Register Clock Driver (RCD) and Data Buffer (DB) chips, and we continue to engage with our customers and the ecosystem. We also continue our leadership in high-speed IP Cores, with multiple new customer wins for GDDR6 and HBM2 on advanced process nodes. As the first IP supplier to offer a broadly-available GDDR6 PHY, we continue to see traction from customers across multiple high-performance applications including AI, automotive and networking.

Our Security Division, which consists of our Cryptography, Ticketing and Payments groups, had a solid quarter with new customer announcements and the launch of the CryptoManager Root of Trust core. The CryptoManager Root of Trust builds upon our first-generation CryptoManager Security Engine by adding flexible and secure processing capabilities within the trust boundary of the core. Featuring a secure RISC-V CPU custom designed by our security experts, the core helps to address wide-reaching CPU vulnerabilities, like Meltdown and Spectre, in a broad range of applications including IoT, networking and automotive. As a market leader in smart ticketing solutions, we announced the implementation of our smart ticketing software with West Midlands, and have been selected to roll out our Host Card Emulation, or HCE, Ticket Wallet Service for mobile ticketing to passengers on Scotland’s national rail network. Finally, our Payment Product Group announced last week that the Unified Payment Platform has been selected by Coles, one of Australia’s largest retail groups, to secure its Digital Payments Solutions to enhance the customer buying journey and provide a hassle-free, omni-channel payment service.

Lastly, our Emerging Solutions Division which focuses on advanced research, innovation and IP development continues its partnerships with industry leaders like Microsoft and IBM to build our portfolio of advanced memory IP and develop technologies that help move the industry forward. Both our cold memory and hybrid memory programs continue to progress with each in varying stages of prototype development. By collaborating on research and development for the future memory architectures, which includes a growing list of ecosystem partners, we are also able to leverage our learnings to drive licensing and product engagements with our memory and security customers.

Financial Review – GAAP	Three Months Ended June 30,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605

Royalties		$30.1		$43.5		$73.6		$70.0
Product revenue		8.1		0.1		8.2		8.4
Contract and other revenue		18.3		(1.3)		17.0		16.3
Total revenue		$56.5		$42.3		$98.8		$94.7
Total operating costs and expenses		$76.4		$—		$76.4		$86.5
Operating income (loss)		$(19.9)		$42.3		$22.4		$8.2
Operating margin		(35)%		58%		23%		9%
Net income (loss)		$(15.4)		$29.6		$14.2		$2.6
Diluted net income (loss) per share		$(0.14)		$0.27		$0.13		$0.02

Licensing billings (1)		$73.2		$—		$73.2		$72.9

Net cash provided by operating activities		$3.6		$—		$3.6		$25.0

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

Financial Review – Non-GAAP (1)	Three Months Ended June 30,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605
	As Reported ASC 606		Adjustments (2)		ASC 605 (2)		As Reported ASC 605

Royalties		$30.1		$43.5		$73.6		$70.0
Product revenue		8.1		0.1		8.2		8.4
Contract and other revenue		18.3		(1.3)		17.0		16.3
Total revenue		$56.5		$42.3		$98.8		$94.7
Total operating costs and expenses		$66.8		$—		$66.8		$69.3
Operating income (loss)		$(10.3)		$42.3		$32.0		$25.4
Operating margin		(18)%		50%		32%		27%
Net income (loss)		$(3.1)		$26.9		$23.8		$15.6
Diluted net income (loss) per share		$(0.03)		$0.24		$0.21		$0.14

(2) See note (1) under “Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Revenue for the quarter was $56.5 million, above the high end of our expectations, due to the structure of our licensing agreements signed within the quarter. Revenue under ASC 605 would have been $98.8 million, in line with our expectations. We had GAAP total operating costs and expenses of $76.4 million and non-GAAP total operating costs and expenses of $66.8 million. We also had $0.14 of GAAP diluted net loss per share and $0.03 of non-GAAP diluted net loss per share. Total GAAP and non-GAAP diluted net income per share under ASC 605 would have been $0.13 and $0.21, respectively, and were in line with our expectations.

Cash, cash equivalents, and marketable securities as of June 30, 2018 were $298.3 million. Adjusted EBITDA under ASC 605 for the quarter would have been $34.6 million.

