Rambus (RMBS) 2 Aug 222022 Q2 Earnings call transcript

Good afternoon. Thank you for attending the Rambus Second Quarter 2022 Earnings Call. My name is Matt, and I will be your moderator for today’s call. All lines will be muted during the presentation portion of the call and opportunity for questions-and-answers at the end. [Operator Instructions] I would now like to pass the conference over to our host Desmond Lynch, Chief Financial Officer of Rambus. ahead. go please Desmond,

today release of that we And for call. next the Chief I and be for with this has call discussing will Form on week at Operator. our results the XXXX the with Financial second results Rambus will me call filed the SEC conference am the at on X-K. Luc welcome press you, Seraphin, Rambus CEO. to quarter Officer is be today Thank The Desmond been A XXX-XXX-XXXX. replay available Lynch,

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

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

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

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

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

I company pleased performance as high table, him as The to to his on years you, introduce and the management His the CFO. roles results. with for of turn we senior a newly and million experience the our demand In guidance dive understanding XX have brings will at results, generated to and strong role Atmel results as him you center the and continues your QX, earnings industry Renesas, in Rambus choice of very before expanded supply QX, players but team of data the strong in over call role finance to we know moment many announced ideal in already the success to I on into like we cash delivered and to Des, am major quarter. I’d National on congratulations like of our end operations. a Thank including now company the leadership IDT, Semiconductor. the deep take expect Des be revenue demonstrated constrained. our and CFO. know to make an you, in $XX.X the drive at from even

dynamic addressing delivered million data silicon each is contributing which patents, of fueling driving the industry-wide very situation closely work remains center our to profitable in company’s even and of to partners customers. long-term supply proactively scale team the revenue our a at with minimize the Memory face challenging interface help another and continues of diverse the are chain impact to IP very chain our $XX.X We needs record growth. supply and chips the environment. chips, the portfolio and The performance, product in with of

for the a transitions as DDRX. interface memory expansion to leader industry chips, growth a has As in opportunity Rambus great some and DDRX

in few used also PC the with into a with production we offering footprint. These weeks new with ago, sensor. Hub and DDRX our growing companion chipset RCD in And the are memory expanded volume introduction our server DDRX SPD memory RCD just SPD temperature qualification of chips and the Our the along modules. integrated Hub modules a chips, is

before, companion and This of the have the rollout with its the XXXX. We DDRX production in but is year life still in this discussed stages customers chips computing platforms. company, are now sampling is for new of milestone on cycle exciting to a expect product dependent very late of as the is and ramp shipments initial early we the

ahead product the continue expect toward our server demand As ramp that, to volume be DDRX, next-generation our shipments, customers for we of build we in DDRX chip to as the With nature. lumpy shift memory crossover. somewhat interface march mix projected may DDRX

look on we solutions. and the the expansion pooling great across seeing of as of evolution feedback needs center, we and memory CXL the engagement longer-term addition, getting In entire for the ecosystem strong data are at the market

key providers service addressed DRAM major closely on with are including initiatives. players, vendors by We CXL cloud leading working our and platforms next-generation

further Hardent of data We also world-class product amplified CXL based with strengthened the of development solutions. the team our center addition and

Turning driven part and We into now for wins in achieved to inroads robust the data and automotive. continued of and our at center IP, memory deliver the execute Data markets. revenue and continues high another delivered five adjacent offerings edge, the controller leadership addition for our another areas focus multiple on track we key on sustained are chips in was earnings of guidance. with continuing demonstrate silicon our center a of finally, revenue end companion considerable diverse In and and quarter with strong seeing with demand IP growth strategy strong solutions our solid of licensing record momentum design to across quarter another and remains as in for to TAM portfolio and the wins. government from growth multiple of revenue year we have we and AI DDRX Rambus IP streams. this security balanced our performance markets. product delivered long-term a We performance highlighted momentum a strong from by driving company expanded closing, team record interface with And high silicon by chips. Silicon with of foundation programs. key IP the the and major

We growth data unique and in and at the and advanced keep center XXXX products expertise of of programs beyond. will that forefront us in continue to sustained fuel architectures invest our combination critical

for I closely me to a very both Des over and turn through transition successful for with we back working He the Des, has take period. call to positioned the interim well moment Before call a like I contributions this thank to discuss the very Des job good done remain the his I’d to financial the Keith company over bring a future. to results. and turn to quarterly during With that, Des?

like as for the and well of end to growth I’d strong of a we support. summary begin our execution delivered expectations. and on his results again, Thank very earnings in results financial ongoing and we our our the you, the with quarter Once pleased to slide five. at financial high delivered second with a Keith quarter initiatives. We revenue thank of Luc, are you

