Rambus (RMBS) 31 Oct 222022 Q3 Earnings call transcript

Welcome to the Rambus Third Quarter and Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to pass the conference over to Desmond Lynch, Chief Financial Officer.

You may begin, sir.

Thank you, operator and welcome to the Rambus third quarter 2022 results conference call. Chief me at our today Lynch, the and CEO. Desmond with call is am Financial Rambus Officer on I Luc Seraphin, discussing The we with the for SEC today be the X-K. press filed has Form results on been release will that will call week available for this at of the XXX-XXX-XXXX. replay be A next

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

at X:XX replay our today A this website be call Pacific on accessed p.m. of can Time. beginning

presentation has These actual Our forward-looking call. regarding discussions that both demand including XX-Qs Relations are our reconciliation from financial in effort projected of on These company's Investor and any the clarity measures our Financial most included statements, call results financial Releases. to been both solutions, of statements on our the press effects greater XXX may during we and are growth, GAAP A this rambus.com no obligation this documents comparable in the risks manage to slide on release, these under ability the ASC SEC, our are our non-GAAP to non-GAAP will market may In X-Ks, to supply update on and website directly financials page provide today materially the contain the and are revenue press with at discussed in our differ including in items. chain we release more to and described financials, uncertainties an effectively GAAP under and and these using statements. and our presentations subject our results, we expectations financial for XX-Ks. amongst fully in statements shortages be other the prospects, reported forward-looking file

balance under in XXX way earnings company's periods of sheet restate using beginning the a through an as We the adoption retained did is rather ASC XXX adopted but results XXX between to comparison retrospective ASC effect method our not prior prior which the a ASC under modified progress. results adjustment. track than Any XXXX not cumulative and accurate

continue our such provide investors billings licensing into performance. operational better our operational to We insight will as to metrics give

call overview our start of Q&A. the I'll the will follows: discuss business. of as with financial turn Luc? Luc Luc then end an order will will overview over with today we be call quarter. to provide of The our to results and an will now the I

for delivered revenue cash were you, These excellent a both The record performance delivered in a of exceeded Thank $XX and company and million environment. earnings challenging context in our the strong Dave. an QX. in achieved macroeconomic results guidance We operations. from

execution outlook strategic the our give growth focus in and diverse portfolio continued of strength strong and company data Our the of driving a for profitable center, are in confidence us QX. offerings of

addition, extension, this With value have stockholders program In most that our And our and our $XXX debt comprehensive to our have we product value businesses. foundation that we announced repurchase to further cash million this from growing return to morning, years. XX patent of we us generation additional return and an program build just to share we stockholders a a for Samsung retirement. are initiation the recently accelerated consistently allows with continue solidified agreement our license sustained of licensing able extended to with

testament continued to of we many very strategic are the has our to industry. a is collaboration innovations of for a products on partner strengthen enables This extension trusted years the Samsung value the and and pleased been the our for ongoing relationship. deeper advancement

navigate we through $XX.X of was million, year-over-year. revenue sequentially a performance but the chips at macroeconomic another interface quarter vigilant product drove Turning from This dynamic great as and conditions. team to our detailed XX% results, we up memory record XX% remain

continued continue execution QX. supply chain environment. Visibility the the we are platforms. We through is rapidly as prepare ship Demand expect supply-demand managing actively for continues DDRX to of customers strong evolving and improving the focus in to DDRX remains for our growth RCD next-generation ramp and on and computing a our

We the interface transitions. march our memory first With now continue we toward in the and projected lumpy product midst project as 'XX. DDRX, we we may to And chip crossover DDRX server ramp to as the which are such, in platform half in expect to of nature. simultaneous demand somewhat DDRX for shift mix that, be DRAM the be memory of

our offering memory in modules. quarter's sensor. our with we of last companionships integrated new introduction the These Hub In call, DDRX are server SPD temperature along chipset the mentioned addition, with into as RCD, expanded we and

expect production ramp with to 'XX, market line these in in We parts demand. of

look memory of accelerating. architecture. center, we emerging longer-term the to is applications As CXL attached are momentum industry the new for CXL data evolution Multiple tiers in memory around the enabling

to performance generations server improved of cost higher and CXL ownership enabled deliver architectures total promised come. to in