2018 Third Quarter Outlook

The Company has provided its third quarter outlook under ASC 606 and ASC 605 in order to provide additional transparency. The Company believes that providing this additional disclosure in the short term will help its investors and analysts understand the impact of the change in revenue recognition standards, especially given the material difference in the timing of revenue recognition for its fixed-fee licensing arrangements as mentioned above. Note that the presentation under ASC 605 is not a substitute for the new ASC 606 revenue recognition rules under current GAAP.

2018 Third Quarter Outlook (ASC 606)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$45 – $51	$45 – $51
Total operating costs and expenses	$81 – $77	$69 – $65
Operating loss	$36 – $26	$24 – $14
Diluted net loss per share	$0.24 – $0.17	$0.13 – $0.06

For the third quarter of 2018, the Company expects revenue under ASC 606 to be between $45 million and $51 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects operating costs and expenses to be between $81 million and $77 million, and diluted net loss per share to be between $0.24 and $0.17. Additionally, the Company expects non-GAAP operating costs and expenses to be between $69 million and $65 million, and non-GAAP diluted net loss per share to be between $0.13 and $0.06. These expectations also assume non-GAAP interest and other income and expense of ($6 million), tax rate of 24% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 108 million, and exclude stock-based compensation expense ($8 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($3 million).

2018 Third Quarter Outlook (ASC 605)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$97 – $103	$97 – $103
Total operating costs and expenses	$81 – $77	$69 – $65
Operating income	$16 – $26	$29 – $39
Diluted net income per share	$0.08 – $0.15	$0.19 – $0.25

For the third quarter of 2018, the Company expects that revenue under ASC 605 would be between $97 million and $103 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects that operating costs and expenses would be between $81 million and $77 million, and diluted net income per share would be between $0.08 and $0.15. Additionally, the Company expects that non-GAAP operating costs and expenses would be between $69 million and $65 million, and non-GAAP diluted net income per share would be between $0.19 and $0.25. These expectations also assume non-GAAP interest and other income and expense 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 ($8 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($3 million).

Conference Call:

Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss) and, diluted net income (loss) per share, presented both under ASC 606 and as they would have been presented under ASC 605. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company’s non-GAAP financial measures reflect adjustments based on the following items:

Restructuring charges (recoveries). These charges (recoveries) may consist of severance, contractual retention payments, exit costs and other charges (recoveries) and are excluded because such charges (recoveries) are not directly related to ongoing business results and do not reflect expected future operating expenses.

Income tax adjustments. 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 years to assist the Company’s planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus’ expectations regarding our new product and service offerings, growth for 2018 and financial guidance for the third quarter of 2018, including revenue, operating costs and expenses, earnings per share and estimated, fixed, long-term projected tax rates, both on a GAAP and non-GAAP basis as appropriate. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30, 2018		December 31, 2017
ASSETS

Current assets:
Cash and cash equivalents		$248,284		$225,844
Marketable securities	50,056		103,532
Accounts receivable	39,263		25,326
Unbilled receivables	179,606		566
Inventories	6,041		5,159
Prepaids and other current assets	14,456		11,317
Total current assets	537,706		371,744
Intangible assets, net	70,940		91,722
Goodwill	208,680		209,661
Property, plant and equipment, net	50,235		54,303
Deferred tax assets	82,111		159,099
Unbilled receivables, long-term	571,269		—
Other assets	4,832		4,543
Total assets		$1,525,773		$891,072

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable		$8,386		$9,614
Accrued salaries and benefits	17,385		17,091
Deferred revenue	13,583		18,272
Income taxes payable, short-term	18,794		258
Convertible notes, short-term	80,648		78,451
Other current liabilities	13,402		9,156
Total current liabilities	152,198		132,842
Long-term liabilities:
Convertible notes, long-term	138,647		135,447
Long-term imputed financing obligation	36,816		37,262
Long-term income taxes payable	84,804		3,344
Other long-term liabilities	7,823		10,593
Total long-term liabilities	268,090		186,646
Total stockholders’ equity	1,105,485		571,584
Total liabilities and stockholders’ equity		$1,525,773		$891,072

