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.

Purchase accounting adjustment for inventory fair value step-up. These adjustments are the result of accounting for certain business acquisitions and are excluded because such adjustments are non-recurring. Additionally, the Company excludes these expenses in order to provide better comparability between periods.

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 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 years to assist the Company’s planning for future periods. 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 impairments and 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 financial guidance for the fourth quarter of 2016, including revenue, operating costs and expenses, earnings per share and estimated, fixed, long-term projected tax rates. 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.

About Rambus Inc.

Rambus creates cutting-edge semiconductor and IP products, spanning memory and interfaces to security, smart sensors and lighting. Our chips, customizable IP cores, architecture licenses, tools, services, training and innovations improve the competitive advantage of our customers. We collaborate with the industry, partnering with leading ASIC and SoC designers, foundries, IP developers, EDA companies and validation labs. For more information, visit www.rambus.com.

RMBSFN

Rambus Inc. Condensed Consolidated Balance Sheets (In thousands) (Unaudited)
		September 30, 2016				December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents		$	89,479			$	143,764
Marketable securities		61,310				143,942
Accounts receivable		26,363				16,408
Prepaids and other current assets		22,150				11,476
Total current assets		199,302				315,590
Intangible assets, net		164,862				64,266
Goodwill		207,531				116,899
Property, plant and equipment, net		59,191				56,616
Deferred taxes		165,661				162,485
Other assets		3,749				2,165
Total assets		$	800,296			$	718,021
LIABILITIES & STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	10,188			$	4,096
Accrued salaries and benefits		10,209				12,278
Deferred revenue		17,772				5,780
Other current liabilities		21,632				6,212
Total current liabilities		59,801				28,366
Long-term liabilities:
Convertible notes, long-term		124,443				119,418
Long-term imputed financing obligation		38,194				38,625
Other long-term liabilities		25,018				5,079
Total long-term liabilities		187,655				163,122
Total stockholders’ equity		552,840				526,533
Total liabilities and stockholders’ equity		$	800,296			$	718,021

Rambus Inc. Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited)
		Three Months Ended September 30,								Nine Months Ended September 30,
		2016				2015				2016				2015
Revenue:
Royalties		$	68,298			$	66,823			$	194,010			$	196,173
Contract and other revenue		21,557				6,956				45,028				23,332
Total revenue		89,855				73,779				239,038				219,505
Operating costs and expenses:
Cost of revenue (1)		19,424				11,111				45,720				34,004
Research and development (1)		33,820				27,784				91,100				85,506
Sales, general and administrative (1)		24,795				17,860				69,679				53,701
Gain from sale of intellectual property		—				(106		)		—				(3,262		)
Gain from settlement		—				(510		)		(579		)		(1,530		)
Total operating costs and expenses		78,039				56,139				205,920				168,419
Operating income		11,816				17,640				33,118				51,086
Interest income and other income (expense), net		142				539				1,522				874
Interest expense		(3,193		)		(3,117		)		(9,497		)		(9,291		)
Interest and other income (expense), net		(3,051		)		(2,578		)		(7,975		)		(8,417		)
Income before income taxes		8,765				15,062				25,143				42,669
Provision for (benefit from) income taxes		4,254				(166,971		)		14,878				(155,727		)
Net income		$	4,511			$	182,033			$	10,265			$	198,396
Net income per share:
Basic		$	0.04			$	1.56			$	0.09			$	1.71
Diluted		$	0.04			$	1.52			$	0.09			$	1.67
Weighted average shares used in per share calculation
Basic		110,214				116,444				109,951				115,940
Diluted		113,723				119,542				112,805				118,997

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