Rambus (RMBS) 3 Aug 212021 Q2 Earnings call transcript

Welcome to the Rambus Second Quarter and Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Desmond Lynch, Vice President of Finance and Investor Relations.

conference. your begin may You

with Thank you, XXXX VP Rambus quarter week the will to Finance this for our the Luc CEO; The Rahul And conference call. welcome Mathur, call on Form SEC results press and Lynch, Investor we X-K. the the today XXX-XXX-XXXX. I is and Seraphin, second Relations; operator. me am call have available today at of A results for CFO. discussing next been of will on the be our that replay release be file with Desmond

hear by XXXXXXX number when can the number, and the hear toll prompt. You free the replay you ID then entering dialing

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and we both results effort These In in XXX forward-looking our revenue of documents other no will financial activity, the non-GAAP and discussed in clarity to in forward-looking newly we timing are risks using during statements more GAAP to these materially file press statements. adverse our and release update business COVID-XX presentations the the of in strategies, and are benefits the on A or regarding provide for products slide call. are both financial an discussions non-GAAP merger, differ and of XX-Ks. press X-Ks, under financials, greater launches, from and actual obligation statements release, we most and included website efforts, XXXX, reconciliation our measures to comparable serve, and this the the has financials GAAP presentation reported subject the this these our expected opportunities, markets SEC, with success impacts acquisition including and uncertainties today rambus.com we be and and in on our third of at company’s in to various results growth on directly using expectations from our guidance which related page Releases. investment our Relations cumulative XXXX XX-Qs statements, described amongst did may Investor ASC and related our retrospective expected modified retained sheet through the of progress. ASC comparison that opportunities the may are track Any call period, of deliver way an for drivers, the rather but technologies, including balance our fully in including ASC Financial company’s existing XXX outlook the and to the growth, XXX These ASC acquired not method, to under restate potential not results quarter effect product at XXX demand and the under prior the company’s divestiture beginning adjustment. and risks things. earnings effects to ability under the We the between accurate arising prior on is the of adopted the Our adoption of integration our ran ongoing profitable been contain

turn I will results, Rahul end now with be our will discuss to order overview quarter. with the for we the periods to guidance of business. We our of Luc such then to The give the over an Q&A. call including provide and operational start call will an follows. continue future license overview will financial Luc? insight performance. our operational metric as as into will provide billings of will investors to our Luc our better today

to capture with architectures. Des, the quarter company. focused excellent performance complimented wave strategic We center semiconductor next for a financial exciting was an the our advancements of and data afternoon, good Thanks, on number everyone. growth QX next-generation of

operations, cash delivered in we for in $XX.X beating and and line. million quarter, revenue million quarterly This $XX.X the expectations bottom top from the

In acquisitions PLDA share initiated million these in and size growth IP Initiative repurchase AnalogX the next data addition, program. the of Each of launched puts CXL a position to and of in $XXX our our announced and grows Memory semiconductor great the the and Interconnect on of businesses scale a chip activities wave and the accelerated company company centers. capitalize

and PCIe based AnalogX initiative high CXL of solutions. And interface IP interconnect critical our pooling opportunity offerings. our for to security architectures. combination centers. have unique enabler data with we the augment new in CXL IP, see in ingredients and Initiative, blocks and well building Rambus all Rambus to bandwidth CXL industry these be before, is breakthrough expertise interconnect products. expansion the to have to CXL memory PLDA As market interface of a high-performance solutions use for as accelerate Through of adoption providing leader as disaggregated critical is lead discussed tremendous when next-generation CXL necessary and IP PAMX The and the and complimentary the acquisitions Interconnect an our strengthen this The and develop of technology experience our differentiated solutions offer combined by Interconnect cases. we subsystem interface Memory in and chip be composable and existing leveraging going CXL based to

Turning to performance, back quarter’s meet continue consistently or beat financial we this to targets.