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30				Six Months Ended June 30
	2018		2017		2018		2017
Revenue
Royalties		$30,049		$69,990		$51,423		$138,946
Product revenue	8,087		8,401		15,400		19,305
Contract and other revenue	18,322		16,329		36,061		33,820
Total revenue	56,458		94,720		102,884		192,071
Operating costs and expenses:
Cost of product revenue (1)		$4,199		$7,480		$8,556		$12,730
Cost of contract and other revenue		11,089		14,337		23,211		28,818
Research and development (1)		37,696		37,522		77,813		73,522
Sales, general and administrative (1)		24,483		27,137		54,681		55,323
Restructuring charges (recoveries)	(1,022)		—		2,223		—
Total operating costs and expenses	76,445		86,476		166,484		170,393
Operating income (loss)		(19,987)		8,244		(63,600)		21,678
Interest income and other income (expense), net		8,249		129		17,365		283
Interest expense	(4,634)		(3,261)		(9,055)		(6,467)
Interest and other income (expense), net	3,615		(3,132)		8,310		(6,184)
Income (loss) before income taxes		(16,372)		5,112		(55,290)		15,494
Provision for (benefit from) income taxes	(1,015)		2,507		(4,244)		9,883
Net income (loss)	$(15,357)		$2,605		$(51,046)		$5,611
Net income (loss) per share:
Basic	$(0.14)		$0.02		$(0.47)		$0.05
Diluted	$(0.14)		$0.02		$(0.47)		$0.05
Weighted average shares used in per share calculation
Basic	107,737		110,060		108,542		110,758
Diluted	107,737		112,565		108,542		114,091

_________

(1) Total stock-based compensation expense for the three and six months ended June 30, 2018 and 2017 is presented as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Cost of product revenues		$2		$19		$5		$33
Research and development		$3,286		$3,067		$6,478		$6,079
Sales, general and administrative		$(1,400)		$3,523		$2,919		$7,093

Rambus Inc.

Supplemental Reconciliation of GAAP to Non-GAAP Results

(In thousands)

(Unaudited)

	Three Months Ended June 30,
	ASC 606		ASC 605
	2018		2018		2017

Operating costs and expenses		$76,445		$76,445		$86,476
Adjustments:
Stock-based compensation expense	(1,888)		(1,888)		(6,609)
Acquisition-related transaction costs and retention bonus expense	(30)		(30)		(90)
Amortization expense	(8,738)		(8,738)		(10,450)
Restructuring charges (recoveries)	1,022		1,022		—
Non-GAAP operating costs and expenses		$66,811		$66,811		$69,327

Operating income (loss)		$(19,987)		$22,375		$8,244
Adjustments:
Stock-based compensation expense	1,888		1,888		6,609
Acquisition-related transaction costs and retention bonus expense	30		30		90
Amortization expense	8,738		8,738		10,450
Restructuring charges (recoveries)	(1,022)		(1,022)		—
Non-GAAP operating income (loss)		$(10,353)		$32,009		$25,393

Income (loss) before income taxes		$(16,372)		$18,949		$5,112
Adjustments:
Stock-based compensation expense	1,888		1,888		6,609
Acquisition-related transaction costs and retention bonus expense	30		30		90
Amortization expense	8,738		8,738		10,450
Restructuring charges (recoveries)	(1,022)		(1,022)		—
Non-cash interest expense on convertible notes	2,717		2,717		1,774
Non-GAAP income (loss) before income taxes		$(4,021)		$31,300		$24,035
GAAP provision for (benefit from) income taxes	((1,015)		4,791		2,507
Adjustment to GAAP provision for (benefit from) income taxes	50		2,721		5,905
Non-GAAP provision for (benefit from) income taxes	(965)		7,512		8,412
Non-GAAP net income (loss)		$(3,056)		$23,788		$15,623

Non-GAAP basic net income (loss) per share		$(0.03)		$0.22		$0.14
Non-GAAP diluted net income (loss) per share		$(0.03)		$0.21		$0.14
Weighted average shares used in non-GAAP per share calculation:
Basic	107,737		107,737		110,060
Diluted	107,737		111,157		112,565

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

	Three Months Ended June 30,
	ASC 606	ASC 605	ASC 605
	2018	2018	2017
GAAP effective tax rate	6%	25%	49%
Adjustment to GAAP effective tax rate	18%	(1)%	(14)%
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 June 30,						Three Months Ended June 30,
	ASC 606		ASC 605				ASC 606		ASC 605
	2018		2018		2017		2018		2018		2017

Revenue (i)		$56,458		$98,820		$94,720		$56,458		$98,820		$94,720
Operating income (loss) (ii)	(19,987)		22,375		8,244		(10,353)		32,009		25,393
Operating margin (ii/i)	(35)%		23%		9%		(18)%		32%		27%

