Rambus (RMBS) 1 May 232023 Q1 Earnings call transcript

Welcome to the Rambus First Quarter Fiscal Year 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After conclusion of our prepared remarks, we will conduct the 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, Chief Financial Officer.

conference. your begin may You

me Thank you, XXXX Chief Rambus quarter call to Officer CEO. Seraphin, and conference call. welcome with the results on Lynch, Rambus; the is I Luc at our first and operator, today am Financial Desmond

filed for replay been of the will available the press this today release will next discussing Form for XXX-XXX-XXXX. results call the The SEC week we on that be have with A at X-K. be

call, and reference In with are today's addition, our webcasting this today X:XX slides call will we we website audio, we call. this at webcasting on p.m. during along are be of simultaneously the of accessed Pacific can beginning A Time. that replay portions

regarding for financial market ASC revenue, any effects Our items. discussions today XXX solutions, will our supply the reported contain to expectations financial growth, chain prospects, projected forward-looking effectively demand of company's on our statements, ability the and manage other shortages results, amongst including

subject we to with the that more XX-Qs the obligation actual differ file we statements materially call statements may documents forward-looking update fully including no and described from These our are statements. These this during risks results, and SEC, X-Ks, and are are may discussed under in be uncertainties XX-Ks. to our and these

Relations Financial these included in of our an to reconciliation slide press in presentations and In at presentation financials the rambus.com website both on to GAAP financial comparable call. provide the our page in Releases. the press clarity A on our release, has under directly financials, measures greater Investor in most GAAP both our release effort non-GAAP been on we are and using this non-GAAP and

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

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

as discuss we The call an will results, order of Luc and our I overview will will end with financial the of follows, with Q&A. business. then today start will our be

I'll Luc overview now over turn the call provide Luc? to an the of to quarter.

and the We sheet. Thank by company, retired the guidance. environment. year of to everyone. a remaining with at cash you, the balance continued the results revenue earnings were from our start and operations Dave, in million and last good was for driven achieved execution $XX our strong and the afternoon, challenging high-end These QX the further This of in macroeconomic strengthening debt of context delivered

Samsung with the leadership our market. great strong for Hynix our middle announced in performance, strategic XXXX, renewal in our Similar expansion a our we the In to across QX, the addition ongoing our strengthens early portfolio of is demonstration agreement innovations financial to with to were and technology ongoing foundation of through of with pleased extend to our relationship and product patent value investments SK our very the comprehensive of this agreement. licensing

of conditions. we Turning navigate product memory. we new to QX million, despite a the delivering the $XX chips generation up to Memory our transition term, of challenging the vigilant as XX% performed results. of industry remain business revenue interface market year-over-year the well, through In dynamics near

our on for actively orders execution end come our as with through and are working at DDRX remain inventories DDRX seeing customers. initial quarter starting in While second quarter. remain towards are the guidance, We of shipments with high we end customers, the some reflected focused

second levels demand to and normal inventories for ramp. more We DDRX half continues as expect to a stronger return

the first be XXXX, lumpy period. for server the previously, memory and chip As mix expect said our we we transition have half is the interface to crossover of during projected memory DDRX product to

in improving leadership in in Given for DDRX second XXXX. the and positioned position annual market our we half, conditions continued growth strong are we well believe

As of and will memory performance AI data further center workloads. the growing other of to critical address requirements out, advancing capacity look we advanced and the bandwidth generative be

the our are all of good follow-on ecosystem in and Gen partners. our sampling We the making progress DDRX to our across on with of generations RCD RCD customers qualification and X GenX

and aligned DDRX, timing to collaboration the to and market come. with continues needs server the we ecosystem generations close CXL with for support road well addition developments In to the years of future on and are map

silicon achieving second per the in illustration data rate is technology IP of It latest leadership. which addition recently interface, of IP, market-leading announced our the GDDRX fastest continued is a great gigabit best-in-class portfolio, to includes a industry's also memory subsystem. HBMX Finally, our XX our

and these training AI Rambus With solutions, the memory with of addresses inference both offerings. needs state-of-the-art

