Rambus, Inc. Earnings Analysis: 2015 By the Numbers

Rambus, Inc. reports financial results for the year ended December 31, 2015.

We analyze the earnings along side the following peers of Rambus, Inc. – Micron Technology, Inc., NXP Semiconductors NV, Microsemi Corporation, Texas Instruments Incorporated and Advanced Micro Devices, Inc. (MU-US, NXPI-US, MSCC-US, TXN-US and AMD-US) that have also reported for this period.

Highlights

  • Gross margins widened from 84.60% to 84.70% compared to the same period last year, operating (EBITDA) margins now 23.38% from 37.38%.
  • Earnings growth due to contribution of one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2011 2012 2013 2014 2015
Relevant Numbers (Annual)
Revenues 312.36 234.05 271.5 296.56 296.28
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings -43.05 -134.34 -33.75 26.2 211.39
Earnings Growth (YOY) -128.53 -212.02 74.88 177.64 706.79
Net Margin -13.78 -57.4 -12.43 8.84 71.35
EPS -0.39 -1.21 -0.3 0.22 1.8
Return on Equity -9.81 -35.76 -10.2 7.16 46.05
Return on Assets -6.35 -20.97 -5.19 4.03 32.33

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Earnings Growth Analysis

The company’s earnings growth has been influenced by the year-on-year improvement in gross margins from 84.60% to 84.70%. However the company’s overhead costs have prevented it from fully capitalizing on these gross margin improvements. In fact, the company’s operating margins (EBITDA margins) showed no improvement over the same period last year.

Gross Margin Versus EBITDA Margin

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

RMBS-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 349.51, compared to last year’s level of 286.59 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Margins

The company’s operating (EBIT) margins contracted from 23.81% to 23.38%. In spite of this, the company’s earnings rose. This was influenced primarily by one-time items, which improved pretax margins from 16.94% to 20.33%.

EBIT Margin Versus PreTax Margin
EBIT Margin History
PreTax Margin History

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Company Profile

Rambus, Inc. engages in the provision of inventions and technology solutions. It operates through the following segments: Memory & Interfaces Division, Cryptography Research Division, Emerging Solutions Division, and Lighting & Display Technologies. The Memory & Interfaces Division segment focuses on the design, development, and licensing of technology relating to memory and interfaces. The Cryptography Research Division segment focuses on the design, development and licensing of technologies for chip and system security and anti-counterfeiting. The Emerging Solutions Division segment includes computational sensing and imaging group. The Lighting & Display Technologies segment focuses on the design, development, and licensing of technologies for lighting. The company was founded by P. Michael Farmwald and Mark A. Horowitz in March 1990 and is headquartered in Sunnyvale, CA.

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