	Three Months Ended June 30,
	ASC 605
	2018		2017

Net income		$14,158		$2,605
Add back:
Interest and other income (expense), net	3,426		3,132
Provision for income taxes	4,791		2,507
Depreciation expense	2,587		3,330
Amortization expense	8,738		10,450
EBITDA (1)		$33,700		$22,024
Adjustments:
Stock-based compensation expense	1,888		6,609
Acquisition-related transaction costs and retention bonus expense	30		90
Restructuring recoveries	(1,022)		—
Adjusted EBITDA (2)		$34,596		$28,723

(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 September 30, 2018				Three Months Ended September 30, 2018
	Low		High		Low		High

Forward-looking operating costs and expenses		$81.4		$77.4		$81.4		$77.4
Adjustments:
Stock-based compensation expense	(7.5)		(7.5)		(7.5)		(7.5)
Amortization expense	(5.4)		(5.4)		(5.4)		(5.4)
Forward-looking Non-GAAP operating costs and expenses		$68.5		$64.5		$68.5		$64.5

Forward-looking operating income (loss)		$(36.4)		$(26.4)		$15.6		$25.6
Adjustments:
Stock-based compensation expense	7.5		7.5		7.5		7.5
Amortization expense	5.4		5.4		5.4		5.4
Forward-looking Non-GAAP operating income (loss)		$(23.5)		$(13.5)		$28.5		$38.5

Forward-looking income (loss) before income taxes		$(33.5)		$(23.5)		$11.5		$21.5
Adjustments:
Stock-based compensation expense	7.5		7.5		7.5		7.5
Amortization expense	5.4		5.4		5.4		5.4
Non-cash interest expense on convertible notes	2.7		2.7		2.7		2.7
Forward-looking Non-GAAP income (loss) before income taxes		$(17.9)		$(7.9)		$27.1		$37.1
Forward-looking GAAP provision for (benefit from) income taxes	(8.0)		(5.6)		2.8		5.2
Adjustment to Forward-looking GAAP provision for (benefit from) income taxes	3.7		3.7		3.7		3.7
Forward-looking Non-GAAP provision for (benefit from) income taxes	(4.3)		(1.9)		6.5		8.9
Forward-looking Non-GAAP net income (loss)		$(13.6)		$(6.0)		$20.6		$28.2

Forward-looking Non-GAAP basic net income (loss) per share		$(0.13)		$(0.06)		$0.19		$0.26
Forward-looking Non-GAAP diluted net income (loss) per share		$(0.13)		$(0.06)		$0.19		$0.25
Weighted average shares used in forward-looking Non-GAAP per share calculation:
Basic	108.0		108.0		108.0		108.0
Diluted	108.0		108.0		111.0		111.0

Rambus Reports First Quarter 2018 Financial Results

First quarter GAAP revenue of $46.4 million; revenue under ASC 605 would have been $100.5 million
First quarter GAAP royalty revenue of $21.4 million, royalty revenue under ASC 605 would have been $77.2 million and licensing billings of $75.9 million
Record revenue for Memory and Interface IP Cores
Launched CryptoManager Root-of-trust programmable secure processing core with custom RISC-V CPU to protect against vulnerabilities like Meltdown and Spectre
Partnered with IBM to develop hybrid memory system architectures for future data centers

SUNNYVALE, Calif. – May 7, 2018 – Rambus Inc. (NASDAQ:RMBS) today reported financial results for the first quarter ended March 31, 2018 under the newly adopted GAAP Accounting Standards Codification Topic 606 (“ASC 606” or “New Revenue Accounting Standard”), which superseded the revenue recognition requirements in ASC Topic 605, Revenue Recognition (“ASC 605”) that was previously applicable. Total revenue for the quarter under ASC 606 was $46.4 million, with GAAP diluted net loss per share of $0.36 and non-GAAP diluted net loss per share of $0.10.

Rambus also reported financial results as they would have been presented under ASC 605. This ASC 605 presentation is required under the modified retrospective transition method that Rambus has chosen to adopt under ASC 606. Rambus notes that this presentation allows a more relevant comparability with prior results, which were all reported under ASC 605. Total revenue for the quarter ended March 31, 2018 under ASC 605 would have been $100.5 million, 4% higher than a year ago excluding the impact of the Lighting Division, with GAAP diluted net income per share of $0.05 and non-GAAP diluted net income per share of $0.21.