IP and we in conditions, long-term macro continue areas in current interface of both in We for to remain lead spite security of our the growth and opportunities. challenging focus confident

and of In for the was executing quarter strong this high-end at closing, team well. company guidance the results with a the

near like computing advanced ever-increasing as Rambus While a captured see bandwidth very the enabler, growth accelerated memory these positioned generative the secular the to first time a of performance data. the industry the state-of-the-art is market and required AI strong in have to with availability we workloads with for we that applications. demand examples the in for memory applications well is navigate will order center These drive ChatGPT by data trends dynamic And enable imagination. perfect solid the broadening advanced are exciting growth that This with a conditions term, in the public opportunities. continue of

strength growth continued offerings, of in our we drive focus confidence data the and long-term center, strategic in of have and diverse to our for portfolio ability company. strategy execution the With profitable

products the memory. investments bottlenecks focused the that right processing innovations We between deliver to performance high-quality are address critical making differentiated, and and

ongoing I'd like their customers, always, our partners support. for As and to thank employees

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

our in begin the of quarter summary to delivered and execution we high Slide a balance macroeconomic for and first very Luc. are challenging end at delivered financial quarter, with financial ongoing Once company's strong a I'd the X. with our a we on expectations, sheet. results of again, Thank our revenue you, strengthen We environment. to like earnings results the continuing while pleased

In recognize were for ASC XXXX, effective April, expect we QX financial extended delighted SK XXX. additional becomes at years Hynix we an quarterly similar extension to agreement licensing we in under with and to revenue announce XX terms. This our

last continued of innovation relevance strength we've In largest demonstrates patent months, the terms, our our two which the both and portfolio and six engine. XX-year extended for licenses, patent

strengthen balance sheet. repaid retire and notes agreements. debt, strong utilized the to continuing the hedge continue to on we value. of our to the final We We've settled balance existing QX, hand our in generate cash cash Additionally, underlying and convertible while flows drive associated that shareholder

licensing in we X. as million, on licensing of and Let between primarily income through continued statement while on billings the revenue we Slide relates revenue me quarter bill to difference same always million. was our The million, revenue recognize With focus our was as expectations. $XXX.X our our non-GAAP timing first for high execution, not $XX.X the was customers. the $XX.X billings Royalty do revenue royalty end quarter you walk at

of $XX.X memory primarily was was silicon chips. revenue million, and Contract of consisting interface IP. $XX.X other consisting revenue primarily Product million,

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

we expectations including our expenses million of we XXX as costs, were with be in the sold ended operating total was to employees. $XX.X Total $XX.X cost with of in the our vigilant headcount line management, for quarter quarter and goods million. expense Operating of continued

and the other financing licensing interest ASC million. $X.X agreements component was related which have yet payment. to received revenue, interest included income quarter $XXX,XXX but of first fixed Non-GAAP of income for we for the not recognized XXX This fee

ASC to Excluding $XX.X income was interest of rate the financing been assumed net of non-GAAP Using have non-GAAP for $XXX,XXX would income. the pre-tax net interest income, XXX, million. for tax this quarter income flat an XX% related

cash, by and X. securities settlement the equivalents the me balance from convertible details totaling the cash repayment turn let driven underlying the prior decrease million, agreements. marketable the slide and $XXX.X the mainly of Now, on ended quarter a hedge to We note quarter, with sheet

for receivable performance related accounts operations QX, $XX.X which we was contract At agreements million, million. of end licensing worth obligations. value quarter of assets the which from unbilled $XXX no present to had the future the reflects has Cash for the net company

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

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

for turn guidance quarter to on Now, our the slide let me second X.

reminder, a forward-looking the time. estimates current guidance reflects best at our this As

We review. and what environment the differ continue to macro from to our results about actual monitor I'm actively could materially

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

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

in million Under the between million. ASC revenue second expect XXX, quarter $XXX $XXX we and

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

operating total COGS costs, and to $XX $XX be non-GAAP which million expect includes We million. QX between

million ASC results expected of between We $XX second expect approximately $XX QX million. million. and a quarter non-GAAP CapEx for operating to XXX, $XX be the to be is profit Under

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

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

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

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

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

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

growth portfolio with diversified remain a a patent backbone our have licensing long-term and business. our We our stable strategy. predictable from in to investments support We disciplined

deliver our generation. We a with balance shareholders our value to innovation, sheet strong and continue cash robust strong to

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

first Gary Wells Our of Instructions] is [Operator line You. from Fargo. Thank the question Mobley with

You may proceed.

