Rambus (RMBS) 31 Jul 232023 Q2 Earnings call transcript

Welcome to the Rambus Second Quarter and FY '23 Earnings Conference Call. At this time, all participants are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a 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 your host, Desmond Lynch, Chief Financial Officer.

your with begin may conference. You

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

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

risks regarding be for financial market effects on supply and results, statements Our differ under amongst more discussions these that forward-looking the today of obligation solutions, and may this These including documents, will our our chain the subject challenges from other XXX items. our contain to expectations statements. financial growth and prospects, projected forward-looking effectively during demand the company's ASC may our are filed statements, SEC, ability we XX-Ks. discussed the market uncertainties manage are described in are X-Ks, fully statements and and XX-Qs update call we materially actual revenue to other results, and reported no These including with to

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

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

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

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

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

high We line another you, guidance. of Des, revenue afternoon, everyone. end with quarter Thank and strong at earnings delivered good the in and

million successfully as cash $XX also macroeconomic continue operations generated from we challenging to conditions. in We navigate through

of for center, that for advanced demand with bandwidth well As such as is as at a purpose for types generative boost memory systems the for is accelerators very memory for growth servers. more and and high-end memory performance expected rapid servers be data with these traditional the for a than substantially dedicated AI advanced that preprocessing utilize for memory demand workloads to in AI and long-term specialized typically simultaneously run capacity other This positive DIMMs DDR company. catalyst will are requirements demand Generative strong populated a HBM. driver multiple The accelerate growing workloads pace. servers data greater general as

of an AI the company Rambus strategic the of the just continues and reliability to lead long-term the to needs took focus, that security in We and continue important to performance, data our deliver intercept in pipeline. market. step areas providing the chips of the IP to feed evolution

well of security development solutions and and while business as we With to that market. a that, PHY expand and on signed scale AI. strengthening have sell IP PCIe diversity the the the center for CXL the IP including definitive of digital to in our opportunities business, while chips digital data Cadence business data and as to We state-of-the-art retaining IP controller agreement our our differentiated our industry-leading HBM, IP maintained center critical focus

concert performance our to servers high-performance companion adopt computing the we investing the expand data portfolio chips and systems thus space continued support investments as complex to its space. evolution come. higher digital only data years requirements initiatives far. solutions offerings, increased center and expand as client are with In modules the These on used center our product and Data memory product focus subsystems IP gradually in emerging our with memory offering technologies in competitive well increasing new bandwidth of center will for the require client for the to more will will

to Turning results. quarterly now our

of to businesses well. continue our execute All

of For results $XX end expectations, strong of with at memory million. delivered interface product revenue chips, high the we

to As highlighted inventory DDRX correction. in the predominant to continues volume ecosystem, headwinds than production through the this to quarter the DDRX In the year dynamic. a DDRX over positive but very In shipments remain past DDRX, for QX. be ramp unit we tripled we continue have of represented broader with which to remainder and expect QX, our line transition volume outlook faster but by this we was on see quarters, very offset the deeper-than-anticipated pleased long-term DDRX were projected, in

run actively migrations remain in of inventory RAM headwinds. are DDRX continues lumpiness through works customers platform partners. in Going and DDRX this, as on forward, and business working we focused industry the with face to product continues short and execution expect while our the With challenges the continued the we

and X continue customers the the all partners. of follow-on we to our After our qualification our DDRX X with sampling in RAMs, of generation and leadership position generations DDRX first RCD across Gen our Gen in of ecosystem RCD

collaboration DDRX, map memory the novel of with to and server to continues close solutions on the support road addition development ecosystem In generations. future

execution strong company solid the In closing, was team. continued a this from quarter the with results and for

long-term continue excellent center driven growth demand We the increasing data AI. fueled by opportunities in to see by

well position navigate systems. to dynamic expand high-performance investments our the we in critical near computing the us deliver focused While leadership term, market and solutions for conditions our

thank discuss results. financial ongoing partners for the their Des? customers, to like turn employees and always, And quarterly to our As that, the with support. Des I'll call over I'd to

to you, begin ongoing I'd delivered summary the market. pleased Slide of the we second focus and strong are again, trends company's results for quarter our with Thank financial quarter, on addressing very like a the a in and X. Luc. Once execution with we on key

financial results we strong the with QX generation revenue Our and quarter. sheet the our expectations as cash earnings balance expectations end line of strengthened continued in were in our our with high further at