to the expansion market continue We ecosystem aligned memory DRAM strong from with timing. and needs OEM develop cooling. seeing CXL cloud, for close solutions makers in with to engagement and and alike the work We're well collaboration and are

are government to now we silicon have We high-performing $XXX million silicon AI Data year-over-year. and markets. automotive. deliver for revenue driving over $XXX solutions remain multiple performance Turning with growth We and our robust in to momentum on IP. sustained strong in million another delivered demand and growing traction IP across center XX% track to and

above We QX. PHY, leadership areas In in expect our delivered and quarter Rambus controller excellent this to closing, security continues major of and results even the was an wins. IP stronger with guidance focus demonstrate an for company.

vigilant the in long-term remain the company growth of challenging but are given macro confident the environment. We

ongoing in market of value their for to thank strong right and and I invest support. to am for data to extremely drive we growth return programs stockholders. are to team center proud continuing continued and customers are our balance the the I We to the our sheet our partners leveraging want

results. call I discuss Des turn to to that, With the quarterly over the Des? financial

our above the begin the high to quarter earnings of like with we Slide quarterly for and both third results summary financial delivered quarter I'd financial and from Once strong operations Luc. generated end a X. of expectations a our million. on of $XX cash our revenue record a results again, with you, Thank

ability us our has to cash invest to flows consistently Our generate initiatives enabled capital in consistently and strategic strong shareholders. return to

initiated During share the $XXX repurchase million quarter, million X.X which accelerated retired we a shares. immediately program

$XX to convertible In $XX net our addition, repurchase of of we paid amount aggregated principal amount a notes. million million

walk Slide you me statement income through non-GAAP X. Let our on

for high to continue revenue the the We third of and our was end expectations. million, above execute $XXX.X quarter

our $XX.X was we upfront memory royalty revenue for quarter million, of our line consisting prior customers. Contract interface license as chips. bill demand quarter strong are The customers. we to million, $XX.X QX. was expectations. between record see down was arrangements timing Product revenue primarily relates same such delighted revenue due the a Royalty and was we in with revenue from primarily included to do chip licensing silicon IP. billings Memory company in consisting and primarily interface million always of revenue in several as million. was the being to and not from revenue recognize difference billings $XX.X It was the our revenue for $XX.X other Licensing

as portion only IP our revenue a other is as is and in licensing well portion in royalty in reminder, reflected the silicon reported revenue revenue contract of billings. a remaining As and

we of and quarter head for of goods $XX.X million line including expectations with with costs, sold interest million operating Total the total million. Under related XXX cost ended payment. for of the which we income XXX, was were ASC $XX.X count not quarter expenses fee $X.X in Operating our financing the but employees. recorded we of yet a recognized fixed have revenue component of licensing arrangements received to

currency during associated $XXX,XXX portfolio. million of This by the interest period. from in expense favorable with our offset Additionally, approximately and We with interest approximately exchanges our cash incremental we was income convertible foreign benefited $X.X associated investment notes. incurred

for noncash adjusting non-GAAP interest million. on quarter resulted of in the And interest $X.X income the convertible notes, other this third for and expense

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

to million turn repurchase million down operations $XXX.X sheet the details $XXX ended the balance cash with We record Slide securities quarter payment Now, notes. by quarter the from $XX marketable the program quarter let X. of $XX the was previous accelerated and share totaling convertible million initiated on and from as net million in to cash, we me cash offset the repurchase equivalents

due of $XX aggregated convertible the now in our February principal At remaining of amount notes QX, in end approximately XXXX. are have to mature million which we

contract QX, value unbilled reflects future deliver strong to the we execute, million in worth has assets continue future. which arrangements $XXX obligations. company of the of receivable from to performance expect licensing had At present net end no the we to for As which cash related operations we accounts the