Silicon expect portfolio continue IP coming remained And record and the solid growth our for AI. for industry and product a $XX as data quarters. of center will from and QX. Silicon continues another interface chips by chip interface robust. to wins to with memory Demand scale design in revenue in continues continues quarter a to number quarter-over-quarter bolstered Our IP to revenue. of revenue the solutions build memory drive be XX% we was up chips revenue of in Product million balanced

the DDRX DDRX. We have sustained momentum and in in market position strong

DDRX the deliver chips interface memory started We to have production received market. orders and have to

and we our by challenges experienced the the supply peers some are time semiconductor cycle the in side, On now industry. shortages of seeing

We customer aggressive products growing demand to managing year. working of ensure closely memory beginning support the with interface targets our are the partners our our to we revenue chip chain satisfy for actively the the supply and our at set ability and

AnalogX quarter’s with for IP off remained IP blueprint and security compress Verimatrix for high-performance particularly This growing trusted Silicon for applications, provide PLDA record revenue our business. also into our Silicon Northwest IP. in strong, IP saw bandwidth business center and timelines, a need digital from IP. accelerating AI demand and extremely bring performance and delivered need integration as product Silicon and excellent controller and acquisitions where the development performance The the The for reliable security successful well shelf Logic of and the have and we data

our quarter, we from the strides make businesses codification In addition the to programs. in continued of our environment great social strong this to or performance in

sustainable fabulous the that committed semiconductor chains. know joined provider, practices responsible supply biggest to global of and we that, selection the in partners. organization and we are With of an have business responsible as impacts responsibility in the is the corporate one to social can environment our through have we a We the dedicated alliance,

and of a oversight formalized actions for committee with that health safer partners global safety passion aligned remain structure our customers future. Our The and workforce, and governance and our creating top policies priority. and sustainable more ensure our our

forefront the in impact locations. are appropriately on to excellent roadmap the second the challenges had critical steps closing, took industry the We grow strategic each of intensive uniquely market remains some facing very and human is our global the monitoring actively of geographic our In accelerate are important to responding an company and Rambus data quarter. architectures. positioned of our and position. We address pandemic the next-generation

grow front in very to and customers be many product size the to We about With continue to new and us Rahul? faster year we leading excited increase as beyond. turn quarterly and continue market transition than in I’m that, the the and steps company. are I’ll over of scale. this to Rahul There right the a financial support challenges as we results. the to call company the our our discuss taking will And opportunities

quarter begin to million second financial summary from high cash a for end again, Slide the with $XX.X the of solid of on in and financial at X. Thanks, I’d a results operations. with expectations Luc. Once we generated delivered like quarter results

me us flow. to future enabled financial realized highlights consistently some growth cash We’ve Slide This capital through a growth. initiatives, free foundation in years. operations cash for you profitable strong let X. strategic has on many invest returned from talk over We’ve built and Now, and the improve investors past to

relates while our $XX.X quarter Product we was same of primarily always between the of business. bill Contracts was million slightly $XX.X the was me very and above buffer delay revenue the other to if chip non-GAAP $XX.X end would our of below a million. have recognize at the quarter billings for revenue expectations. $XX.X revenue expectations was license billings you difference midpoint customers. revenue Slide Buffer second license the through quarter. IP primarily $XX.X and growth consisting of walk demonstrated income was we business. not and royalty Revenue primarily and chip timing million shipment XX. and the revenue revenue on as as Royalty the consisting Let million was don’t The million, statement in silicon

Northwest As quarterly the acquired IP. digital security controller were records Logic business report for Luc from we delighted to we noted, and

June. the quarter-over-quarter. Overall, the $XX.X the certain XX% two silicon came for $XX.X Our discreet execution integration at in operating in the Operating due expectations well timing than quarter IP business including bodes were to expenses of Total million R&D of over announced expenses. lower the acquisitions expenses, we COGS for grew of million.