“We delivered a solid first quarter and are making strong progress across all of our businesses as we maintain our growth trajectory, making data faster and safer for the data center and mobile edge markets,” said Dr. Ron Black, chief executive officer of Rambus. “We continue to gain traction with our products, services and licensing, while expanding partnerships with industry leaders to extend our reach to new technologies and market segments.”

Business Review

We had a very positive quarter in our Memory and Interfaces Division, with ongoing customer traction for our DIMM buffer chipset and record revenue for IP cores. We increased our market footprint for our DDR4 memory buffer chipset with further OEM and cloud customer qualifications leading to more design wins at our key customers. As we look to the next-generation, we maintain our leadership position, leveraging our head start in learnings for DDR5 memory buffer chips as the first and only supplier with working silicon for both the RCD and DB chips. For IP cores, we continue to grow our portfolio with new technologies and expand to new market segments. With the launch of our new GDDR6 memory PHY as part of a comprehensive solution alongside ecosystem partners Micron, Norwest Logic and Avery Design, we are the first IP supplier to offer a broadly available GGDR6 PHY and closed our first major design win for non-graphics applications.

Our Security Division, which consists of our Cryptography, Ticketing and Payments groups, had a solid quarter with the Cryptography team launching the CryptoManager Root of Trust core. Representing the next-generation of programmable secure processing, the core features a RISC-V CPU that has been customized by our security experts to go beyond a secure vault and enable the siloed execution of secure code within the core to help protect against vulnerabilities like Meltdown and Spectre. In addition, we expanded our DPA licensing program, signing agreements with Gemalto and Beijing Tongfang Microelectronics, our first licensee in China, to protect against side-channel attacks. Our Ticketing group remains a market leader in smart ticketing with ongoing deployments of our back-office software and services to train and bus operators across the UK. The Payments team continues to see ongoing traction for tokenization solutions for card payments and beyond with world-wide implementations of our Token Service Provider software and ongoing customer engagements for the Unified Payment Platform.

Lastly, as we look to further our innovation and IP development from our Emerging Solutions Division, we announced a partnership with IBM to develop hybrid memory system architectures for future data centers. As part of the collaboration, we will develop an architecture that combines the best attributes of DRAM and storage class memory to create a high-capacity solution at lower cost per bit, with performance levels comparable to that of DRAM.

Financial Review – GAAP	Three Months Ended March 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605
	As Reported ASC 606		Adjustments (1)		ASC 605 (1)		As Reported ASC 605

Royalties		$21.4		$55.8		$77.2		$69.0
Product revenue		7.3		0.3		7.6		10.9
Contract and other revenue		17.7		(2.0)		15.7		17.5
Total revenue		$46.4		$54.1		$100.5		$97.4
Total operating costs and expenses		$90.0		$—		$90.0		$84.0
Operating income (loss)		$(43.6)		$54.1		$10.5		$13.4
Operating margin		(94)%		104%		10%		14%
Net income (loss)		$(38.9)		$45.0		$6.1		$3.0
Diluted net income (loss) per share		$(0.36)		$0.41		$0.05		$0.03

Licensing billings (1)		$75.9		$—		$75.9		$68.6

Net cash provided by operating activities		$16.5		$—		$16.5		$17.2

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

Financial Review – Non-GAAP (1)	Three Months Ended March 31,
(In millions, except for percentages and per share amounts)	2018						2017
	As Reported ASC 606		Adjustment (2)		ASC 605 (2)		As Reported ASC 605
	As Reported ASC 606		Adjustment (2)		ASC 605 (2)		As Reported ASC 605

Royalties		$21.4		$55.8		$77.2		$69.0
Product revenue		7.3		0.3		7.6		10.9
Contract and other revenue		17.7		(2.0)		15.7		17.5
Total revenue		$46.4		$54.1		$100.5		$97.4
Total operating costs and expenses		$68.7		$—		$68.7		$66.8
Operating income (loss)		$(22.3)		$54.1		$31.8		$30.6
Operating margin		(48)%		80%		32%		31%
Net income (loss)		$(11.3)		$35.3		$24.0		$19.0
Diluted net income (loss) per share		$(0.10)		$0.31		$0.21		$0.17

(2) See note (1) under “Financial Review-GAAP” above for a description of the Adjustments and ASC 605 presentations.