to revenue start Hey, us resurgence that, as color I Congratulations the into to possible considering revenue But product guys. Is I related a a for on the the and for price you us position by all second market I and can some to your the see product year Register a DDRX different DRX, a in revenue that it transitional comments you new the those quarter the of time hoping when selling of we preview quarter year. Good half giving give DDRX-related crossover is maybe was revenue. share the to the XXXX? industry expectation in Clock product exit for year, good for see high the afternoon. second Driver understand revenue. appreciate things. in the And can uplift calendar

in you good thank is despite higher was last your million in at the than terms of revenue execution quarter, This had highest same we so quarter $XX a first XX% the Gary, for for with million. grow the that of business revenue, question. company. continued product $XX challenging the quarter actually good Hi, environment. terms quarter to in product also we Yeah, second

and the that's DDRX transition our previously between said, be QX products. reflected product lumpy, and DDRX we guidance As in for will

are inventory the advance softness the there in data start orders ship by product for fact DDRX, we a center of the DDRX in very period DDRX outlook, But have the transition. we to will QX. received for digestion that in late which for Given encouraged be will

a would And year. to growth -- our half view this is compared half be of the of year first the of second year half that the

is second to week. by half ramp the we're be -- lumpy, driven said, we this the we and stronger of the compared lumpy. it's precisely expect So as said, and first quarter watching every dynamics DDRX. This to overall the year transition half second That timing being of the

that Luc. Okay. I appreciate

half part second was question DDRX between this the we crossover, Yes, see transition in of DDRX and of think happening the I still first with the XXXX. the transition. the your

second five five Thanks, about want years it. the higher you the being SK Luc. your first Got average rate million a quarter, years. than renewal. Hynix at license I your to described the royalty In $XX ask with X-K,

So to license half put specific see you your in new the a from will start of next Hynix? step-up SK a that in revenue to to deal the question, when year, second you of licenses the form to patent recognize

question. were licensing your XX for thanks for happy very Gary, We years. SK with Hi, the to Hynix renew agreement

correct are variable us allow that ASC You will which we revenue a that have structure under Hynix, XXX. this is to SK with recognize

If consistently of step first royalty part end. up, the of you estimates the up way a the million our We've the but written, see SK will that innovation. change a look being on from slight rate, at overall which Hynix, we're sort the the with will revenue really the is is speaks which year. very step-up was contract, the of there. portfolio even patent happy on off contract sort midpoint, step the at overall, years sort not of of But contract of of a and to for about that $XXX the contract the million, first able to couple renew in then back the sort This on talked we're volumes will our to there million patent $XXX we $XXX

Des. Thanks,

Gary. Thanks,

Thank you, Mr. Mobley.

from Susquehanna. with of is Hosseini the Mehdi question next Our line

may proceed. You

XX% And to especially a Thanks comfortable, the we think how commentary an the second follow-up. I two and continue licensing us margin taking think for to Luc's on that year. I in you for higher about of about should XX%? question should gross the XX% product want Can than And the talked feeling of about royalty? give half? second half call, would back you first earnings half the revenue same given margin you that my Yes. I hitting IP, question. be go to margin Are in last outside the Silicon improve have traction that update above to items.

Hi, Mehdi, thanks for your question.

quarter, at and line margin, with full fluctuations our target both gross product the look gross our And any be of if transition I gross our could around year, we've On is revenue which think XXXX margin And in are the depending long-term product XX%, you in has upon what product given consistently you XX%. shipping the gross back margin said margin. strong. growth performance lumpy. was that, gross could products some been were What in this margins XX% to for see

X% product which QX. around improvement of our expect to sort quarter, In we And margins looking XX% slight product gross the gross QX, mainly were do QX, by into for to was about a favorable margins, up mix. compared see in product driven

from upon do Luc As do will that with based margin And we we product that, grow to a mix expect to half more mentioned in do see And margins our the second that, improve year. we expect a gross that. perspective. favorable the expect of

product As XX% be and in of from expect line reductions, our long-term to very product to a with management, do year margins gross been company, of in cost XXXX, our our XX% drive our we've target disciplined Mehdi. there. ASP for the full will And we continue to

part and margins. second just XX% of around go-forward They on of our Silicon sort related sort in do XX% similar of a margin basis. expect over were gross we the that gross your mix a think of to I QX, sort question IP

can gross you and on healthy IP. have fairly profile Silicon see a So margin that we rich

quarters, by of basis? this of points XX the increase point like Luc. that assume parity QX around like so half for the about reference first on like a DDRX points next Talking year, then DDRX over increases between in with a that's incremental so I and the question Got mix Thank you. quarterly Should XXXX, And that it. one referencing XX-XX. increase is three a the XX of XX

first crossover Thank we you, point the to XXXX. happen in Mehdi. Yes, expect the of half

shipping As I to at this are of for start quarter. indicated end starting DDRX orders earlier, see we the that will

So really this encouraging. is

As said also is transition in nature. the be DDRX earlier, between going we DDRX lumpy and to

as linear is or half the the going to be from say in going what of it's be start DDRX digest whether first the to of that over to but is say, that, DDRX it's But period to we nature. of to DDRX lumpy XXXX. inventories the now trend difficult it's be So DDRX, favor stretches ramp over going customers in to not, and can

you. Thank it. Got

The with is Thank question Hosseini. Kevin you, Mr. next Rosenblatt Cassidy from Securities.

