Rambus, Inc. :RMBS-US: Earnings Analysis: 2016 By the Numbers : March 10, 2017

Rambus, Inc. reports financial results for the year ended December 31, 2016.

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


  • Gross margins narrowed from 83.86% to 77.86% compared to the same period last year, operating (EBITDA) margins now 29.03% from 36.12%.
  • Year-on-year change in operating cash flow of 21.06% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

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

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 336.6 296.28 296.56 271.5 234.05
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 6.82 211.39 26.2 -33.75 -134.34
Earnings Growth (YOY) -96.77 706.79 177.64 74.88 -212.02
Net Margin 2.03 71.35 8.84 -12.43 -57.4
EPS 0.06 1.8 0.22 -0.3 -1.21
Return on Equity 1.26 46.05 7.16 -10.2 -35.76
Return on Assets 0.91 32.33 4.03 -5.19 -20.97

Access our Ratings and Scores for Rambus, Inc.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 83.86% to 77.86%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 36.12% to 29.03% in this time frame. For comparison, gross margins were 83.86% and EBITDA margins were 36.12% in the previous period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

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 decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days have fallen to 245.45 days from 349.51 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

RMBS-US‘s change in operating cash flow of 21.06% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 23.48% to 14.15% and (2) one-time items that contributed to a decrease in pretax margins from 20.33% to 6.73%

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Rambus, Inc.

Company Profile

Rambus, Inc. engages in the provision of cutting-edge semiconductor and Internet Protocol products, spanning memory and interfaces to security, smart sensors, and lighting. It operates through the following segments: Memory and Interfaces Division (MID), Cryptography Research (CRD), Emerging Solutions Division (ESD), and Lighting and Display Technologies (LDT). The MID segment focuses on mobile memory, server-based memory, serial link designs, and custom solutions. The CRD segment comprises of chip and system security, anti-counterfeiting, smart ticketing, and mobile payments. The ESD segment includes computational sensing and imaging group in the area of emerging technologies. The LDT segment covers 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.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of RMBS-US.