QX. to that As and PHY expect close IP Luc announced our we business, transaction to we entered discussed, a we Cadence with in definitive divest agreement into the

pleased allow and to of us investments products. our as into will transaction higher growth We it redeploy with areas this are digital IP

second and Let you Slide was $XX.X million. revenue primarily as quarter to same billings The me non-GAAP X. customers. as licensing for our always with revenue bill was Revenue relates the on $XXX.X quarter line expectations. statement in million, between was $XX.X licensing we Royalty our in difference through the royalty our timing recognize walk million billings income don't while revenue we

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

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

we $XX.X XXX. including vigilant expense expenses our we head sold lower was expectations with million operating our as to quarter Total ended cost management in than continue count goods of for quarter were the the a $XX.X costs, of be of total and million. Operating

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

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

X. to equivalents receivable operations At cash, Now for details QX, the related had present up performance balance and totaling million. we worth let from from quarter, marketable turn the value which cash million previous Slide arrangements obligations. accounts licensing me ended to reflect primarily of no the which quarter We sheet future through with has contract end million of net assets company of the cash $XX.X $XXX.X the unbilled securities $XX.X the on

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

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

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

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

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

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

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

$X the quarter we revenue third $X offset and $XXX expect PHY ASC running million revenue breakeven million cost. million between approximately our IP Our basis, in as the million. On with quarterly a includes guidance for is the quarter XXX, is $XX business. business in in Under

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

business, product to we gains. made a We well position and market the share long-term and positioned lot with competitive are growth, our deliver progress a in profitable while maintaining have of

transition As Luc mentioned earlier, the DDRX underway. is product

digestion. continues However, our be guidance inventory by revenue product impacted DDRX to

remainder this expect the We of to us year. transition impact through the to continue

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

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

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

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

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

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

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

team's unpredictable am continued results challenging against finish in the strong Let summary our environment execution progress this Slide pleased to continue and make our I with as strategic macroeconomic and me we with X. a initiatives. on

business. with diversified licensing a portfolio a stable backbone from our predictable have and patent We

Our capture product portfolio is fueled center opportunities growing positioned AI. data by well to in the

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

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

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

the Securities. line from comes of Kevin question Rosenblatt The Cassidy proceed. first with Please

Yeah, have than one be DDRX the Or DDRX taking good or question. results. Maybe have inventory my Congratulations of maybe questions customer thanks the DDRX. on higher another? versus split shipping And do Is more you of the for a you the at will to another? what do was? exposure one customer around the

see channels for other high across the placing you, in time. in The say hand, have I Thank QX, exact the levels. orders slow. to every we saw surprisingly but the at are is situation DDRX as the at inventory common high. these customer, quite inventory Kevin. still that levels in we We point But all visibility customers is And burn the board, in DDRX would on don't this customers

to of across backlog, orders cancel don't We in burn. the which customers inventory customers, working burn. very slow for backlog. of board reflection with Typically, new being with the they We're with placing all push them DDRX. but the So backlog, on our DDRX a on see try our our a is they slow slow

base. DDRX going across We take that consumed, it's we time inventory to it's customer expect anticipated eventually to be more and but the the

I see.

be registered we a And made down expecting from that? client about an see the support used CPUs interesting servers more PC Or you Can applications into you and being DIMMs PCs? to there comment be give will that? that a should client. moving Or in little Okay. us of explanation

expand of In as that client transfers long into between processors the the faced we've the increase, the the speed of to the data in memory some going space. center run, challenges and are

are on expect So long lead that run, in we what space of appear thermal development the integrity and that data client the chips will had to problems we problems, in to the the similar center. signal

to the market probably are the us. that are those of last from So that And years over hit client for but be we years, space. faced will few believe of of focus an data today a we technologies in couple the investing that faced in because the area going now, center the some challenges that's by

Thanks. great. Okay,

Please of Hosseini next The with from proceed. you. question Thank the SIG. Mehdi comes line

taking a your us Yes. help is question. Thanks better chip server. can you my how buffer Look, for all understand maybe driven by

I buffer much chip shipment so just DIMM with the by by may on DDRX, demand have confused your way. unless server chip. us -- not driven wrong the think Can this the that I'm units someone the of of please just and is thinking you Street is bits DDRX buffer about or remind driven

of on Thank you, for put two, AMD. from slots the of of channels the one, how Mehdi. sales you one you number many main processors each The channels. the Intel chip each have buffer drivers are And number and that on number can

the we do will a That of to DDRX there's number And more channel. So an have going what's market to with per that people put per the more channel. compared emergence opportunity DIMMs therefore, be per the generations. potentially that happening RCD is means to processor see channels DDX in higher of

and to is what's kind move has at high the combined on higher to the gives be channel. this DDRX of density these with that So But happening. per opportunity things. of DDRX level, This DIMMs a to number augment