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

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

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

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

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

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

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

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

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

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

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

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

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

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

am environment. macroeconomic execution this me excellent results and Slide a in with pleased team's with our I on summary Let X. finish the

momentum strength sustained into in paying the relevance terms product quarterly is we XXXX, patent IP licensing innovation extension stable revenue a really strategy substantially our and in have our an were and effect interface announce under demonstrates expect in off engine. and which the same recognized XXX. years Our silicon continued XX the of We Samsung agreement we for for QX portfolio pleased extended financial agreement by of business. fueled pleased and growth licensing to to chips, additional backbone that this to be portfolio when we memory with continued I'm in our comes this ASC account diversified

execute discipline strategic continued now are we focus, plans. well on With our to positioned long-term and

has profitably with our strong to minimal and consistent to cash debt We capital business returns which the continue generation shareholders. grow enabled

continued to the teamwork to their Before up Q&A, like would I I for call our thank and execution. open employees

the turn have to to Q&A. call our Could With I'll our that, question? we first back begin operator

first from Rosenblatt comes of Securities. the Cassidy Kevin one with [Operator line question Instructions] Our

Congratulations on the terrific results.

you in seems it pulled in it’s going by the thought I bit Is was like contract, be negotiations? there a a of reason was a it On to been – surprise guess, for you? have I about Or that? been year. it a was for surprise. this Samsung any already

flows some term to Luke. this long us relationship the strategic in And renewal years we come. rather visibility with products Kevin, cash question. years lays show than important for more Thanks could this further It Samsung in for for data to it We the develop technologies our the for could and our the results. the as for the stability later foundation and we in our predictability was secure earlier come. with results Samsung center to for in that engage also is so for

them. behind So lay foundation relationship, product this put the for it us us for long-term and was with to long-term to development important

we reason the that's So earlier. did it

are with also Okay, great. you then? And working Hynix SK

The of of course, is for our in we or constant discussions So are negotiation with the SK partners. Hynix 'XX. second scheduled quarter

to try relationship strong and we we an we have don't this And a at SK. point commitment As time. partnership this have with with in make early Samsung, will but renewal on

fact on same lot Samsung terms, can Some portfolio. But strong of is renewed our time. validation take has a that patent a patent the of renewals very the

there's quite we're it's be earlier. reengaging confident that with discussion a done in to going no So SK but guarantee

great. other on the of be acceleration CXL think an Okay, Are seeing for for production circuits licensing but that request in acceleration that -- would And ICs, an one the now. I you must IP most CXL are seeing are just you the expecting in XXXX CXL? that IP -- volume be design is for of

Yes.

indicated our to IP XX% has portion of the introduction customers. year-over-year. was business IP large as and prepared of about So in And silicon grown our due our remarks, PCIe to CXL that a

business the growth own these When market IP we’ve for year silicon it comes customers our building products in we’re our products, will our hit in year. the CXL last are silicon silicon we’ve using products, to and this in So CXL. over that our products our that shown XXXX. And products seen building

line comes questions next of Our from Mehdi of Hosseini SIG. with one line the

the the competitive landscape, X especially Yes, competitor just two in And restrictions I follow-up. team. you change curious have follow-ups whether looked and landscape? the if increased have into would for competitive China a I'm

your for cross Mehdi, economic and geopolitical show XXXX you, currents Thank both question. will Certainly, situations. some of

silicon China is and IP mostly business around our portion Our business. a is small in of this

headwind in China. our said, remains is possible the any of monitoring China, China to the So the some are of slowdown recession impact, if in modest. situation export restrictions This minimal. things, our may on IP the to portion to business there and be silicon outside between the China, see scheme some in ground is economic for the of that again, impact IP silicon going IP business we But on China being we

Sure.

that shipment relates midpoint for If two. hopefully, the really on not to Okay. even And the take par product just one haven’t guide it I chip. And quick as to XX%. the your grow buffer volume follow-up you’re I’m we of of of business almost by QX, mixing And adoption of the DDRX. for started part

demand think Or all early the think opportunities you’ve what’s So should driving about I here? are engineering DDRX we happens how the in ‘XX. these work once how about And crossover done? the could

Thank you, Mehdi. That's a great question.

one anticipation chip. We been a for X ramp. to some an exceptional for for year in I is, started extent, modules combination think, has the to of XXXX build had buffer DDRX phenomenons; our customers DDRX

the So right delays that the more in DDRX were buy had our part was than we transition also DDRX, to that to market, of the in saw DDRX shifting growth of some XXXX. expecting And they to. because the secondly, because customers was

