Rambus Reports Third Quarter Financial Results

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Cost of revenue	$	14	$	12	$	42	$	51
Research and development	$	2,337	$	1,548	$	6,526	$	5,303
Sales, general and administrative	$	3,092	$	2,008	$	8,788	$	6,395

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

	Three Months Ended									Nine Months Ended
	September 30, 2016			June 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015

Operating costs and expenses	$	78,039		$	64,493		$	56,139		$	205,920		$	168,419
Adjustments:
Stock-based compensation expense	(5,443		)	(5,049		)	(3,568		)	(15,356		)	(11,749		)
Acquisition-related transaction costs and retention bonus expense	(441		)	(789		)	—			(3,038		)	(2		)
Purchase accounting adjustment for inventory fair value step-up	(1,168		)	—			—			(1,168		)	—
Amortization expense	(10,174		)	(8,152		)	(6,268		)	(26,045		)	(18,914		)
Non-GAAP operating costs and expenses	$	60,813		$	50,503		$	46,303		$	160,313		$	137,754

Operating income	$	11,816		$	12,008		$	17,640		$	33,118		$	51,086
Adjustments:
Stock-based compensation expense	5,443			5,049			3,568			15,356			11,749
Acquisition-related transaction costs and retention bonus expense	441			789			—			3,038			2
Purchase accounting adjustment for inventory fair value step-up	1,168			—			—			1,168			—
Amortization expense	10,174			8,152			6,268			26,045			18,914
Non-GAAP operating income	$	29,042		$	25,998		$	27,476		$	78,725		$	81,751

Income before income taxes	$	8,765		$	9,983		$	15,062		$	25,143		$	42,669
Adjustments:
Stock-based compensation expense	5,443			5,049			3,568			15,356			11,749
Acquisition-related transaction costs and retention bonus expense	441			789			—			3,038			2
Purchase accounting adjustment for inventory fair value step-up	1,168			—			—			1,168			—
Amortization expense	10,174			8,152			6,268			26,045			18,914
Non-cash interest expense on convertible notes	1,700			1,675			1,605			5,026			4,745
Non-GAAP income before income taxes	$	27,691		$	25,648		$	26,503		$	75,776		$	78,079
GAAP provision for (benefit from) income taxes	4,254			6,107			(166,971		)	14,878			(155,727		)
Adjustment to GAAP provision for income taxes	5,438			2,870			176,512			11,644			183,836
Non-GAAP provision for income taxes	9,692			8,977			9,541			26,522			28,109
Non-GAAP net income	$	17,999		$	16,671		$	16,962		$	49,254		$	49,970

Non-GAAP basic net income per share	$	0.16		$	0.15		$	0.15		$	0.45		$	0.43
Non-GAAP diluted net income per share	$	0.16		$	0.15		$	0.14		$	0.44		$	0.42
Weighted average shares used in non-GAAP per share calculation:
Basic	110,214			109,904			116,444			109,951			115,940
Diluted	113,723			112,061			119,542			112,805			118,997

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

	Three Months Ended						Nine Months Ended
	September 30, 2016		June 30, 2016		September 30, 2015		September 30, 2016		September 30, 2015

GAAP effective tax rate	49	%	61	%	1,109	%	59	%	365	%
Adjustment to GAAP effective tax rate	(14	)%	(26	)%	(1,073	)%	(24	)%	(329	)%
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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