Revenue for the quarter was $46.4 million. Revenue under ASC 605 would have been $100.5 million. Revenue was in line with our expectations, and included $2.5 million from our Lighting Division which was wound down in the first quarter of 2018. GAAP total operating costs and expenses of $90.0 million and non-GAAP total operating costs and expenses of $68.7 million included expenses from our Lighting Division for the quarter. We also had $0.36 of GAAP diluted net loss per share and $0.10 of non-GAAP diluted net loss per share. Total GAAP and non-GAAP diluted net income per share under ASC 605 would have been $0.05 and $0.21, respectively, and were in line with our expectations.

Cash, cash equivalents, and marketable securities as of March 31, 2018 were $291.2 million, a decrease of $38.2 million from December 31, 2017, mainly due to $50 million paid in connection with an accelerated share repurchase program, offset by cash generated from operating activities of approximately $16.5 million. Adjusted EBITDA under ASC 605 for the quarter would have been $34.7 million.

2018 Second Quarter Outlook

The Company has provided its second quarter outlook under ASC 606 and ASC 605 in order to provide additional transparency. The Company believes that providing this additional disclosure in the short term will help its investors and analysts understand the impact of the change in revenue recognition standards, especially given the material difference in the timing of revenue recognition for its fixed-fee licensing arrangements as mentioned above. Note that the presentation under ASC 605 is not a substitute for the new ASC 606 revenue recognition rules under current GAAP.

2018 Second Quarter Outlook (ASC 606)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$42 – $48	$42 – $48
Total operating costs and expenses	$87 – $83	$68 – $64
Operating loss	$45 – $35	$26 – $16
Diluted net loss per share	$0.35 – $0.28	$0.20 – $0.13

For the second quarter of 2018, the Company expects revenue under ASC 606 to be between $42 million and $48 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects operating costs and expenses to be between $87 million and $83 million, and diluted net loss per share to be between $0.35 and $0.28. Additionally, the Company expects non-GAAP operating costs and expenses to be between $68 million and $64 million, and non-GAAP diluted net loss per share to be between $0.20 and $0.13. These expectations also assume non-GAAP interest and other income and expense of $2 million, tax rate of 24% (refer to non-GAAP financial information below – income tax adjustments) and diluted share count of 107 million, and exclude stock-based compensation expense ($8 million), amortization expense ($11 million), and non-cash interest expense on convertible notes ($3 million).

2018 Second Quarter Outlook (ASC 605)
(In millions, except per share amounts)	GAAP	Non-GAAP (1)
Revenue	$94 – $100	$94 – $100
Total operating costs and expenses	$87 – $83	$68 – $64
Operating income	$8 – $18	$26 – $36
Diluted net income per share	$0.02 – $0.09	$0.17 – $0.23

For the second quarter of 2018, the Company expects that revenue under ASC 605 would be between $94 million and $100 million. Revenue is not without risk and achieving revenue in this range will require that the Company sign customer agreements for patent licensing, various product sales, mobile payments software and solutions licensing among other matters.

The Company also expects that operating costs and expenses would be between $87 million and $83 million, and diluted net income per share would be between $0.02 and $0.09. Additionally, the Company expects that non-GAAP operating costs and expenses would be between $68 million and $64 million, and non-GAAP diluted net income per share would be between $0.17 and $0.23. These expectations also assume non-GAAP interest and other income and expense of $2 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 ($8 million), amortization expense ($11 million), and non-cash interest expense on convertible notes ($3 million).

Conference Call:

Non-GAAP Financial Information:

In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss), diluted net income (loss) per share, presented both under ASC 606 and as they would have been presented under ASC 605. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.

The Company’s non-GAAP financial measures reflect adjustments based on the following items:

Income tax adjustments. 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 years to assist the Company’s planning. The Company has provided below a reconciliation of its GAAP provision for income taxes and GAAP effective tax rate to the assumed non-GAAP provision for income taxes and non-GAAP effective tax rate.

Forward-Looking Statements

This release contains forward-looking statements under the Private Securities Litigation Reform Act of 1995 including those relating to Rambus’ expectations regarding our new product and service offerings, growth for 2018 and financial guidance for the second quarter of 2018, including revenue, operating costs and expenses, earnings per share and estimated, fixed, long-term projected tax rates, both on a GAAP and non-GAAP basis as appropriate. Such forward-looking statements are based on current expectations, estimates and projections, management’s beliefs and certain assumptions made by Rambus’ management. Actual results may differ materially. Rambus’ business generally is subject to a number of risks which are described more fully in Rambus’ periodic reports filed with the Securities and Exchange Commission. Rambus undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date hereof.