But QX, we our and more is have expecting happened In shift is that higher than a to QX, be. the what In demand because between supply-constrained DDRX the we more the see going had transition. still DDRX shipments. for we're in we of and in we DDRX demand DDRX, more of still were supply. the orders supply So expected environment we for market what gap than we is what a to if could shipped had DDRX

see QX. So some we beyond may adjustments

first think half over half will to the year. work second of digest and of backlog in DDRX second I start on going the time supply towards people part to is for of full their that. the have production And the -- DDRX the we'll

in show may the both some first So on the revenue quarter mix some we the in the fluctuations, mix. see margin may adjustments and mix that

DDRX faster we the half year long we're the growth why the first DDRX anticipation market to of to And adjustment catch much were through same bit at explains DDRX right. had continue because market. we that go period now up bit this to In grew, a the Again, building people on year. grew year they than the of the the we market will but run, in DDRX shifting is delayed. But was had going outpace throughout the exceptional So next to time, XXXX. an but in a in

Do a understand. very I to quick it’s I ask think important you if mind follow-up? just very

a DDRX chip pricing. carries Your buffer higher

the were as units or a fair transition that buffer from drop chip a decline, buffer DDRX Is we to X% to X%. like price if higher expect a offset pause We chip here DDRX could characterization? even this shouldn’t that. So off

pricing introduction of old at the but ASP, between on certainly difference of There's the gap generation new the the volume beginning diminishes. in the volume new And that generation also ramp. depends technology in and ramps, as it

first going to in their So backlog as people of it's going -- the the to we're DDRX. year have are consume I work think this to on through half transition

to are that. DDRX going -- backlog We their also for. up And see as or fluctuations have We're something we start backlogs to and that DDRX. looking further that. we're some they going monitor when we to price for It's in XX build do

on Maybe more the higher now have DDRX just have tell said, forward. curves what the to Luc does to form ASP going normal add can certainly does pricing to you and ASP, DDRX

a the think deliver well mentioned, in we growth X we’ve we’re the done dynamic forward. revenue what hope product positioned here I job DDRX But quarters managing mix between where over think we’ve continue that’s a of I we and to Luc going and great able record are DDRX product but going to as forward. transition been last

Bank. Our comes line next the question of from Ho Deutsche Sidney with

just up to last want I the follow question. with

half your for maybe With year QX current next the in or you is And year? you of mentioned, expectation follow-up next of that products adjustment just expect revenue to that. the period a kind first what of just

to DDRX question. lower you products see price that any memory prices? Are And Some for as in can that? result a commenting of faster of memory a follow-up your to environment then And current pressure lower starting are lead DDRX seeing the are prices conversely, the companies you of DDRX. adoption

the for thanks question. Sidney,

one As at know, we time. you only guide a quarter

ahead looking a of fiscal ahead just it's us into now. year So bit 'XX, little

fantastic I growth sort executing DDRX of and think in product what job our balancing a on we DDRX have done of mix from there. between is the

As that and DDRX sort of lumpiness Luc his seen we for to into some in have demand sort mentioned remarks, expect prepared and QX. we QX continue in of

a continue DDRX normal pricing So we forward. line to go dynamic previous a monitor as we'll we manage product perspective, and curves in from From see sort with there. of continue this following carefully to mix generations pricing

the is really see job a done normal our of to which managing of well year. we product So next the our QX. as at up continue sort nice sort overall, we for to sort go we've ASPs But pricing of into on side, expect of gross to margin XX% as ended

to again, up So relatively slightly versus that flat QX. was

we've margin in ASP the So really nice a both job the profile. done managing also and

helpful. that's Okay,

question go Just -- a follow-up ahead, sorry.

ahead, Sidney. go No,

Sorry.