Okay.

which it's anything not you're It's market is description, the -- given you're DDRX, this transition. of coming. opportunities like So It's that earlier in missing CPU server into new or with just the associated is we're that stage share. tied losing

companion involves chips. in What's memories, new is of That's new buffer launch the new correct, chips, happening DDRX Mehdi. new processors, that market technology

a few teasing of past So makes issues, there seen which challenging we've over quarters. as ramp the the lot are

DDRX a But that between is dynamic between inventory transition market grow. SAM. industry. data to channels, being in the higher More in DDRX very now going this DDRX said, problems teasing need just into That from and the the processors, DDRX to more is for digestion more translate going ramping and is

on and I may Okay. companion us? anything the follow-up. product share can Is one chip If ask just introduction an or with there you update attraction

Yes.

So this companionships. but shipping Gen to given others, We're chip Mehdi ramp released we're contribution last in today, that the late We we they XXXX. making were volumes revenue year. the start with DDRX will good X low with to progress from products two are in and devices will compared products, increase

ship to good customers. starting So we're progress, modest revenue that to

X market. the correspond launch I of to revenues in think will the earnest the Gen in DDRX

Great, thank you.

the Thank Gary proceed. line you. Wells Securities. The Mobley Please next question with goes to of Fargo

drawdowns of guys. the headwinds Thanks for the taking create To Hey, question. uncertainty year. paraphrase, mentioned balance you my that the from DDRX will the customer for inventory

shipments is, quarter my it ramp between product DDRX, can possible grow grow to undercurrent inventory And DDRX the can given QX. and fourth sequentially So the is through of the question DDRX continue sequentially? through drawdowns revenue QX that

question. It is good

pleasantly DDRX. the are -- are the we we I surprised time, said, the think same slow by quarter. we DDRX were is I burn on as how in surprised second of the At ramp with

that is said year. in much we give last to shipped year as the you this QX. But we was a we in three prepared remarks, shipped the perspective, this total what as On times

we're That that. being said, very this This dynamic can pleased is and as you in starting with So large in see quite swings. is with earnest. QX,

that between So DDRX difficult that we overall, predict we us footprint transition in And QX have for is market. expect going be expect in positive that, our X DDRX to flattish swings DDR to and be but given the QX. to the DDRX we given is to

thing And Gary, just speakers]. one [multiple

ahead, Sorry, sorry. ahead. go Gary, Go

No, ahead, Des. go

the predominant QX. in that What on were I delighted we unit DDRX think -- is shipment

situation these The shipments customers unit We pull volumes really Luc the just given in production remains did fluid. inventory challenge. on are place taking we mentioned, back As QX DDRX see seeing now. these

we shipment that from on guidance expects are quarter Our production normalize transition so start DDRX these they DDRX the are to inventories hoping QX for minimal as now. just into there. place of positive, the volumes the get December and taking But sort

you. Thank color. helpful That's

you if ask trending. I quarter business? to silicon follow-up, PHY million And was update $XXX about business the I rate. you third of As IP Des, it. know the but my IP run mentioned Can the divestiture guide includes wanted how clarify revenue I missed annualized Last this, the is

were our this a about revenue, out and our Gary, growth was question. IP by good expectations, which and grow year-over-year which $XXX we business That's really delighted long-term million to really in fueled thanks. in up Last XX% growth about year, double digital controller business. was the security

rate see that in China. would on macro growth business funding Going the into we people and did lower, this the being of year, the we which this slowdown warn headwinds includes start-up challenges

have million of to performance basis that quarter been of half you rate $XX operating run million the we given described which we at performance on first headwinds on is per If look flat some the year, revenue, really the our $XX earlier. a in to XXXX roughly

are here, the digital and business in areas XX% to security this to high-growth the the areas back we growth HBM, long rate PCIe for are from AI expect IP of controllers IP right invested in as critical CXL solutions, We come well the which as XX% the term, which there. includes controllers to do in

by As breakeven quarter. Rambus mention IP business guidance I is a we prepared PHY $X I cost, roughly included is Gary, business mentioned for million there. our as in in upfront the my is for have revenue did million $X the this What remarks, offset in in roughly from

guys. Thanks,

Gary. Thanks,

the Ho, you. proceed. line next Please The Sidney Deutsche question Thank Bank. from of comes

quarters -- premium would us sustainable the you going And I Sidney. see have kind of there Great. And ASPs sort ASP seeing price And playing a are is as follow-up. a forward? and expected trends or you compared Thanks. as price of have first I couple what My on premium. do out DDRX? on to of ago? out This guess, you these playing guide can for are through is question DDRX [Indiscernible] you

now Hi, cycles. a good Marco, expectations in in we're normal with environment really question. The pricing pricing that's our and also is that just line

competitive do with suppliers, individual of Given not DDRX environment the ASPs and we're and products of the individual in we X break out three customers the DDRX.