would XXX, in to the for as $X.X income interest quarters We which expense count of roughly with at have resulted but of incremental this through drive in XXX, expect with not ended to cash the million, strong and interest investment the related count for interest coming expect other ASC of expense growth. income this acquisitions QX our the component we offset excluding and related Under million to After in head yet financing expense including flat adjusting talent quarter. was quarter note, fee ASC AnalogX licensing the we I expense. and We head by recorded for note. of income increase received convertible million product interest the recognize return arrangements non-GAAP from convertible interest we grow interest $X.X and payment. on quarter We been PLDA. in our on fixed to interest of to from the to associated engineering $X.X other incurred long-term This for XXX previous investment integrate revenue, million financing the roadmap, the primarily non-cash related portfolio. $X.X

that profit net non-GAAP on expectations. non-GAAP delivered flat cost $XX.X for a was the continued disciplined above With pre-tax Assuming quarter nicely focus income rate XX% was income, execution, and of for million. we

let Now sheet me to turn XX. on details Slide balance the

Our cash was of both million we us the $XX.X and in consistently return from generate the shareholders. previous capital cash offset $XXX.X drivers quarter and initiated the operations share million from $XXX down totaled helped cash growth equivalents quarter. ability marketable quarter cash, million securities to repurchase has to invest by accelerated as End of in program to

these As from present operational cash the we us future arrangements strong entire we have agreement value the $XXX this our expect related agreements as bill efficiency, for execute obligations. I that as deliver value unbilled the net deliver It’s down At to licensing licensing performance we important on to each doesn’t of revenue quarter. contracts. and to company reflects continue number allows which to AR represent on worth royalty-based that top metric which to for the had of expect no has and contract future. note existing the operations QX, line recognize assets we the customers in end collect to this of continue million, several to trend

We CapEx Second in free delivered was million, depreciation was of million $X.X cash quarter. the while flow million. $X.X quarter $XX.X

Looking CapEx year expect third continued the forward, be for I full I $X of quarter roughly depreciation million expect to XXXX. the for of million. to $XX roughly

for guidance on quarter me Slide let our the XX. turn to Now third

And time. review. reminder, a reflects best differ about this to guidance current our could As actual I'm estimates materially results our from what forward-looking the at

the invoiced on ASC licensing billing, XXX, which to financial customers reflects our adjusted addition providing In amounts outlook we've licensing certain also during differences. is under the an been operational to information that for period metric

quarter, correlates we licensing had ASC billings to under XXX, revenue million as with and expect had in between we historically million. historically ASC revenue Under royalty we XXX. third As the $XX what closely reported reported $XX

royalty revenue between $XX billings We million million and $XX and million expect $XX and million. between $XX licensing

of others, customers. but many now business. As times the as our and see represents Luc the revenue supply commitments starting mentioned, delivery chain, some this to Like outlooks strain to in for our we're semiconductor lead buffer maintaining of record now chip the

and we QX in expenses, operating non-GAAP cost between includes COGS million total to expect $XX increase as $XX We investment which million, and be programs.

incremental Our incremental from July, don't we revenues closed expense acquisition the guidance but due which in we expect includes AnalogX, accounting. any

which Our forward-looking is million expect Under quarter. ASC operating the PLDA, contemplate third we $XX not an do results profit. million to $XX projections later between expected XXX, close quarter for non-GAAP this and

to and incoming non-GAAP which to interest expect of million other expense, XXXX. For due exclude notes related XXX, of $X.X the in interest income expense, $X we includes interest approximately expense related which ASC million

is to the rate We The expect higher XX%. the tax XX%, foreign rates rates our pro higher than XX% tax in remain forma consistent due primarily roughly statutory of jurisdictions.

licensing cash Korea. by agreements million $XX roughly a taxes primarily each our we As year driven in with pay partners reminder, of

taxes between of an non-GAAP expense million million in be We $X expect QX. $X to and

QX outstanding. per We roughly range $X.XX million XXX shares a anticipate $X.XX Overall, to diluted count and the between basic share quarter. share non-GAAP we be and expect profit for

me with Let Slide XX. the finish on summary

several long-term growth. our to portfolio years, address substantial opportunities made and past We've support and operationally the data the financially. progress center we've to realigned strategically, in Over

Our growth our of are strategy. anticipate positioned well and capital the demonstration long-term successful product in allocation an each was market QX segment. businesses we excellent in

invest PLDA CXL to shareholders to return our in AnalogX We share like organically through continue like inorganic DDRX investments value initiative, products and our repurchases. make and and

to Q&A, to first their question? I teamwork thank turn Q&A. I'll like yourself uncertain begin and once and safe back and times. resilience we Everyone, up the continued Could again, to for execution Before With I take our employees these open our please stay our families. during care to call please of would your Operator the have that, call

Wells first Fargo Instructions] comes Mobley question Gary with [Operator Your from Securities.

line open. is Your

to CXL for start guys. asking want by approach the taking out Good afternoon Thanks your question. I in about there.

expect we IP different help First licensable and question CXL or innovation And the whether eventually productize product of of of think How we you. about the for when as contribution acquisitions, the CXL, Maybe those? is, relates should it the headwind accounting so near initiative. don't specific basis two then to to purchase those form how well, much IP, the not revenue phases the you CXL should when and would of related a about portion then then the think term, each which but the in you of Thank revenue? from chip-related have to to expenses two.