You may proceed.

the congratulations for the growth of taking second DDRX, half follow DDRX in and quarter, Yeah. worked with will year, my to to you down that or good decline? question see on Thanks Maybe results. revenue just that on the just continue inventories with getting this can

inventories or inventories some digested we as being high burned. still but these DDRX, of there's level of are So said,

these take more burn. receive a of said, the to couple there's still And we I still DDRX. DDRX going year. the think for should it's half for we being a demand second towards to This that for has quarters DDRX of inventories orders expect life.

we first the in said, in we expect As to happen half XXXX. the crossover of second point -- the

We good obviously, until backlog that backlog, doesn't have us period. cover that but

customers some are we transition. to demand their going the time, point cover at So the our to replenish in DDRX as through move for backlog

from So in second we of orders expect DDRX the the more half year.

Okay. of CXL see has different And the on around a been Great. I developments. Thanks. market a subject, the lot activity maybe --

I customers? ramps licensing of licensing of compare just activity XXXX. give CXL past the any or do can you you've how of data it activity licensing second Maybe any type points of the around Is past. said in or is. the ramp, could aggressive type for expecting think you're maybe seen it have you other you've your But any some plenty that CXL, us if an half in of feel to feel you

our revenues see on the last CXL. with headwind and just sales that less are macroeconomic not reached Silicon size do the last we in to or We Silicon is first Silicon to se is CXL. continues lot to record that driver deploying do strong some as business. well we Silicon That a are IP of in A drive year been generation But $XXX customers some our has of at side. controller first that coming sales the going now side are into favorable. CXL on market for from Yes, had IP the how million environment of the the IP end CXL These the per play for explains on CXL revenue CXL IP that Kevin. our our as you, Thank PCIe growth the generation Silicon in year. applications systems, systems that's

Our when market road down products are a years into going to the play in the of reach now. later X.X CXL couple comes from

Okay. Great. Thank You.

Thank you, Kevin.

Thank you, Mr. Cassidy.

from Next is Arete Nam Kim with Research. question

You may proceed.

taking you of have questions. my for couple question. Thank Hi. a I

Just curious comment I DDRX know premium. on RCD pricing. chip don't price chip you

based But on you you PMIC over chip the Are the you premium you And expect However, about when you prices I'm over the time developing own are product? your price over think just and curious price partnership or chip then carry high down chip developing I with DDRX? do this have DDRX continue ramp any expect product over RCD carry very mature. and DDRX should -- know usually and lifetime. you. Thank are we I second will DDRX chip to initially PMIC, PMIC question come to of module. see DDRX supplier existing if premium

Hi, welcome. Nam and

the see six DDRX. time And transition. seen ASP to DDRX is have the for on market the an seven speak, have over expected, been now. stabilizing by erosion for The pricing to do first yes, as DDRX with We years right. some And and associated we as we seeing the DDRX, premium DDRX you're in question products

now, example, monitor price volumes take expected that's seven the time. are They as new launch. we to is we over In if see now. years are ASP erodes we erosion we're a quarter-over-quarter. something DDRX the And But DDRX, took Price some to to the higher going it today, expect to but six product It higher. are grow. get really

the or To on with market we developing to this we're PMIC the in devices partnership, hit are devices, regarding own, PMIC developing devices, expect a we your not PMIC, year. our PMIC question next our and own and

question -- this low more year. mid if I can. Silicon revenue IP you, guided One thank time you Okay. single-digit percent to last

mid Do You there? of growth earlier any in there meantime, said like guidance it's on a lot in you in AR going change AI a activities macro single-digit are with this edge. solution or some cloud the low and year, your still headwind. keep But to

our make macro a Yes, more do of see end see time bit of of designs a there are a It's our slowing our for some decisions. days environment to controllers, well as applications We the FIs just is IP. challenging number lot We down. are these security with the lot a little as taking that headwinds. start-ups just

single-digit we So year. was the maintain an But of guidance between grow our last in high business remembering yes, low we and expect growth XX% growth that long that XX%. year-over-year, exceptionally year to run,

we think headwinds to just I current year. this deal have the with

Okay. you Thank

Thank you.

