Rambus (RMBS) 3 May 222022 Q1 Earnings call transcript

Welcome to the Rambus First Quarter and Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Des Lynch, Vice President of Finance and Investor Relations.

You may begin your conference.

Thank you, operator and welcome to the Rambus first quarter 2022 results conference call. VP and Lynch, Relations. Desmond am of Investor Finance I is with our Interim And call today CFO. Luc our on the Jones, me Seraphin, Keith CEO and The Form X-K. will that been press with the today filed on discussing has we SEC the release for be results this XXX-XXX-XXXX. replay week of for next will call A available be the at

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

slides audio, that simultaneously are this and we webcasting portions are the today’s webcasting will In addition, we of we along call, during reference with call.

Pacific joining So you the via if of may at accessed even Time. you A website p.m. want presentation. access are this with us webcast our conference be can today on the call, call replay to beginning slide X:XX

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

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

with good a continue start We strong and The Dave year, and generated at to million the from exceeding had afternoon grow of the you, operations $XX.X solid profitably. guidance company revenue earnings cash to the at and QX expectations. at business Thank high-end everyone. $XX million

We contributing growth. and center expect Rambus supply and the our investing company’s continues in to in into licensing and silicon even are results growth diverse QX patent strategically a programs with IP demand new as we chips, and to strong trajectory are balanced across at be the industry scale our continue that portfolio accelerate data all constrained. to driving the exciting has

trajectory we our are portion strategy, we retiring long-term company continue a by sheet execute to strengthen and of our the debt. the our balance in confident of As on to chose significant

The interface a we $XX industry-wide memory of even to Turning another record We supply at the impact chips, to team perform partners to our demand continues in environment. chain customers well grow. challenging to and help revenue continues very expect to minimize continue million outstrip our continue to delivered to closely supply quarter chain to and product supply. proactively work as very with

the interface provides are DDRX expansion. chips a in leader us transition and great DDRX We SAM opportunity to and memory for growth

in production footprint, a stages with Our growing early volume the but of its lifecycle. qualification in product still RCDs DDRX DDRX is

later projected nature. earnest lumpy expect center overall in drives DDRX memory to interface next-generation in our As crossover chip in that, demand march as mix growth. we of XXXX, demand With continue ahead DDRX, server strong for the year, DDRX the while shipments toward data line product may late we our top this customers to ramp shift somewhat be build volume

a Let’s solid now where we turn to silicon had IP, performance.

including our IP. in areas, Security Express leading PCI focus are We HBM, and chosen CSL,

certified the government. augmented automotive to our of continue be over IP solutions silicon portfolio and our AI. data center the And Our footprint with course quarter, biggest in expand to we markets and

exceeded for sustainable supplier next stewardship was we sustainability, to commitments and is This and outlining Moving comprehensive operations another and and year Earnings to company and qualify continue to our the to start on the high-end for advance revenue. environmental for of our We around commitments. closing, on our strategy very targets programs ESG, our In we quarter we step in report strategy Rambus, QX. a great product this our our published trajectory a report responsible first at and development. expect and great growth to to as our continue execute responsibility. guidance strong the deliver were long-term

data supply results tight, demand with While is chips revenue interface remains memory silicon driving strong in center and momentum from IP. sustained record

at to call to results. from Keith solid quarterly beyond. will I XXXX the positions With a have revenue us and and center foundation of Keith? growth well We the This forefront streams unique in financial remain architectures. continued that, discuss multiple data next-generation for and licensing over turn the combination

delivered for I’d Luc. results financial solid X. pleased the initiatives. first a We results with quarter to like earnings Thanks, our begin end summary we Slide of again, our we guidance on Once delivered are very at financial with and high quarter ongoing the above revenue a growth the execution of expectations. and for of our

the amounts we in cash to elected notes. the are which to of company, in goal down drive elected as increases such investments light strategic With our will a the believe future on Doing refinance notes value. our and this further execution, of we in convertible to we notes. early shareholder so, focused we on-hand not did pay utilize As value elect we to retire mind,