Luc. is questions. Gary, this Great

kill stone. us, for we the three kind So of birds with one CXL, with CXL,

our First, for wants to chips who expansion it improves market. anyone offering that for build for memory IP and desegregation

People with into from IP So their the IP buy and almost immediately products IP, will to products. that going market post-acquisition. CXL start integrate that those is address revenue

first the So that's if bird, wish. you

products terms complex, own having able building products thing the second these especially to the would that's is are successful our few be take about in-house in hit products. we The in in is, now critical from develop. going there. CXL And that run development we are because years those latency. for from of And a years three products, critical that to the those of to IP and IP market semiconductor And use

related of to So is aspect Rambus. IP. is wave revenue teams going bring war be engineering themselves these coming talents, to very third based these of company of from the that there's us not the allows the acquisitions to CXL their in into And talented second on which revenue products growth two of times a of

and we our these for expect short So longer million in year. increasing us to revenue two of combined revenue run royalty in $XX talents the IP product about bring And the on our in increasing objectives run. revenue acquisitions the it bringing shows three board, first

Thank and and additional hear Okay. what quarter I what chip chip And the your to degree do I'm well, color, jam in fix bumper was what as follow-up you to does what appreciate others late Luc. to question, chain of the degree my sort any took revenue, all that it's that constraints? shifts buffer the alarm business you. the supply business, QX sure I'm steps contemplate interested there to it, on

say to manage building you as few all, well know redundancy would of to chain revenue, last first quite that the supply million million $XXX supply the years, by over So, I last been grew our able the $XX chain. we've from about in XXXX in We year.

our some but competitors. across the pockets be And increasing now pockets as see do So supply don't supply to working of affects I the ways, we and very suppliers immediately, one seen it see continues our we this make and demand we we chain and see, sure these us. suppliers high. we actively and very of supply from not with we actively of challenges have markets which at different across of of times adequately to we And each than constraints different lead we that their later we we disrupt working very make potential But address sure point people in does serve demand, that to products constraints the products, ahead great some some the support what are or our chain disrupt said, time that in different it the see shortages.

you. Thank

question comes John Credit Your with from next Suisse. Pitzer

Your line is open.

as quarter as that Gary's such you could been your question supply sequential supply much Yes. you see in I well? product product on into growth incremental on do some look I guess, And how We’ve pretty clear the quarter? September importantly, just on show have on that the it's revenues you'll a in December, follow-up the side, better December guess coming side

I'll start, yes, great question.

can situation. term and have we we to the visibility for we third quarter, manage This think short the of what great able do. are is I

respect quarter comfortable fourth have quarter. the feel a with to a third visibility. we with lack of We just So

with I and and say that momentum would between QX think is, it's suppliers between to continues. DDRX the with pockets be. is improve the we win continue But our predict I challenges DDRX, design to what but of transition what the our situation going suppliers to difficult

just Our to QX work quite with there. backlog this for to from suppliers our in predict point fast, demand we what exactly DDRX support continues products grow is our to the the going continues It's at number. in, is and to be feel very QX for but time, confident difficult

the Luc, call, DDRX, And they and what kind could ASP on get later next at do ramping curious kind a their And then, XXXX? the think market And sense of as to DDRX or perhaps to an be little calendar I’d of share. bit than shift should a thought about DDRX earnings that you exit DDRX end I on talk I of on Micron your year. trajectory ramp. guess, the importantly, either how thoughts on our revenue much the add be market the you have of year

potential about we in of are of the systems ahead So building but yes, the heard the DDRX, launch. ecosystem happening people is delay that what’s

