Rambus Swings Back To Profit
By Zacks Investment Research on July 25, 2011
Rambus Swings Back To Profit
Rambus Inc. (NASDAQ:RMBS) posted second quarter 2011 earnings per share of 7 cents, strongly beating the Zacks Consensus Estimate of a loss of 14 cents. The adjusted earnings per share exclude other patent royalties received, acquisition costs and retention bonus, restatement and related legal charges and amortization expenses as well as tax adjustments, but include stock compensation expenses. Shares surged 3.08% in the after market trade.
Revenue
Rambus reported total revenue of $66.2 million in the second quarter, up 70.4% from $38.9 million in the year-ago period. The quarter’s result was in line with the upper end of the company’s guidance. The improvement was attributable to strength noticed in both segments.
Royalty revenues increased 59.6% year over year to $61.0 million. Revenue from Contracts saw a whopping 682.1% rise from the comparable quarter last year.
During the quarter, Rambus signed five-year patent licensing agreements with Freescale Semiconductor Inc., reflecting growing demand for its new and innovative technology licensing capabilities.
Operating Results
Total operating expenses in the second quarter were $68.7 million, up 51.0% from $45.5 million in the year-earlier quarter. The year-ago quarter included $10.3 million gain related to the Samsung settlement.
Reported operating loss in the quarter was $2.5 million, compared to $6.7 million in year-ago quarter. The operating margin was negative 3.8% compared to negative 17.5% in the year-ago quarter. Excluding the impact of other patent royalties received, acquisition costs and retention bonus, restatement and related legal charges and amortization expenses, but including stock compensation expenses, the adjusted operating margin was 23.1% versus 29.9% in the year-ago quarter.
Reported net loss was $10.6 million or 10 cents per share, compared with $12.5 million or 11 cents in the comparable quarter last year. Excluding one-time items but including stock compensation expenses, the adjusted income per share came in at 7 cents.
Balance Sheet
Rambus exited the quarter with cash, cash equivalents and marketable securities of approximately $359.4 million, compared with $508.6 million in the prior quarter. The decrease was due to cash spent for acquiring Cryptography Research Inc., slightly offset by modest cash generated from operating activities.
There was no share buyback activity during the quarter.
Guidance
For the third quarter, Rambus expects revenues to range between $91.0 million and $96.0 million. Pro forma operating expenses are expected in the range of $61.0 million to $65.0 million, accounting for litigation expenses of $15.0 million to $18.0 million. Pro forma net income is projected between $11.0 million and $16.0 million.
Our Take
Rambus reported an interesting second quarter, surpassing the Zacks Estimates with flying colors. The company also provided an upbeat guidance based on strong licensing deals.
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. Moreover, Rambus has won a favorable ruling from the U.S. International Trade Commission for lawsuits filed against various parties, including chip maker NVIDIA Corp. (NASDAQ:NVDA) and PC makers Hewlett-Packard Co. (NYSE:HPQ) and Asus Computer International Inc. However, pending lawsuits against Hynix and Micron Technology Inc. (NYSE:MU), as well as competitive pressure from Samsung Electronics remain concerns.
Currently, Rambus has a Zacks #2 Rank, indicating a short-term Buy recommendation.