continued profitably do decision speaks cash belief in to and strong the generate flows ability company. our our strong grow to so to Our

the The Let $XX licensing chip billings primarily million. to revenue million, we you bill the quarter revenue revenue customers. billings primarily we Royalty was memory interface Slide and our income $XX.X in me $XX of was as difference timing was licensing walk non-GAAP through always royalty revenue our same recognize expectations. relates million, for $XX.X on Product business. X. consisting exceeding first as statement while our don’t Revenue our quarter million, was between

are have $XX revenue Total to As in other mentioned, record a supply memory million. our with non-GAAP of employees the income in recognized and of our the related We despite our Operating arrangements the quarter chain and with headcount for interest primarily which with our After consisting total increase were the not as expenses other XX adjusting of variable of in above licensing was quarter interest convertible operating seen Under the associated slightly incurred we prior interest recorded costs, and Luc component of see from strong for by quarter, company notes. stock business. came million, million customers. the expenses. interface an primarily fee $XX.X employees, was a XXX, of sold income non-cash of industry associated including $XXX,XXX. offset This silicon expense, we portfolio. taxes Contract and payable on expense expense XXX we other $X.X at million but goods investment this from chip vestings of for the yet cash cost payment. IP such million We notes, revenue, and incremental resulted was incremental for delighted quarter. revenue associated of demand ended with financing for challenges fixed employee convertible $XX.X ASC to of payroll result interest $X.X expectations received interest the

expectations. been rate of financing delivered With execution net $XXX,XXX other ASC was flat again focus, disciplined for of income this an non-GAAP the income tax we would and pre-tax $XX.X have interest that XX% the non-GAAP interest above were expense. XXX, around related quarter Using Excluding to earnings assumed income, for million. and

repurchase turn from totaling and let sheet securities me a quarter, We cash, the the operations by offset marketable ended decrease million, equivalents to partially million balance a quarter. as X. payments the This a $XXX.X prior Now, flows portion with was Slide convertible cash on made primarily details cash quarter decrease the of of generating during notes. our result to $XX.X large from in

repurchases we of end repurchase are $XX.X $XX.X the of amount transactions February QX, licensing $XXX.X of and the unbilled net to convertible performance million million receivable value significant of we in entered XXXX. in I At end the of to repurchase million amount completed In notes privately the notes $XXX.X QX, the obligations. such of notes, the for our of QX, remaining. accounts million net future cash related original due cash QX, purchase negotiated million, the During principal completion of has At settled to debt company the the At of retired a to no underlying convertible of as reflects we were portion $XXX.X paid we the arrangements the paid which which agreements. had amount million earlier, as had principal $XX.X hedge of present scheduled notes. mentioned the the of we mature of a XX.X% the we which assets contract repurchase to to in process,

does metric to us value not represent to these we is to and a down manner trend as this restructure agreements brines each to revenue continue that number each It as our bill for licensing patent contracts. existing expect allows at recognize this that entire quarter. important our the renewal we We of note in collect opportunity,

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

forward, to quarter $X we second be CapEx for the roughly Looking expect million.

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

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

billings As under we what reported we include revenue have as correlates ASC royalty reported had with historically XXX. closely historically,

Under and the guidance $XXX quarter ASC second the Now turn on quarter let X. XXX, for $XXX we in Slide second million. million expect me between our revenue to

certain revenue the between agreements, million and million there XXX licensing Due $XX licensing to reflected our in is patent timing one-time of $XX between million. royalty to and expect benefit revenue $XX and guidance. $XX on recognition million ASC revenue We a billings

$XX We seen cost $XX which operating to of operating XXX, the $XX non-GAAP non-GAAP million sold quarter and between expect and $XX total ASC million. Under be million. costs, a is results profit to for expected QX goods includes million be second of

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

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

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

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

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

summary Let me finish a Slide with X. on

with in our we long-term am growth. our very strategies. investment the show the for continued pleased setting that and results long-term trajectory results I financial Our growth are for quarter

both strategic execute to financially. operationally and continue on our objectives, We

in us to Our center growing capture positioned well product portfolio opportunities data and leads markets. cloud the

and improving We investing value our delivering consistently our are growth opportunities to profitability, in shareholders.

