The Company also expects that operating costs and expenses would be between $81 million and $77 million, and diluted net income per share would be between $0.08 and $0.15. Additionally, the Company expects that non-GAAP operating costs and expenses would be between $69 million and $65 million, and non-GAAP diluted net income per share would be between $0.19 and $0.25. These expectations also assume non-GAAP interest and other income and expense of $1 million, tax rate of 24% (refer to non-GAAP financial information below - income tax adjustments) and diluted share count of 111 million, and exclude stock-based compensation expense ($8 million), amortization expense ($5 million) and non-cash interest expense on convertible notes ($3 million).
Rambus management will discuss the results of the quarter during a conference call scheduled for 2:00pm PT today. The call, audio and slides will be available online at investor.rambus.com and a replay will be available for the next week at the following numbers: (855) 859-2056 (domestic) or (404) 537-3406 (international) with ID# 3034809.
Non-GAAP Financial Information:
In the commentary set forth above and in the financial statements included in this earnings release, the Company presents the following non-GAAP financial measures: operating costs and expenses, operating margin, operating income (loss), net income (loss) and, diluted net income (loss) per share, presented both under ASC 606 and as they would have been presented under ASC 605. In computing each of these non-GAAP financial measures, the following items were considered as discussed below: stock-based compensation expenses, acquisition-related transaction costs and retention bonus expense, amortization expenses, non-cash interest expense and certain other one-time adjustments. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes the non-GAAP financial measures are appropriate for both its own assessment of, and to show investors, how the Company’s performance compares to other periods. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Reconciliation from GAAP to non-GAAP results is included in the financial statements contained in this release.
The Company’s non-GAAP financial measures reflect adjustments based on the following items:
Stock-based compensation expense. These expenses primarily relate to employee stock options, employee stock purchase plans, and employee non-vested equity stock and non-vested stock units. The Company excludes stock-based compensation expense from its non-GAAP measures primarily because such expenses are non-cash expenses that the Company does not believe are reflective of ongoing operating results. Additionally, given the fact that other companies may grant different amounts and types of equity awards and may use different option valuation assumptions, excluding stock-based compensation expense permits more accurate comparisons of the Company’s results with peer companies.
Acquisition-related transaction costs and retention bonus expense. These expenses include all direct costs of certain acquisitions and the current periods’ portion of any retention bonus expense associated with the acquisitions. The Company excludes these expenses in order to provide better comparability between periods.
Restructuring charges (recoveries). These charges (recoveries) may consist of severance, contractual retention payments, exit costs and other charges (recoveries) and are excluded because such charges (recoveries) are not directly related to ongoing business results and do not reflect expected future operating expenses.
Amortization expense. The Company incurs expenses for the amortization of intangible assets acquired in acquisitions. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company’s prior acquisitions and have no direct correlation to the operation of the Company’s core business.
Non-cash interest expense on convertible notes. The Company incurs non-cash interest expense related to its convertible notes. The Company excludes non-cash interest expense related to its convertible notes to provide more accurate comparisons of the Company’s results with other peer companies and to more accurately reflect the Company’s ongoing operations.
Income tax adjustments. For purposes of internal forecasting,
planning and analyzing future periods that assume net income from
operations, the Company estimates a fixed, long-term projected tax rate
of approximately 24 percent for 2018 and 35 percent for 2017, which
consists of estimated U.S. federal and state tax rates, and excludes tax
rates associated with certain items such as withholding tax, tax
credits, deferred tax asset valuation allowance and the release of any
deferred tax asset valuation allowance. Accordingly, the Company has
applied these tax rates to its non-GAAP financial results for all
periods in the relevant years to assist the Company’s planning. The
Company has provided below a reconciliation of its GAAP provision for
income taxes and GAAP effective tax rate to the assumed non-GAAP
provision for income taxes and non-GAAP effective tax rate.