Rambus Inc (RMBS)

Interest coverage

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	187,642	193,051	245,910	219,519	188,618	142,321	38,643	63,010	-5,952	-12,332	-8,787	-30,605	33,992	15,595	-772	-23,652	-26,134	-22,640	-29,827	-53,501
Interest expense (ttm)	US$ in thousands	1,416	1,441	1,470	1,475	1,490	1,597	1,678	1,650	1,874	4,127	6,362	8,697	10,706	10,588	10,502	10,399	10,340	10,271	10,182	10,136
Interest coverage		132.52	133.97	167.29	148.83	126.59	89.12	23.03	38.19	-3.18	-2.99	-1.38	-3.52	3.18	1.47	-0.07	-2.27	-2.53	-2.20	-2.93	-5.28

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $187,642K ÷ $1,416K
= 132.52

The interest coverage ratio indicates a company's ability to meet its interest payments on outstanding debt with its operating income. A ratio below 1 suggests that the company is not generating enough operating income to cover its interest expenses, which could raise concerns about its financial health and ability to service its debt.

Rambus Inc's interest coverage ratio was negative for several quarters up to June 30, 2021, indicating a consistent inability to cover its interest expenses with operating income during that period. This negative trend could signal financial distress and potential challenges in meeting debt obligations.

From September 30, 2021, onwards, the interest coverage ratio improved significantly, reaching positive territory. The positive trend continued into 2024, with the ratio showing substantial improvement, surpassing 100 in some quarters. This indicates that Rambus Inc has enhanced its ability to cover interest payments with operating income, suggesting a healthier financial position and a reduced risk of insolvency due to interest obligations.

Overall, the significant improvement in Rambus Inc's interest coverage ratio since 2021 is a positive sign and indicates a stronger financial position compared to the earlier quarters of negative ratios. However, it is essential for the company to sustain this positive trend to ensure continued financial stability and debt servicing capability.