solid own they their to that So we able customers, because ship that the delay the systems potential is all be run to very despite customers from products building do to see orders memory products. the the ecosystem

that’s book little on a has on had it backlog. our So thing. very good impact order And our

early. see we DDRX calls, is when said of as we We footprint And we quite price our these a backlog. our increase in part the earlier move strong, started to downside. because We on expect see as to

market, ramps in should our it continue to share grow. we the see actually when So

our over increase comes when consistently come see share few grown – going we’re in DDRX to but to we’ve past share DDRX years, to in a So step production. our the

three ramp have in strong systems bills point receive customers this them. are DDRX. at from anticipation So a the backlog. Their the of of We of time, building we in

good. see So when is from going actual all looks that happen. launches standpoint, We’ll to the

Great. Thank you.

with Your Ho Deutsche next question comes from Sidney Bank.

Your open. is line

Thanks taking Great. my question. for

yet, doubling chip about regular chipsets. and potentially what do So to talk side. timing about a lot years? what second memory about over by a are XXXX. don’t waves – know kind of from you sizes few but to going TAM you I that happen expansion, Can various DDRX waves And expect couple of you of the of want maybe talk expectations buffer QX questions TAM you the on the that’s memory talk know guidance question, the talk three next I these

Sure.

of So have way the it’s versus hyper DDRX, question favor in can what our visibility as I see said, about and – favorable despite DDRX say the on over a between we mix in DDRX as DDRX of the is the QX, We delay question DDRX. about mix, DDRX. first I DDRX little talks first but on potentially

add don’t we of any the is, in the is buffer you time we timing. to the with mix it’s the that’s other few XXXX, that the think suppliers our XXXX. these said, watching today, XXXX, growth, But going DDRX, the the of months for with we’re it had to despite And CXL as we due that respect customers. based the two. product looks CXL, watched if product we’ll I said, QX, by building that to products as delay market. ship our disrupt to start see the interface on mix combination the well. for mix I So ecosystem, sure I fact favorable looks ramp to so to And type and doubling With of as shipments as but is This the work potential make

today more by a this So that’s lower need market is where cloud reason so going explained that to latency. from million, terms And $XXX as double in size, for have there’s is earlier the in XXXX, of to to $XXX capacity access is million in memory calls, XXXX. the around service number we that that market with providers from the

and memory be be memory for our cooling line either that. disaggregation in in memory wave to product going that target cases, expansion of product is for second which creates is first use the to going which that So the the need or

So we a do have roadmap products. of

the CXL would with memory processor. address per starting which memory for the going to expander, first So initiative need be these CXL the we product, more are which is

think on Curious, be your a and follow-up year, about billings. licensing mistaken, why industry. If the utilization in typically, will guidance up this a you in just understand the a don’t the AnalogX, But accounting from is QX I have in because any is in licensing strongest, probably guys is I great. purchase billings? have not revenue to X%. curious, guidance. your don’t quarter and Okay, lower you of billings given anything licensing I’m typical decline strong usually third it is recognize the the for question PLDA you to see and Maybe and billings for

Hi, tell good you renewing that any of in process question. is I’ll the partners. we’re What perpetually given quarter,

so kind based that how a to see quarter-to-quarter And happening what structure as that’s our us is fluctuate deal in of at perspective. we up done of they terms you from are ends with just financials. the the how of in end And on contracts, billings the terms partners negotiation those of working licensing often just can want structure

IP seen we’ve from billings of year perspective, our licensing piece other that Silicon than this is up show it anticipated. licensing The a more revenue billings we’d of in

think I coming into thought $XX it’d year, I to be closer million. the

closer $XX think it’s I probably to million. going be now to

still the as some contracts we are number, we our We have thought. The our is on that of Silicon $XXX continue several business as support to that stay continues patent somewhere million just $XXX so very business a strong, as well. to million just between our licensing predictable. wrong could base as that We’ve half very business, year great structured to had print first that the And for will years. see always I that think IP fluctuation renewals belief, next how you the be some of depending in

that And also licensing it very of mentioned think we nicely. up business XX% revenue as earlier, and a IP combination in sometimes well quarter-over-quarter, royalty grew contract other and growing is billings. as Silicon as Our I shows in or

I So into look change. that’s way at too the it, much think wouldn’t quarter-over-quarter read the I I

helpful. Very Okay. Thanks.

comes from Mehdi Hosseini next [Operator with Instructions] SIG. Your question

Your line is open.