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

Thank Instructions] comes Sidney Deutsche with you. Your of first question [Operator the line from Ho Bank.

line Your is open.

my taking and quarter thanks guide. question and Hi, good on congrats for

that What First obviously, just QX and the from included strength in a numbers, the of the the question and margin licensing year? more is Is impact look gross XX%. more upside? at I clarification. big on more it is billing have I And other. this contract the other If drove came contract is

question. great Sidney, Hi,

So strength continued from our business. IP we’ve quarter, been silicon saw this

had acquisitions including of trajectory a million about that that So run had business, the in we talked QX $XXX exited year we rate. before, the with

what closer $XXX to businesses million those scaling, to and seeing Now performing that per run million a that year. is rate lot $XXX we’re

we in rate we’re product million that as that our We also, with increase IP $X well. noted, silicon But a from see as business. of the very good So growth business. growth you pleased had

for also And remains are our biggest very the those that for So to then two stable. business growth say It’s drivers been petered. consistent we’re relatively patent happy us.

strong the that be first mentioned helpful. just you us an could I product and second Maybe that very product Obviously, you to revenue follow-up That’s your Can But guidance a Luke, quarter quarter revenue. good. is know close Great. the update give on revenue lumpy. I the If the XXXX. product to the of somewhere for year? in growth line it? Is remainder to think I kind guess year, for XX% way for just right the that full of second flat about forecast quarter

Sidney. Thanks,

if the a for we growth going midpoint same about is as if And quarter, X% to take compare to than the this you we just higher quarter are year, reminder, the QX last So over year. of be last about current XX% QX. guidance

buffer business the chip. we grow are to continuing our So in

supply I environment think during we’ve done in that transition. DDRX challenging also a and product DDRX very to the

for year. the be be think second I – to need So we half prudent of the we to need prudent

taking first If compared above last half still of of growth. QX, the we you half for look midpoint year XX% are first the to this year,

the in to ecosystem rest as So DDRX DDRX But we I from transition, to the happening of the of ecosystem having be the what’s that is that very think to supply because starting but the a it’s fourth ecosystem partners had buy the why year. last quarter also chips year to transition the of early. going strong well lumpy the for and DDRX constraints. because absorb That’s

has the DDRX changed. loveliness So situation not transition situation And be That the be the beyond We has to quarter. will there the our in half for of not second have I improved. would prudent supply from visibility DDRX. on second don’t supply year. The

give we guidance quarter. you can second the So for

think prudent of there be being said, for first faster year launch growing This than look should much and the the if you second year, the market. I DDRX. In last first quarters, across we to is the for just half half. of half compared this momentum of we’re

quarters lumpy ahead few a have to going just We’re of us.

I maybe can more one squeeze in… And Great.

in But Luc’s seeing, It of point, the growth are terms terms more particularly terms been the we not seeing of of rates kind that’s compelling perspective. supply really half what what of year, are that what basis, I in an as would of we’re you year-over-year a Luc the No, market. in from growing a and to add story of and with your of indication really back noted outlook we’re on thrilled has of the absolutely they we’re seeing demand. articulated a

demand supply our So scenario. and case are to relatively within again, the our from have a manage is supply business consistent than constraints. you’re that we greater share amounts talking that. much But see The what we once about

a Curious concerns seems Maybe business is side, That’s spending. think or be and do guys forecast this it’s of not the the the risk that there chain. to you On kept importantly, of that, There of the me. talking in inflation side, spending And Thanks. to on more macro at one supply but most kind this your whether of operations? and which how on elevated demand been part geopolitical, inventory Great. had supply and of environment? more kind you about has environment eventually your hurt enterprise will more lot for helpful. consumer environment, top an

That’s a quick question.

to Our business the directed mostly data center. is

that would faster a the We do terms as much and affected say, not is more activities to of great data demand see consumer continued new for I data business as access center by in center. So in inflation having markets. architectures data

the prudent we’re demand, the as center very see Keith do in with high data continue although space. environment, So to said, economic we

by consumer not that the affected space, We’re happening we the just have. given really in what’s portfolio

thing other have offering. working The that that favor of balanced we in portfolio Rambus of the is a is

So offering stable generate business, above of and the beyond cash. as goes data patent have our licensing we remains product the strong which center, year-over-year that into

a market will that few that be builds the IP We products solid in silicon in years also have business a from very now.

portfolio makes us a the pretty balanced So, economic against environment. this strong

Thank you.

