Rambus (RMBS) 5 Feb 242023 Q4 Earnings call transcript

Welcome to the Rambus Fourth Quarter and Fiscal Year 2023 Earnings Conference Call. [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.

You may begin your conference.

Thank you, operator, and welcome to the Rambus Fourth Quarter and Full Year 2023 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 next A replay The we this call with the for available of (XXX) SEC today for XXX-XXXX. be be the the X-K. press filed at has Form results on will been week release will that

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

items. effectively Our discussions and other the supply challenges amongst that projected growth, and regarding prospects, are on XX-Ks. chain and in today expectations market described may market other ASC of the file contain X-Ks, including XX-Qs to discussed and will our demand to uncertainties for including are during be the reported XXX These manage our this call with the results, documents risks solutions, fully and SEC, financial statements, shortages financial statements our effects forward-looking revenue ability we company's more subject

differ page on to been on these of and in Relations financials included non-GAAP at under slide financial release, reconciliation the statements provide presentations in these press measures website and directly materially actual forward-looking our we our our A call. in our our the release are clarity Investor greater may non-GAAP These In an under this on and rambus.com using are no GAAP in both comparable results, update to to most obligation Releases. and from statements. effort financials, press we GAAP has both Financial the presentation

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

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

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

robust on the revenue you, a year Thank the we finished the high market year good from earnings million Through outpaced outstanding very dynamic operations. $XX execution QX a overall semiconductor cash and everyone. Des, and with that end delivered in at afternoon, We in and results full guidance strong strategy, environment. of our

need we the me landscape year for generative trend years artificial long-term The secular continue to take memory and bursting and the first with expect positive review as the scene workloads emerging demand a a to for by our onto the come. intelligence Rambus for very performance data-intensive was and growth. Let increasing of XXXX XXXX for across moment accelerating computing strong accomplishments. to one a AI is catalyst many driven capacity for

revenue respected And award the emerging chips PHY through the digital with Over returned our business. semiconductor strategic important in on retirement. GSA's We finally, sale category. The its strengthened of stockholders value of debt number of agreement achievements. center testament we for enhanced company our data and SK honored the the our the and We to licensing company our repurchase further with realized share balance with hynix. of Rambus to course milestones a long-term and our as year, bolstered focus the foundation a success, and was a with differentiated IP extension most sheet

embedded Silicon which future solutions, continued segments. well businesses. AI-centric post-quantum brought are focus and we controller share With our differentiated scale, to security, solutions, as blocks security strength our to and interface digital multiple environment. interface architectures. challenging for of continue for operate execute building all and well state-of-the-art essential Turning market on including comprehensive we data to memory GDDR, a at IP In now to in offering and IP market gain solutions as security chips, center IP HBM, CXL PCIe leading-edge

to low were declined share. year. million. remained was a In X,XXX redirected while last on megatransfers revenue of delivered maintain the operations trajectory enable DDRX leadership We We with to to QX, we revenue And servers, announced inventory DDRX in we products ecosystem solid per $XX for for DDRX, adoption, traditional the pleased for very execution CapEx RCD which headwind, December the focused with and saw at continue As market shipment our to DIMM quarterly first GenX year. double strategically us QX our AI allowed predominant results DDRX acceleration our industry's product and of servers digestion digits gain an Server second. and unit on DDRX remain delivering the which to

very Again, in the to progress with team the XXXX continues while market successfully the make pleased I dynamics. navigating am

anticipated, server to market turn on As remain the into and year, slower first continue longer-term this persist softness inventories to half DDRX while than we positive recover very the outlook. we XXXX, we to expect to of in the the traditional

our to continues patterns We solid DDRX continue show reestablish order momentum. shipment and customers to to work and DDRX closely with

computing through generations have and solutions platform the progressing of life support stages production of DDRX multiple We pace cycles to qualification simultaneously the rollout. our different accelerated of

the demonstration actively to well as great I We leadership. DDRX. product the growth chip is previously, which the of our of a market, RCD positioned remain and As introduce partners ongoing were a we on focused customers very to first work GenX execution ongoing with on commitment and mentioned to we

chip forward and later to this positive our sampling providing a are we year chipset management to with our development complete memory the generations. progress and for We on DDRX our customers Additionally, server coming receiving look power pleased very first the our interface companion expanding with solutions module portfolio feedback. PMIC of to

and and and XXXX the importance workloads beyond, infrastructure. to the look further we accelerate other on will memory of AI As computing demand compute-intensive

client Continued investment will and ] architectures as that multi-ring advancement in industry critical memory expand enterprise memory performance enablers to and across collaboration close the system attached be leadership solutions we well with map product our as systems. and of and compute road novel and built market a [ Through and new as such disciplined strong levels bandwidth cloud, DRAM capacity performance serial and improve have unlocks opportunity. ecosystem, efficiency

a that of year company and great capped off strong In agility. closing, for the QX a execution was quarter

the While us focus we performance long-term center near and very consistent products to on is market for time for return like their ongoing of term, of for always, stockholders. industry AI positions value conditions navigate for and growth customers, the Rambus profitable dynamic a exciting the to employees data support. the This and drive I'd and thank well our in company the our as to the our partners strategic high and

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

we a full I'd for the by year a above as like Thank results again, delivered quarter execute long-term challenging summary execution quarter the we our macroeconomic strong XXXX, with X. financial Once and our you, for fourth XXXX our had and in continued with both to on strategy. on Slide of begin environment strong earnings expectations. financial continue to We revenue our a driven results in Luc.