Sure.

my we’ve some either question cautious center data more because is, to just slowdown So started by second constraints see customers. supply spending in or build-out, of

component there’s at Anything terms a orders from concerned you you parts in adjustments backlog the be inventory next too over see And your you demand will Are these highlight few some the quarters? standpoint. much would appreciated. for seeing certainly customers? of inventory We’re do that how

level And a high and the demand I'll see point. bandwidth and for transition. At from some platform a we're let still our and also level, at technology facing vantage So a more Des capacity we high major comment on numbers. more

we year elasticity, products. of transition, and QX to still and I with So the seeing, a that, is DDRX price backlog see that in can you we What growth lean platform with deal have generation between is we said however, deal supply to the we we is the mentioned, what are as do standpoint. what DDRX. DDRX market higher still of and have QX than see as ship. in our is next that first levels What the half from inventory in earlier, we're management on And

aspects So that we’re share looking based But these our market. with customers and variables. when stabilize, X see continue we will overall, in these at on to partners, our all we grow what of

transition. year first inventory deal we But still management that for footprint they’re the a we high to we’ll is DDRX. point don’t said, a elasticity, platform customers in this at be year of as in have strong see of as the the in have going of position in and DDRX price to time. half our in I the of said half We see when The buildup earlier DDRX demand with, the calls, market. this where of ramp-up we And starts waiting as supply

of Our with comes McCurry line the next from question Ashley Wells line of Fargo.

I the lead as is just This comments Ash result online? any as order Mobley things. Wells our the of And build on side at a chips in additional shrinking inventory want is coming additional chip situation supply Fargo. Gary On as on ask to any for for situation, of McCurry buffer times that well customer that terms of supply supply buffer

From question supply to your Ashley, that perspective, to growth been some Des. enabled we've it's in the us seeing coming there. we both and able supply which additional higher Thanks for a drive has QX trend online are QX. revenue to

forward been levels overall, us. But I product inventory year. there. sort to of And sort inventory which the higher normal the there from covered lead the product of sort though, was from customers demand we'll to of building the customers sort of DDRX, bit months customer sort and remain place the of an into an second to sort buildup transition last advance next continues think, lean of that first is of to perspective. of revenue. in with minimize X, deliver on mentioned DDRX will of improving have supply able supply. a of half our some the X from take inventory Luc remain a situation Luc From for products of going sort sort actually question. next think there. I could been DDRX higher half over gap the perspective, what overall, As work We’ve the than inventory sort And And we in

comes questioning Instructions] line of next with [Operator the Jefferies. Our Chan line from [ph] of Brian

on -- Mark behalf for question a of Asking Lipacis.

your curious hyperscalers trends. visibility if revenues would for dynamics manifesting -- order We're in any for in year you that's way got for some product demand of positive the increased commentary in we any details of helpful. terms incremental next or CapEx terms on So from be

from Good demand service direct generation we CXL memory earlier, of add the for or this as DDRX the more on given products. adds you, allows on is we're next-generation to providers memory is also a DDRX memory and more impact translate bandwidth bus developing which the to systems the we And CXL computing because of to and the tier capacity a capacity memory cloud mentioned either bandwidth This directly usage And products these for it And CapEx products providers Thank that the going into us of translates the on on are case memory bus of Brian. subsystems. need adds and actually whole memory into compared the the to those processors. developing. to service capability resources or cloud the between question. share

both good is thing do chip this our buffer driving as and a CapEx CXL providers cloud map and from we products. on us this for the see service what's investment the road So the

next question follow-up Rosenblatt the Our is a Securities. with final Cassidy Kevin line of from

security You’ve number prepared in fast just of growing? remarks rough give us And IP the your opportunity description silicon what’s of mentioned Can how IP. about is estimate? as that of you a in part a customers, pipeline

it interface is of business IP $XX is million and -- $XX half run IP rate half the said, of is million of stable a to on silicon we security. a quarter, now our as it approximately So

growth saw today security The watching. in and for an about in multiple nice but year. We mentioned main IP. these XX% that and have, We over This see We we're area very automotive applications the AI multiple XXXX. and businesses, we're applications, well. are particular, government as in prior some growth is markets data centers do addressing growth we in customers

slowdown We the customers environment. may have the these business headwinds environment. A for the of given start-ups are lot in the to funding economic economic potential new and current watch that for projects

market. We have also that possible and what’s in we to happening watch address to the restrictions China have

grow. So we will continue to

fast markets year year. market as and the think customers, grow just multiple faster going as than will fast environment. And multiple market think going grow of not we last to last I because do have as We grow not to we’re is but we the economic as

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

time. again Thank has We who speaking you joined look soon. with forward everyone, for very your and you. Have you, day. a today to us interest good Thank continued

Thank you. now concludes This today's conference.

may now You disconnect.