Inc. of During the quarter, Hardent, acquisition we successfully completed the

very as We acquisition excited are our which about extremely an of initiative. talented group it CXL will engineers bolster the adds

you primarily our revenue customers. record chain same royalty in high line from Loyalty and The million from Product by between do second in up $XXX.X billings bill our was a was was not industry. we the in always at license our timing, million me challenges for seen despite the as company other of with quarter slide several driven difference was interface revenue Let consisting recognize relates were additional upfront million, quarter we Memory business. expectation, of $XX.X through the our Revenue for income billings statement chip interface memory revenue the non-GAAP to walk on revenue six. licensing our QX revenue $XX.X Licensing revenue primarily as chip expectations. the end agreements. supply $XX million. and

consisting to IP. was from primarily silicon Contract see such demand $XX.X million customers. and other We are our revenue of strong delighted

As we an including and of income, for royalty a have employees as revenue includes in well headcount the million XX reported of IP period, operating strong sold goods revenue, of acquisition. which the which with reflected Operating came the increase of total reminder, ASC for a component arrangements, $XX.X revenue, Under contract we $XX.X at and Hardent million related not quarter quarter fee recognized $X.X other talent $X.X in the the of silicon We expectations. from billings. prior fixed million. but yet received engineering with our Total portion which of cost expense million is were remaining financing through in of the to as interest of recorded portion our the revenue, line in costs XXX payment. licensing licensing ended added is XXX, only employees, a

expense foreign we $X interest exchanges notes. from the interest Additionally, We in This other for incurred investment the on million cash the with of our non-GAAP and and with expense by expense primarily After second convertible in $XXX,XXX during quarter associated incremental notes, portfolio. million. benefited income of resulted convertible the currency associated favorable adjusting for offset $X.X non-cash approximately quarter. this interest was interest

been assumed focus, interest financing non-GAAP earnings other disciplined again related and interest of the execution this Using $XX.X net end ASC that of pretax timeframe and would the was flat XX% was With at income have for $X of expectations. income, quarter for to Excluding non-GAAP the income income. million million. delivered an XXX, we high

had We offset turn let to the with obligations. the end details seven. unbilled company no and related arrangements partially the the prior for At previously totaling paid increase which an million Hardent accounts equivalents assets quarter of licensing debt ended the worth present receivable contract cash me the cash operations cash, sheet of performance were cash as $XXX.X payments Now value has future to balance quarter net marketable repurchase flows $XXX.X final securities from made announced million, on of of for and settlement we million, to from the acquisition. by QX, reflects $XX.X slide which the

this to We to expect these and agreement. value important of number the an does contracts. for down entire trend we that not It as represent licensing metric continue this collect existing is bill to note

patent quarter. As we each opportunity, us to each our renewal revenue in a allows agreements restructure recognize manner that

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

be for CapEx approximately expect quarter we the third forward, Looking $X to million.

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

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

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

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

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

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

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

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

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

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

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

on slide with nine. me Let summary finish a

debt. minimal focus a and organically the our cloud allows grow to This and and inorganically. demonstrating products of profitably data set business diverse our has strength us both in allowed investments, generation leverage us to continue to This solutions financial continue markets. strong We strategic cash develop and having on flow center to leverages while our

In an interface addition IP the ongoing success momentum memory on rate of to $XXX positioned continued well remains run With we continue $XXX the our to chips strong focus, annual IP. long-term I delivering execution plans. strategic am with pleased million record to its quarter, success the Silicon of silicon in another and and discipline million. are of

operator the With Q&A. back like our to question? I for will Before I the Could thank our to the their call I begin open up Q&A, we first call to teamwork would and to turn have continued execution. that, employees

Certainly.

Gary The first of line Wells question from is with Fargo. Mobley the

Your line is now open.

asking chip side is, as I in some demand grow me you as if some revenue, share is your with to curious am afternoon. coming revenue trends your chipset backlog more capacity the Des, fungible maybe dynamics, extend And shifting memory out your considering there? let maybe about on supply details appointment. most specifically. on getting the you supply your Good the just guys. presumably Hey on able congratulations additional are my deferred and the to well were incremental you partner, buffer interface I curious am start foundry there can

and Des then comment. Hi, start Gary. I will can

that’s higher for and We have and case the again seen an a that was this In of supply. environment much we where demand year, gap first is demand had than supply meaningful half -- the between QX.

