Rambus Inc. (RMBS) posted first quarter 2011 loss per share of 2 cents, surpassing the Zacks Consensus Estimate of a loss of 6 cents. The adjusted loss per share excludes restatement and related legal charges, amortization, non-cash interest expense on convertible notes, gain from a legal settlement and tax gains. Shares dropped 4.90% after the market closed on April 21.
Revenue
Rambus reported total revenue of $62.5 million in the first quarter, down 61.4% from $161.9 million in the year-ago period. The uneven comparison was due to the receipt of a significant amount from a licensing agreement with Samsung in the first quarter of 2010. However, the quarter’s revenue surpassed the Zacks Consensus Estimate of $60.0 million.
Royalty revenues decreased 63.1% year over year to $59.2 million. The decline was partially compensated by revenue from Contracts, which surged 153.8% from the comparable quarter last year.
During the quarter, Rambus signed five-year patent licensing agreements with Panasonic Corp. (PC) and Toshiba Corp., reflecting growing demand for its new and innovative technology licensing capabilities.
Operating Results
Total operating expenses in the first quarter were $54.2 million, compared to recoveries of $40.3 million in the year-earlier quarter. The year-ago quarter included $95.9 million related to the Samsung settlement, which is the reason for the recoveries balance.
Reported operating income in the quarter was $8.4 million, down 95.8% from the year-ago quarter. The operating margin was 13.4% compared with 124.9% in the year-ago quarter. Excluding the impact of restatement and related legal charges, amortization expenses and gains from settlement, but including stock compensation expenses, the adjusted operating margin was 8.6% versus 66.6% in the year-ago quarter.
Reported net loss was $4.2 million or 4 cents per share, compared with net income of $150.9 million or $1.28 per share in the comparable quarter last year. Excluding one-time items but including stock compensation expenses, the adjusted loss per share came in at 2 cents.
Balance Sheet
Rambus exited the quarter with cash, cash equivalents and marketable securities of approximately $508.6 million, compared with $512.0 million in the prior quarter. The decrease in cash balance was due to excessive cash used up in operating activities and higher capital expenditure.
There was no share buyback in the quarter.
Guidance
For the second quarter, Rambus expects revenues to range between $62.0 million and $66.0 million. Pro forma operating expenses are expected in the range of $54.0 million to $58.0 million, accounting for litigation expenses of $14.0 million to $17.0 million. Pro forma net income is projected between $1 million and $5 million.
Our Take
Rambus reported an uninteresting first quarter but surpassed the Zacks Estimates on both the top and bottom lines. The company also expects its revenue to be flat sequentially.
Rambus’ endeavor to diversify into the lighting and display technology space in an effort to tap the tremendous opportunity of solid state lighting is encouraging. Though Rambus has won a favorable ruling from the U.S. International Trade Commission for lawsuits filed against various parties, including chip maker NVIDIA Corp. (NVDA) and PC makers Hewlett-Packard Co. (HPQ) and Asus Computer International Inc., pending lawsuits against Hynix and Micron Technology Inc. (MU), as well as competitive pressure from Samsung Electronics remains concerns.
Currently, Rambus has a Zacks #3 Rank, indicating a short-term Hold recommendation.
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