erosion the From DDRX, DDRX to as the environment, see just in now, on pricing some the we transition from place production pricing perspective normal be is XX%. we with to see This in us, However, for is second year. taking our long-term anticipated talked DDRX cycles reset volume with generational about gross within pricing us. our just by line what expect now we've half to previously, we manage the we DDRX. for margins was and ASP DDRX will to stable change driven a do and the positive see relatively ramp XX% from of And to the a do range of product

the So overall, ASP that long-term expected, margin targets and the playing product remain for environment as XX% describe out the I to business. is really would committed XX% we we to gross

then the Great. clear, on That's a very PHY I Des. And divestiture. quick follow-up have

OpEx if where see you're So understand on you correctly, I Look, growth. business, exiting faster segments right? heavy To this focus

question there balance cash first how through given to the is, silicon stronger deploy Thanks. even your of long-term word enough us XX% IP then and if be the from that. sort still target this is to that will transaction of valid? for would you that sheet Or expect you can after is So walk XX% -- your bias to

Sidney. Thanks

to to will respond secular chip business to this divest connect AI continue XX% do XX% specific the your average the we business per to question, for of us year. this emergence was that AI, PHY space. trend some see to yes, on chips. expect see need we to to at first With that AI grow we important It other to to to in So

we that it's side, especially the IP, So on controller where differentiation. these communication important invest we into have really, really

chips chips to I be think a to that an to will the of of security there's between is important. where more create environment those going And is bandwidth important. more going finally, going proliferation be be communication

in by portfolio is really, And believe AI, that that we investing that driven really for those good. reasons are

a The We XX% long strong grow to the to year. XX% have expect is and market in market. growing in a run, we position the

a if or analog business, IP. node IP look the different it's And the at to is business because terms business it's scale But dependent. on that is ability its PHY that dependent based PHY of and is process foundry we a business mixed-signal in

has opportunity we'll to competitive So it us of develop to And the this respond be with be able a hands business. to to together, company important the scale the business that give more was the in for market for map. a faster that to road

solution, address IP the you driving and question. was other the what want that's if Des, So to

Yeah. Marco, towards does capital so sale or allocation. of Thanks, posture business approach IP the change our Luc. PHY not the [Indiscernible]

fortunate which As cash generation, a have robust sheet to to flow XX% has a of company, XX% to us a to we return cash consistently with are balance back enabled strong shareholders. free

will which remain ahead consistent, on high-growth approach firstly, Our fund pillars: of the we to allocation investments, continue organic us. focuses the capital opportunities to will three

some and also I think Luc the color in you just in about the additional data center. gave talked his opportunities growing remarks, prepared

faster investment to us freeing there. by up at So of invest growing into rate enable IP the will a from ahead this from opportunities PHY business, the us

we Secondly, with of acquisitions targets. funnel the We been last three inorganic have investments, have a years. five pipeline do and over strong acquisitive

disciplined to us. financially the to opportunities strategically, sense However, make we'll focused approach to and M&A continue remain our operationally, in and ensure

change perspective, And approach to I've capital that we'll and really, the to say here flow shareholders, our return to of the PHY does and outlined not business using you to playbook we'll I continue would today. that capital overall, continue returned consistently and that's IP allocation, we've back sales that on But lastly, the evaluate. free review something cash the

Great, guys. color. Thanks,

[Indiscernible]. Thanks,

you. Thank

a of the follow-up from Cassidy Securities. line question Please with Kevin have Rosenblatt proceed. We

more but the maybe to OpEx the Is will Des, for million the in $X that to $X it we're it's going in think products. about you're Maybe just way what along lines stay because if Thanks. that OpEx PHY business the that? right million of you're should Yeah. same investment the just invest was explaining, into expecting current

consistent areas in you're and the to $XX we'll sure of million to in Luc sort product continue our million million. the our that time, $XX talked looking about. investing the the sort and over gradually on OpEx OpEx can will think I $XX product that We've of been Kevin? continue Kevin, capture $XX that being space think ahead certainly of products forward us. right we'll fairly at million also to to growth increase QX, make time to Yeah, QX increase I the opportunities from in But that OpEx the we growing capture in going there, frame, But

great. you. Okay, Thank

Thanks, Kevin.

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

I everyone and interest would and like you. Thank good very wish your you to your thank for time today day. a

now Thank today's concludes you. conference. This