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How do you read the phrase for Q2 non-gaap earnings guidance?Rahul said, ..."....we expect share count to be roughly 116 million basic and diluted shares outstanding. This leads you to be between a non-GAAP loss per share of $0.03 and $0.09 for the quarter." Is Rahul saying he expects the results to be between a LOSS of $0.03 per share and a LOSS of $0.09 per share?????? In other words an uncertainty band of only $0.06/share (I.e., plus or minus $0.03/share band centered around an expected LOSS of $0.06/share) ....OR Is Rahul saying he expects results to be between a Loss of $0.03 and Positive Earnings of $0.09 per share???? In other words an larger uncertainty band of $0.12/share (plus or minus $0.06/share band centered around an expected Positive Earnings of $0.03/share)???? I think he meant the latter...guiding toward positing non-gaap earnings of $0.03/share at the mid-point, but I am interested in making sure that others read the transcript the same way. (See below): -------------- Now let me turn to our guidance for the second quarter on Salide 10. As a reminder, our forward-looking guidance reflects our current best estimates, and our actual results could differ materially from what I'm about to review. In addition to financial outlook under ASC 606, we've also been providing information on licensing billings, which is an operational metric that reflects amounts invoiced to our licensing customers during the period adjusted for certain differences. As you can see in the supplemental information we've provided on Slide 14 of our earnings deck, licensing billings closely correlates with what we have historically reported as royalty revenue under ASC 605. As Luc mentioned, we saw tailwinds in the form of increased demand in data center and infrastructure and had a fantastic first quarter. While we are optimistic about the potential for these trends to continue, we are remaining conservative in our guidance for Q2 due to the lack of visibility and uncertainty created by COVID-19 and as we continue to monitor inventory status in the industry and supply chain. With that said, under ASC 606, we expect revenue in the second quarter between $50 million and $56 million. We expect royalty revenue between $9 million and $15 million. We also expect licensing billings between $57 million and $63 million. We expect Q2 non-GAAP total operating expenses, which includes COGS, to be between $62 million and $66 million. Under ASC 606, non-GAAP operating results for the second quarter are expected to be between a loss of $5 million and $15 million. For non-GAAP interest and other income and expense, which excludes interest income related to ASC 606, we would have expected $1 million in income, which includes $0.6 million of interest expense related to the notes due in 2023. Based on the tax legislation passed at the end of 2017, we expect our pro forma tax rate in 2020 to remain consistent with our 2019 pro forma tax rate of roughly 24%. The 24% is higher than the new statutory rate of 21%, primarily due to higher tax rates in our foreign jurisdictions. As a reminder, we pay roughly $20 million of cash taxes each year driven primarily by our licensing agreements with our partners in Korea. We expect non-GAAP taxes to be between a benefit of $1 million and $3 million in Q2. We expect our Q2 share count to be roughly 116 million basic and diluted shares outstanding. This leads you to be between a non-GAAP loss per share of $0.03 and $0.09 for the quarter. I'd like to provide some additional context as to how we developed our guidance for the quarter. We are fortunate to have a strong base of predictable recurring patent license agreements, and our guidance reflects some of the structural step-downs we've discussed previously. In our product businesses, we continue to be actively engaged with our partners on chip design activity and have backlog that represents approximately 80% of our expected chip and silicon IP revenue for the quarter. Our Q2 guidance, therefore, reflects a combination of our structural step-downs and conservatism in an uncertain environment. We continue to manage costs carefully and invest in our R&D programs, though travel and other activities are limited. While we have reasonable visibility for Q2 and are encouraged by the engagement with our partners, given the uncertainty surrounding the global macroeconomic environment with COVID-19, we don't yet understand how our end markets will be impacted in the second half of this year. While we don't provide guidance beyond Q2 and demand remains robust, due to the resilience of our model, even if Q3 and Q4 were 10% lower on the top line than what we expected in January, I expect the same overall profitability for the year due to our strong performance in the first half. Let me finish with a summary on Slide 11. We are proud of the excellent performance by our team and the progress we continue to make against our strategic initiatives to drive long-term profitable growth. While we understand that ASC 606 added a level of complexity to our financial reporting, it's important to reiterate that the underlying financial strength of our business remains strong, reflected in our demonstrated ability to generate cash. We have refocused our product portfolio around Rambus' core strengths in the semiconductor industry, improved our operational efficiency and profitability, generated solid cash from operations and leveraged our balance sheet to support our strategic initiatives. We continue to focus on our core markets and are well positioned to come out of the current environment stronger than ever. |
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