Rambus Inc.

Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	March 31, 2018		December 31, 2017
ASSETS

Current assets:
Cash and cash equivalents		$122,361		$225,844
Marketable securities	168,859		103,532
Accounts receivable	26,734		25,326
Unbilled receivables	163,107		566
Inventories	5,596		5,159
Prepaids and other current assets	16,770		11,317
Total current assets	503,427		371,744
Intangible assets, net	82,083		91,722
Goodwill	211,356		209,661
Property, plant and equipment, net	48,392		54,303
Deferred tax assets	96,902		159,099
Unbilled receivables, long-term	607,507		—
Other assets	4,507		4,543
Total assets		$1,554,174		$891,072

LIABILITIES & STOCKHOLDERS’ EQUITY

Current liabilities:
Accounts payable		$7,080		$9,614
Accrued salaries and benefits	14,982		17,091
Deferred revenue	16,480		18,272
Income taxes payable, short-term	15,830		258
Convertible notes, short-term	79,541		78,451
Other current liabilities	11,263		9,156
Total current liabilities	145,176		132,842
Long-term liabilities:
Convertible notes, long-term	137,037		135,447
Long-term imputed financing obligation	37,045		37,262
Long-term income taxes payable	92,052		3,344
Other long-term liabilities	14,345		10,593
Total long-term liabilities	280,479		186,646
Total stockholders’ equity	1,128,519		571,584
Total liabilities and stockholders’ equity		$1,554,174		$891,072

Rambus Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2018		2017

Revenue:
Royalties		$21,374		$68,956
Product revenue	7,313		10,904
Contract and other revenue	17,739		17,491
Total revenue	46,426		97,351
Operating costs and expenses:
Cost of product revenue (1)	4,357		5,250
Cost of contract and other revenue	12,122		14,481
Research and development (1)	40,117		36,000
Sales, general and administrative (1)	30,198		28,186
Restructuring charges	3,245		—
Total operating costs and expenses	90,039		83,917
Operating income (loss)	(43,613)		13,434
Interest income and other income (expense), net	9,116		154
Interest expense	(4,421)		(3,206)
Interest and other income (expense), net	4,695		(3,052)
Income (loss) before income taxes	(38,918)		10,382
Provision for (benefit from) income taxes	(1)		7,376
Net income (loss)		$(38,917)		$3,006
Net income (loss) per share:
Basic		$(0.36)		$0.03
Diluted		$(0.36)		$0.03
Weighted average shares used in per share calculation
Basic	109,358		111,464
Diluted	109,358		115,325

_________

(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

(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

Rambus Initiates Accelerated Share Repurchase Program

SUNNYVALE, Calif. ― March 6, 2018 ― Rambus Inc. (NASDAQ: RMBS) today announced it has initiated an accelerated share repurchase program with Citibank, N.A. to repurchase an aggregate of approximately $50 million of its common stock, with an initial delivery of approximately 3.1 million shares.

“Repurchasing Rambus shares reinforces our confidence in existing product programs and highlights our ability to continue to invest in critical technology areas while delivering shareholder value,” said Dr. Ron Black, president and chief executive officer at Rambus.

Under the accelerated share repurchase program, Rambus will pre-pay to Citibank the $50 million purchase price for its common stock and, in turn, Rambus will receive an initial delivery of approximately 3.1 million shares of its common stock from Citibank within the first week of the program. The number of shares to be purchased ultimately by Rambus will be determined based on the volume weighted average price of the common stock during the terms of the transaction, minus an agreed upon discount between the parties. The program is expected to be completed within six months. The shares of common stock will be delivered by Citibank to Rambus on the third business day following the calculation period described above.

The accelerated share repurchase program is part of the broader share repurchase program previously authorized by the Rambus Board of Directors. As of March 5, 2018, before giving effect to the transaction under the accelerated share repurchase program, there remained an outstanding authorization under the broader share repurchase program to repurchase approximately 7.4 million shares of the company’s outstanding common stock.

Financial

Rambus Reports First Quarter 2019 Financial Results

Rambus Reports Fourth Quarter and Fiscal Year 2018 Financial Results

Rambus Reports Third Quarter 2018 Financial Results

Rambus Reports Second Quarter 2018 Financial Results

Rambus Reports First Quarter 2018 Financial Results

Rambus Initiates Accelerated Share Repurchase Program

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