basis manage our orders. weekly to our our a with backlog on working and are and We our suppliers customers

have large orders on We books. the

quarters We we with is not What’s cancellations on seen have the any orders. these in our shifting are happening in we work the out environment, suppliers. backlog as supply-constrained

node QX well have more still right is of the we in so QX still point very, managing have attention it believe we QX, We DDRX a backlogs, tight front-end time suppliers, crossover the very technology managing the this for to for back-end. estimates at as DDRX, little we the and Des? for that between we the shift a remains visibility our street are between assumptions. also but the capacity that tight, turn in because And our quite into

product for at And $XXX I at gain with have million. $XXX in think delighted the up it of of QX mention, have QX between of back and Luc. our I quarterly think revenue million QX to should was for year, most QX product And is were been number. somewhere revenue, we We Thanks, midpoint. million the look analysts when the flat half growth modeled record $XX relatively I the to able another Gary, slightly revenue sort which we

XXXX. the remained being growth and versus remain assume ramp, our Given very year-over-year rate that assumption product think and about business. about DDRX our and I optimistic XX% Demand the ongoing reasonable strong we fiscal supply would of uncertainty a year the challenges that’s

the I for thank and you year of that DDRX, the end Well, was conversation kind case of your ask next want on view official DDRX delayed Is the last about substantial more best think so year. is of very your both to week you official your all detail ramp that that into ramp? Rapids and and I the how extend the think of so I and you. Sapphire to Intel view

Yes. XXXX, second Gary, into our half started chips last the year, production you as half in the of ahead product initial because module the of second we to the ship builds. go makers DDRX of know, in

Intel doing. beginning we But So of we might first are to are end the We crossover shifting monitoring and the what AMD shipping think DDRX are between volume to in and of both that the XXXX the be slightly queues. XXXX. DDRX from

We are to between be DDRX. is closely. our and we But nature, market. very transition to are in be going market lumpy DDRX to monitoring there that very, lumpy. our we in just going going getting orders I customers. just It’s the the in position think It’s this from be are and And confident

Okay. guys. Thank Appreciate you, it.

Yeah.

your Thank Mehdi from The of is next question. question SIG. you for the line Hosseini with

now is open. line Your

a for up you you basis and a Rapids. of sequential fact my Thank somewhat because up up Yes. and DDRX almost Luc, on taking the very despite this question. XX% product QX, pushed year-over-year revenue XX% Sapphire is in strong had is that

can a you have adoption through strength And accelerates shouldn’t us Sapphire some the before go behind of why help available? I a like it is please Rapids So dynamics when understand DDRX follow-up. and pause a sort this

Thanks, Mehdi.

Ice higher that our with times footprint of than reasons main later very on DDRX happened post Many the the in that is, precisely a into few DDRX a we that of we a than expected the footprint and translates platform. strong bit a because design quarters we why generation call explains explained growth with Lake platform is what had is this last see very And the we year-over-year is lasting Ice of One quarter-over-quarter. and to three this market had market because continue customers, that growth the delay in of win footprint much qualification this Lake, a have we growth the longer share. that strong We DDRX.

The very, to on literally very other weekly through backlog management with supply that with we environment. a period thing and is, supply worked on that constrained weekly our basis basis and chain our make partners a have we closely supply of sure customers optimize

we as is But Regarding DDRX, it’s going believe in be DDRX to nature. said, going ramp. to lumpy we

the end little to I to Sapphire But a going received not is transition platform be from of see Lake platform. orders. earlier. take than we demand Ice continue the orders have by think the going we by that may last We expected fulfilled to the year But is Rapids longer be fulfilled the

So we are every just monitoring week. that transition

cost Got follow-up, based is QX for you. cost should this about I moderate How think growth by would revenue quick going your incremental implies And then QX? million million but ASC moderate QX $X that to $X or up increase, on total increase after after dynamic cost your will million. one XXX, your and $X

Mehdi. Hi, Des. This is

support remain R&D in of the with the in to some up the by we dollars half relatively total we year. expect increases of the for costs a programs SG&A This at are QX favorable driven But timing of Looking our at half few this time was half ramp first look we would some midpoint. QX, at the of of you versus will $XX sold guidance, some in variable the which what expense R&D of back million back see from OpEx, operating R&D year. and to expected If of million time mainly sort guided goods saw to at the includes to we costs the flat expense. year

you. Thank Okay.