Fargo. line Your next Gary question of comes Mobley with from Wells the

line Your open. is

to this guess recently for I with platform DDRX. a few Rapids in year, half guys. select second I a Intel later to question ramp to customers AMD’s more the is about the set ramping taking to meaningful questions is, with year. said currently that year. Sapphire ramp Genoa of their my ask Hey congrats the and strong start Thanks a wanted know I

shipments just two for that in is you from Is And into your there DDRX-related the if shipping the the see platforms when ramp do today? a not therefore, maybe And so channel priming up launches? DDRX Intel AMD and step and we of revenue? in should we these eventual are think so about different much these channel – that

thanks. Gary

You are right.

is the transitioning first market from I think DDRX. to DDRX

So, for in that’s the us. thing run, long a good

continues stronger is be footprint in the in than to DDRX Our DDRX. much it

first generation few ago. a – We quarters we introduced DDRX are our of

We second generation are of DDRX. our introducing

in believe we that So, market. momentum the in

Intel, With AMD we demand increase. and of announcements will the see

a basis, grow, we might to continue year So, lumpiness we some we quarter-over-quarter. X our growth year lumpiness see going seeing we over share and is That’s some is to now. from basis, will integrate what If see all there quarter-to-quarter. the are

Okay.

You power Gen your that DDRX of X timing companionships, the launch that. the is the a related to that quarter? product function the Was down margin management. when was a sensor I would and high solution, mentioned bit. that the And specifically, that expect of gross noticed generation also you includes a mix then line And in more DDRX on the the in

Thank you.

So, a couple questions. of

We RCD buffer the this companionships The value independent chip itself, the first of is. the itself, the chip where The companionships. is emphasis put regarding generations the on are from because most one always the of DDRX.

Generation second for the those ramping should Generation I companionships said that to customers and to buffer next both to The sampling So, announcements our and in we companionships, for start are to year should full second with chip the mentioned make of Generation Generation on a half the half, last be for are X generation in we products programs. track some quarter, X And We the and used year. when as introducing production and are our X, we going to our X. I mean we customers. our

they changed margins buffer both to we So, of purchase gross quarter good quarter, X last to QX exceptional will year respect of we this respect initial product the nothing X an as support chips. the there, had said of With in with last because but Generation was Generation that’s margin, and DDRX.

for we the and DDRX products had was very So, that DDRX mix of between DDRX. favorable

changed we the And within DDRX it’s has our the communicated. and QX, into year. to for we but still gross margins previously mix total between maintain DDRX, range Going continue what outlook of the

quarter-to-quarter, from lumpiness said some I as see earlier. will We

Excellent.

of next Cassidy Kevin [Operator Instructions] Rosenblatt. the question Your with comes line from

line open. Your is

congratulations great the Thank results. you on and

to does Just to or – RCB. X understand for or this or you Gen run Gen X Gen in going parallel, are DDR to X? they replace the those your Gen X Are products

see Hi higher of DDRX the Kevin. generation that Every of generation in generation speeds What generation products. processor is in we exactly we Great offer products memory bus. will new DDRX saw the of what on question. the in

memory bus, to So, speed every have is have you chip. higher a a time higher a offered do buffer speed as

what by we that’s mean second So, generation.

have cannibalize technologies, is in This sequence buffer It’s going that generations of of chips we they DDRX of just will generation and not happened are So, generations DDRX. DDR a of to within memory. previous what DDRX themselves. the DDRX

expanding a your and into Okay. Great. in you further? that automotive the explain Can And then also remarks, prepared government little you mentioned businesses.