Yes.

growth that or seems driver would In DDRX could for and Want a to then there opportunities other picture. growth for in DDRX? a So about be anything there thanks different bigger me as materialize. to thinking once stand my opportunities like other Am I need It you there’s to that – its taking have words, several is IP with on architecture, own. viewed go will But destroyed question. be to to could CXL a growth driver. the change CXL implementation independent Silicon of can back

a has in CXL a on side. the Mehdi. CXL high a level, question, the Great interface side memory At expander processor a memory interface and DDR

it to come buffet chip a as will So compliment business.

the the CSPs memory, Our buffet is the memory attach we’ll this standard and and need you populated business, sit memory processor on interface CXL the bus. then once fully more chip will on more to

they of a critical more us buffet chips, help bus. next develop to going on board, will the to we address can develop bring for set also CXL that’s to DDR attach bus standard processes would of those those important the side generations because that a standard IP both complete expanders to And memory itself have on have us the the So you’re CXL other of product, strategically on product. that that to IP and the was standard interface. do allows And do but memories why it

growth what company guess, is CPU coming say, with trying late understand upgrade. to enable chips based market GPU I’m architecture, or if I Sapphire to your are memory Rapid. trying either CXL some there to confusion new I’m of that opportunities understand CPU let’s the introduction I think Can is a how to ARM-based tied or their adoption is, DDRX vendor of like, Rapid – around just Sapphire other the CPU are and or CPU both?

Right.

chip show with also and Rapids. going to CXL well quarters feature come. X Rapids DDRX that driving bodes the talking Sapphire we’re our for with So interfaces. is PCI is some end, what that X.X interfaces? Gen I standard So this growth will and start offering, the the Sapphire about to DDRX It memory to buffer

So are you available AMD. to going and be those if Intel interfaces in from ecosystem, wish both

your interfaces. with So to these I’ll the demanding with use portion or ecosystem. question is data interface be part processors a pool potentially PCI do use GPU’s they and that, which the market of cases. them, based is what those Gen to is, can do trying same of all know would interfaces, they that very are for they’re going to then And types address they’re follow cores. on their the do And stream CPU’s people X what markets trying good specialized the X.X could could align developing because the of products if CXL to developing they And to main people first with to they the

could and accelerate PLDA, they are next-generation So do another like next-generation of reason Gen this X. PCI the that move acquisitions to they these did X of is the in roadmap are they And is advanced CXL, advanced AnalogX of the because PCI CXL And in why – we X. also development and what X, or they of Gen could X.X X.X. CXL this development faster

to mainstream the So by acquiring needs the business. cases of be address able develop companies, addition we who these processors will use intensive data in people for specialized to

Would Like be than broader more now, comment, year because I you a what be your statement? said. from what a now, a guess, just revenue a that of would out given we’re just there you dealing be will Right. laid what a from relatively today. just And diversification year different final perhaps fair volume

flow of return. to invest and have how organically, as and continue exactly mentioned was stable, inorganically that’s business I to allows very And us a predictable about capital earlier, earlier, it. as licensing at I talking cash fantastic Maybe I look we because

IP silicon see growth wonderful You for opportunities businesses. our

as Northwest chip, the So we in Luc growth our that the just the CXL. mentioned business. we controller for product as IP bought the business, from the see then you buffer be had well not but Logic, it’s security in we also as opportunity, And records mentioned for future, going to as in QX, in in

So from three now certainly sides. on in you’ll product see the years more

IP particular. next think also see growth you’ll I year probably in in

set in across portfolio up to So the I coming pretty to think grow nicely we’re our in years. continue

you. Got it. Thank

turn questions. no conference I over question-and-answer there time, this session. Seraphin. At are to to now concludes would like the further Luc the This back

We time. we your soon. joined speaking hope a for again you each with of Have us you. has great continued you, and forward and Thank to stay Thank everyone today safe interest healthy. look who day. you And

now today’s you. This concludes Thank conference.