Thanks.

question. your for Sidney question Deutsche of next Bank. with is Ho the The line from you Thank

Your line now open. is

constrained appointment. the results on on Des is first the CFO on Congrats you. supply side. also and question My Thank solid your

Des, well. there talked probably your in have quarter can flexibility as what’s any understand you You constraints quarter Is days? in constraints supply of terms in beyond margins, XX and last expectations terms impacting going and way what you the kind impact going past revenue do and help of of supply forward? us about And forward the

had is support into of constraint are we impact had as had last of and QX supply that. you the we that had customers on this revenue. between our demand supply gap quarters, about our a to We of could a the that backlog QX. supply to some result talking have shift If and We had meaningful higher couple our revenue,

the impact. So main that’s

to We cost the to level. are trying maintain our right goods of

we posting So said that we make environment. this are despite margins we the supply would

get were after As situation. that working week we out to we customers and I week suppliers that said, our optimize with equation of until

Sidney, the add maybe, I to would gross question well. as margin just

gross consistently We about to being XX% product have between talked blended margin a XX%.

gross we side, to sort at for margin was on around flat look you QX the QX. were of If XX%, our which product relatively

we been have first in of of operating mentioned. of we year in half the range this So middle the sort the product that

product watch underlying to of sort sort continue we basis, on the committed to but will margins. mix, a to remain XX% of long-term gross We the a XX% product

helpful. very the extreme And major services. That’s you in follow-up on have question interest the is that

announced recognize the time? do timing Hubs you the chips? products you revenue existing SPD that your when RCD attach expect potential versus is you the with of and you And RCD rate temperature these the opportunities? What and the how what So us just from you remind Can over revenues expect sensor. the

Sidney. Yes,

these companion DDRX to the two we as customers are we speak, are as memory added So, chips sampling say, we modules.

transition. DDRX, So to on also going the time at What I is, depend in chips these the by when mean those parts, the this on ramp market. DDRX of companion the starts DDRX

this year types ramp revenue will of are are for This year. these meaningful not expecting there several We any and suppliers next products.

some a TAM either and buffer When adds above TAM. for TAM to in at the we DDRX look is So companion one-to-one there, $XXX TAM XXXX, about But a going rate in of size that compete of million believe be out component for main when share a these remains to on chips companion expect the market the to add to are we that to total we going the for chips chip. memory modules the the RCD DDRX. attach could the We RCD. don’t

I Do more Okay. question? ask one if you That’s mind fair.

Yeah. Please Absolutely. go.

Yeah.

Thanks. bring the the acquisition, what timeline CXL Hardent and the it chips? does have how on that change you don’t already that own your Just table does to for

Thanks, Sidney.

acquisition of the So advantages our brings CXL Hardent to a program. couple

chips, first And is as these they us, ECC probably secondly, and like of knowledgeable in and chips buffer are is some a they have integrity something SOC are most is with chips much that being for more buffer and the experience kind aspect design. SOC complex Rambus important chip specific long those. for to one chips have is The a this small very larger in-house. of CXL chips, going signal technologies things. importantly be that we known didn’t

bringing had that back-end SOCs the are years us building CXL that’s to we many So experience team and a a help our in design as going team chips. of together of large

you. Thank

Thank you, Sidney.

your Kevin the from Securities. Cassidy you The of next line Rosenblatt is Thank for question with question.

Your line open. is now

is remarks, any McClain on but my you Culver in Des, you for have the more activity or in on Kevin CXL activity weighted touched Hi. it experienced appointment. on Cassidy. interface, This for know memory I Thanks. is taking slowdown and Thanks security? question that congratulations, your to and licensing

Des comment. to to to you million $XXX and million business million are $XX said, from that’s to million of back customers about designs. because business a lumpy after as silicon and a are be and can will I IP start lot of But The look Des in $XX we going we lot more. nature, on year, deliver let if track that last $XXX

variation is the on I’d of win. So a quarter-to-quarter designs do but trajectory growth, timing the of say see depending the from some that trajectory we we

across the between our first beyond IP designs We security. types government applications. that are we data IP, with the we This wins In the security IP or have interface winning of and automotive AI. market centers address is board and with security

we like, range to silicon reconfirm the add, $XXX very in we prepared And offerings It’s and comes in security business the mentioned, $XXX We approaching great have. And to been the the IP have in and IP pricing the for to the growing combination scale. of really momentum million with remarks. from IP this this million as that interface just business. you see happy silicon did

you. Thank Great.

further There are questions Instructions] Thank you for your no [Operator question. currently registered.

Okay.

So question. if no there is more

Yeah.

to continued great I’d Thank soon. has Have the and you. speaking to forward interest your and like everyone day. thank joined you. Thank again with time, today who to for you a we call you look

That concludes Thank call. the conference for you participation. your

now your lines. disconnect may You