Yes, absolutely.

pre-certify programs. are market is with demand technology very these they is market this automotive markets. security good for the embedded And our And making doing progress the is part for just group of as We and increasing. our that the specific IP offering in our government security what

as much was center of the ago, year business applications. of as majority the So, vast with our type data a

starting into We government to see the the automotive and are XG, with IP. security starting mostly – IoT, inroads

Okay.

like their to use suppliers your more are I embedded a automotive they if of telling that’s So, want that, that the pulse companies understand security.

type the and applications a electronics to Yes. more in cars in is be of you be there as themselves. There in going going the longer mini run, And if to data know. more is center more cars more we of look and

their automotive. In the within just requiring that of just want harder are people data security for that that harder in all interest run, obvious is to And system is driving all what’s you government, in of and systems. this transmitted your So, security being electronic the it’s longer make car sure technologies in – the is secured. being

silicon market So, for security. our are these the in business favorable to two trends IP

you. Okay. Great. Thank

Kevin. you, Thank

next your with And Mehdi comes question the from SIG. line Hosseini of

open. is line Your

last above an have to private XX% believe for ‘XX. that, ‘XX? into What gross calendar should slightly in year XX% question. my of and This and is A assume at you taking for year, to the came margin look for just for wondering I if Thanks follow-up. I Keith. couple Yes. for is guided am update a I there you And I follow-ups.

Mehdi. Hi

are to DDRX XX%. bit of talked so range we we about see us margin see we Luc between within be then mix that that still And and – and but between had XX%. DDRX little overall, gross XX%, that XX% range anticipating staying a what to is

And Great. memory out. CXL IP. I better biggest understand biggest driver want And what’s Luc, incremental the the revenue, have then past, contribution actually the compared is business the silicon revenue we highlighted, for the in security silicon In driving in ‘XX to you your pushed to bandwidth have or is highlighted ‘XX. opportunities CXL what that in in IP what was

That’s a great question.

CXL. very on have IP or trust. of security high-speed and And side, and interfaces, we high-speed take HBM. of memory focused we And offering. wood approach first all, to PCIe focus on series We serial the So, interface, we focus GDDR high-speed focus an a on then on

is in very the of traction focused connectivity PCIe in growth a So, all IP with and having our are CXL of offering center emergence the strategy. new I is for requirements say silicon them. this business. data very, that the would driving And we

that interfaces. in growth So, CXL that year, that last devices either chips demand. from go acquisition or PCIe of or PLDA Analogx people us are lot and the to feature buying are into quite contributing And a controllers

interfaces. a to said on high-speed government interested traditional lot in is security, are we automotive there a GDDR, the see And in in really markets. our in see there we of there. growth We lot as are continue growth emerging – security growth of particular. that earlier, markets and see I But So, side,

the across PCIe the really it’s our driven that XXXX growth of vast would by majority is designs. in say CXL So, I board, and

is and I next to am that If year X.X. impression that a may CXL follow-up the CXL more of under I just

those will related in that out, then comes into of way PCIe scale X.X right X.X So, talk R&D production? projects when related? R&D thinking more these then you about when to ‘XX or are Is it? about CXL, opportunities the CXL And

this. think about The Yes. way one is to it

we Rambus, CXL product initiative. own As have our

of hit a to and who blocks, are We CXL feature silicon they build are we development or own IP and in being PCIe. CXL And chips, people XXXX. sales. next production speed But building also something year their full will that’s in market IP silicon our the chips selling that in

sell today. XXXX. and So, that It’s as we we license sales growth for the an that revenue the a sale, an we market in customer today creates hit IP IP and products do ‘XX revenue sell IP that today ‘XX, our

So, to the CXL. who people and we timeframe. sell We to IP will this chips, hit chips of is today phasing also the kind silicon CXL own PCIe-capable the approach that our can but in develop are developing same market

you. Thank Great.

Thank you, Mehdi.

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

and interest you Rambus. have has Thank speaking soon, look today a day. great time in for forward us We continued to you, again joined with everyone, your and who

Thank you. This now concludes today’s conference.