Rambus Reports Second Quarter Financial Results

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(1) Total stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 is presented as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Cost of revenue	$	14	$	27	$	28	$	39
Research and development	$	2,109	$	1,988	$	4,189	$	3,755
Sales, general and administrative	$	2,926	$	2,400	$	5,696	$	4,387

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

	Three Months Ended									Six Months Ended
	June 30, 2016			March 31, 2016			June 30, 2015			June 30, 2016			June 30, 2015

Operating costs and expenses	$	64,493		$	63,388		$	57,258		$	127,881		$	112,280
Adjustments:
Stock-based compensation expense	(5,049		)	(4,864		)	(4,415		)	(9,913		)	(8,181		)
Acquisition-related transaction costs and retention bonus expense	(789		)	(1,808		)	—			(2,597		)	(2		)
Amortization expense	(8,152		)	(7,719		)	(6,323		)	(15,871		)	(12,646		)
Non-GAAP operating costs and expenses	$	50,503		$	48,997		$	46,520		$	99,500		$	91,451

Operating income	$	12,008		$	9,294		$	15,554		$	21,302		$	33,446
Adjustments:
Stock-based compensation expense	5,049			4,864			4,415			9,913			8,181
Acquisition-related transaction costs and retention bonus expense	789			1,808			—			2,597			2
Amortization expense	8,152			7,719			6,323			15,871			12,646
Non-GAAP operating income	$	25,998		$	23,685		$	26,292		$	49,683		$	54,275

Income before income taxes	$	9,983		$	6,395		$	12,666		$	16,378		$	27,607
Adjustments:
Stock-based compensation expense	5,049			4,864			4,415			9,913			8,181
Acquisition-related transaction costs and retention bonus expense	789			1,808			—			2,597			2
Amortization expense	8,152			7,719			6,323			15,871			12,646
Non-cash interest expense on convertible notes	1,675			1,651			1,581			3,326			3,140
Non-GAAP income before income taxes	$	25,648		$	22,437		$	24,985		$	48,085		$	51,576
GAAP provision for income taxes	6,107			4,517			5,805			10,624			11,244
Adjustment to GAAP provision for income taxes	2,870			3,336			3,190			6,206			7,324
Non-GAAP provision for income taxes	8,977			7,853			8,995			16,830			18,568
Non-GAAP net income	$	16,671		$	14,584		$	15,990		$	31,255		$	33,008

Non-GAAP basic net income per share	$	0.15		$	0.13		$	0.14		$	0.28		$	0.29
Non-GAAP diluted net income per share	$	0.15		$	0.13		$	0.13		$	0.28		$	0.28
Weighted average shares used in non-GAAP per share calculation:
Basic	109,904			109,733			116,027			109,818			115,683
Diluted	112,061			112,252			120,939			112,202			119,225

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

	Three Months Ended						Six Months Ended
	June 30, 2016		March 31, 2016		June 30, 2015		June 30, 2016		June 30, 2015

GAAP effective tax rate	61	%	71	%	46	%	65	%	41	%
Adjustment to GAAP effective tax rate	(26	)%	(36	)%	(10	)%	(30	)%	(5	)%
Non-GAAP effective tax rate	35	%	35	%	36	%	35	%	36	%

(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 35 percent for periods in 2016 and 36 percent for periods in 2015, 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.

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