Rambus Inc. (RMBS) posted first quarter 2012 adjusted loss per share of 3 cents, missing the Zacks Consensus Estimate of a penny. Adjusted earnings per share exclude other patent royalties received, acquisition costs and retention bonus, amortization, costs of restatement and related legal activities, as well as non-cash interest expense on convertible notes but include stock-based compensation expenses. Shares plunged 3.75% in the after hours.
Revenue
Rambus reported total revenue of $62.9 million in the first quarter, marginally up from $62.5 million a year ago. However, quarterly revenue was within the company’s guidance range of $59.0-$64.0 million and slightly below the Zacks Consensus Estimate of $63.0 million. But the quarter’s revenue fell 25.0% sequentially, mostly due to a receipt of licensing royalty from Broadcom Corp. (BRCM) during the fourth quarter of 2011. However, during the reported quarter, Rambus secured 5-year licensing deals with MediaTek and NVIDIA Corp. (NVDA), which have supported the revenue.
Royalty revenue increased 4.7% year over year to $62.0 million. Revenue from Contracts was $0.8 million, substantially down (75.1%) from the comparable quarter last year.
Operating Results
Total operating expenses in the first quarter were $73.3 million, up 43.6% from $51.0 million in the year-earlier quarter. The steep rise in research and development expenses (64.7%) led to higher operating expenses. Also, the year-ago quarter included a gain of $6.2 million related to a patent suit settlement.
Reported operating loss in the quarter was $17.6 million, compared to an income of $8.4 million in year-ago quarter. The operating margin was (27.9%) compared to 13.4% in the year-ago quarter.
Reported net loss was $27.9 million or 25 cents per share, compared to $4.2 million or 4 cents in the comparable quarter last year. Excluding the impact of other patent royalties received, acquisition costs and retention bonus, amortization, costs of restatement and related legal activities, non-cash interest expense on convertible notes, but including stock-based compensation expenses, adjusted loss per share came in at 3 cents versus earnings per share of 3 cents in the year-ago quarter.
Balance Sheet
Rambus exited the quarter with cash, cash equivalents and marketable securities of approximately $232.5 million, compared to $289.4 million in the prior quarter. The company used $31.1 million to acquire privately held Unity Semiconductor and an additional $11.6 million on other acquisitions.
Guidance
For the second quarter 2012, Rambus expects revenues between $53.0 million and $59.0 million. Pro forma operating expenses are expected in the range of $57.0 million to $62.0 million, including litigation expenses of $4.0 million to $7.0 million. Pro forma net income is projected between ($6.0) million and break-even.
Our Take
Rambus reported a mediocre first quarter, failing to surpass the Zacks Consensus Estimates on top and bottom lines. Though revenue grew marginally year over year, it fell significantly when compared sequentially. Second quarter guidance reflects weak sequential growth, which according to management is due to lower contract price and lower royalty income.
Management stated that the recent licensing agreements with MediaTek and NVIDIA were made at a lower rate than it used to be in the past quarters. Moreover, the bankruptcy of Japanese chip-maker Elpida (a 10.0%+ customer for Rambus) will reduce the amount of royalty income.
But, Rambus’ endeavor to diversify into the lighting and display technology space in an effort to tap the tremendous opportunity in solid state lighting is encouraging. During the conference call, management seemed quite positive on the growth prospect of its lighting and display biz. Rambus has recently licensed its patented lighting technology to Alton, Hampshire-based Fern Howard, a recognized producer of energy efficient lighting solutions.
With the growing popularity of energy-efficient lighting, the in-vogue LED products are finding place in the latest architectural, retail, commercial and residential lighting fixtures. We find Rambus in a favorable position for a share of this opportunity.
Currently, Rambus has a Zacks #3 Rank, indicating a short-term Hold rating.
To read this article on Zacks.com click here.
Zacks Investment Research