Mr. you, Thank Kim.

Our next Bank. Deutsche question is from Sidney Ho with

You proceed. may

Thank you. questions. I two have

first million. the about about DDRX your you up, past, the you're like? do what do mix us you expect DDRX And memory $XXX seeing year that to The and last as million was year? start the $XXX is, think And to look you DDRX revenue year-to-date, remind would how picking between trends you was? order TAM if chipset you talked change down, DDRX this in coming Can question the think somewhere TAM, what

say the talk we TAM changing would see much talk I alone. we if about when RCD year-over-year, So the don't chip RCD that about the chip, we

we the $XXX when the DDRX, their time customers total to the of earlier, TAM earnest for in agile ramping The DDRX to that year this It to digest revenue, how TAM is it's assume at I would regarding as expecting inventory customers' means and to also to million add continue when time split on TAM said to an remain look again, DD-based As think if companionships on And be our that the on combined is number are million of and very DDRX it depends DDRX customers we about that between same. have are and -- products, ramp our but one that we their for we the RCD lumpy. XXXX. fast can same, $XXX remains annual CD grow basis. in our we share going

of a in a lot I high there's memory a Great. form Thank maybe question. and excitement follow-up generator you. the of around memory and how of high-density DRAM maybe quantity point modules. an both product view? of us this are IP you Can know walk then AI, through qualitatively bandwidth of uses Thanks. benefiting from And you or that and revenue lot from

Sure. Great question.

IP workload side, and catalyst generative applications the especially sales, were memory On AI the IP high to type a of on side.

our have the do of in we're type of and addressing subsystems Silicon last IP that the our that part HBM As memory we from offering, Silicon are again, that those applications. into customers growth saw products business explain GDDRX we going And year. that

be more a generative And strength. does we capacity it's modules more the need see AI necessarily side, and for And development that. and strong AI terms strategy generative that increase of of bandwidth catalyst our TAM, not of I but think the On products the for we're in underlying to point pleased applications very product around trends do specialized well. a proof standard the type as very a with GPU's

that So, in a are affected way, critical it's strategy. Silicon our it And in our and factors and point I proof IP think continues capacity positive also to. a bandwidth business

Great. Thank you very much

Sidney. you, Thank

from Wells Mobley question Gary Thank with you, is a Fargo. The Mr. Ho. question follow-up next

proceed. may You

are Hi, you Gary, there?

Hey, guys.

the a opportunity. question that. to about relates follow-up companionship I as it had Sorry multipart just

your that at would or related that. I Gen X have when maybe on And each the hub SPD products. DDRX? companion DIMM, Is ship X the specifically temperature Looking follow-up and two specific to sensors you Gen of expect then to that a DDRX located chip

of first time those RCD So the indicated XXXX sensor end a XXXX. the in of many all of generations we modest generations on the DDRX. follow-on products generation is on chips. market DDRX of will ship companionships of long follow-on to of We're as calls working we're and SPD also as hit be towards of the going on modest DDRX. generation chips, and generations And Hub the for volumes the those for in in have DDRX the volumes of like therefore, temperature to we follow-on follow-on acting of generations DDRX earlier

is to Okay. common take what what shipping start your rate products your I sensors related for sensors? that, eventually question chips to for and Hubs guess temperature DDRX? customers a get RCD your to SPD can trying today who SPD temperature you those I that to Hub, is understand be for do the And think your your compels attach campaign sales? for And

So of are our power in management and temperature the in the companionships, up the or being market. there, generation SPD products, sensor, to the Hubs vendors different there first are And RCD multiple be suppliers customers goal ramp chips. of using combinations different suppliers of

follow-on validation that's process, as work you able go the the will products. the process why and more challenging I be difficult out generations to be time, through become increase it who generations think compelling what's the point of we're the to validation and of people working you DDRX will fastest. of speed and going be generation in compelling future to And on for RCD those at roll and the is new that customers some and qualification for the more with

So I years is to of think complexity that the see DDRX of the over suppliers the over come. suppliers space. going first the lot time, generation of in as that systems DDRX reduce may to a increase number And of

That's helpful. Appreciate Thanks. it.

you Thank

now to concludes turn you, the to the This would time, I questions. session. the are conference like this Mobley. company. no further [Operator Instructions] Thank question-and-answer over there Mr. back At

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

today's concludes now This you. Thank conference.