value. drive coupled Our with shareholder position a in ability sheet, continue robust to flows balance our to generate cash strong to strong continued us puts

Let $XXX.X me walk you driven statement through income quarter was on by above was million, royalty mainly our do expectations, Royalty licensing our difference revenue Revenue not revenue higher in the relates X. royalty to $XX.X million. as million, Slide fourth non-GAAP we in recognize the and the bill $XX.X billings same for while always revenue we timing billings licensing customers. was our quarter revenue The between as quarter.

are be the XXXX which in will billings duration and was patent ASC in XX-year to narrowing We the the of the under and contract as Samsung quarter a licensing as the gap signed recognized royalty was the for renewal, between agreements. licensing XXX pleased revenue variable of see

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

our As expense is revenue for revenue in the in and management. goods we licensing Total million billings. And portion portion head costs, the of expectations quarter our is and of ended only $XX were be count expenses sold were of well in silicon $XX.X a other the XXX. reported reflected IP our operating in cost Operating contract we million a in remaining continue a of disciplined including royalty as reminder, total revenue with quarter to with line as as

$XX.X component million nonmarketable fixed licensing payment. and from ASC income which not have income was other and XXX recognized $XX.X This sale received million. included a of quarter of of the equity GAAP for fourth interest to but both agreements we related yet the revenue for security the financing $XXX,XXX interest fee a gain

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

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

expense collect million, number we $XX.X was in We quarter. trend million $X.X these free cash as flow though and CapEx quarter down million. contracts. continue of to to for expect Fourth this delivered the depreciation $X.X bill We was

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

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

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

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

we $XXX we first between reported billings with reported quarter XXX. what to historically the and as historically, in be XXX, ASC under we correlates ASC As revenue million expect had have Under million. $XXX revenue licensing royalty closely

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

We continued memory progression are interface chip and with execution on our business. our pleased

market excited as earlier, remain As short-term transition the the made to to dynamic. be continues outlook investments. Luc DDRX about right long-term have our We mentioned we

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

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

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

expect product tax pro profitability jurisdictions. tax our to versus a to than approximately down statutory rate be rates XX% XXXX of from the primarily higher XX% foreign higher The We of forma business is fixed tax our is patents. increased XX% to in in rate due due which XX%,

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

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

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

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

in are we execute all continue and portfolio, with strategic pleased diversified progress initiatives. of our our a we to businesses our have against as We

on engine. business for Our agreement relevance strength XXXX, have consistent extensions licensing Samsung we results. of a XX-year similar to the predictable demonstrate and extension continued In the period. licensing follows and in and continues patent innovation portfolio from pleased provide extension, SK XXXX extended a for patent our which to hynix are These

business, we approximately adjusting continues operate as have scale for business with the IP momentum million at silicon $XXX of the revenue sustained our divestiture. after In to PHY

on market opportunities AI. portfolio fueled the data the growing in center by well is capitalize positioned Our to

with XXXX that Our continues as memory in the relatively share flat delivered chip XXXX declined year. gain that were across business in we a market market interface to revenues

We positioned and long-term for growth continue execution to are focus leadership, and in on this we business. well

as we generation Overall, profitable we shareholder which continue strong to growth, sheet, a will drive balance robust cash value. with our success drive are to continue and pleased

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

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

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

It and counterintuitive the the most I of to as quarter. that appears data of sequentially to given And a relates investors, product lot DDRX want uptake the think seems a revenue be it multipart seen that first of to to the a with in we've start bit the down question revenue. I is respect guiding though with points on minds you're DDRX.

you if revenue can in that anticipate muting XX% roughly appreciate or the the maybe do XX% And so may DDRX? Clock us headwinds to be to Register the And Drivers still specific share market help you DDRX? DDRX

Luc Gary, thanks. here.

remarks, As low for the in expect servers above industry, XX% double estimate Des markets redirected softness second ecosystem a year. servers we on cycles coming as we mid-single service our expect our although in up we digit and blended market said, to continue continued overall the XXXX, grow gain basis. and indicated in to to first XXXX, traditional share, to today declined year-over-year, with online. in prepared to revenue, digits But refresh pick with half be in flat share as And the share. market gain AI server the we traditional we the like continue the But in expect the to to do last half we to in others the continue we see CapEx

benefit we I think in have half market on chips a of basis. second introducing our will companion the broader the also pickup,

me that mentioned let light Now the transition this in shed DDRX, environment. some DDRX on you

to a to at inventory. as at those their transition with our time. product the each of expect ship strategic We the time. They they generations to one position last And of themselves are ramping generations, market more major the customers suppliers middle expect hold in multiple same

So we although grow. share that in lumpiness, DDRX lot confidence continues our a of have see to we

the overall, same inventory see, us. at digestion. this DDRX We time, prolonged to a But is transition beneficial

same every XX% actually is estimate But above generations share sometimes we in because clear. XX%. share X launching blended we at XX%, customer from us just for plus, lumpy the It's approaching is and XXXX at momentum see time Our the to DDRX estimated but fluctuations. is quarter-to-quarter, our some be

Our share DDRX is XX%. approaching blended

Our last share about overall blended XX%. year was

very just fluctuations We we So customer DDRX. of see on the those with each creates That confident generations. momentum in those themselves from every feel one quarter-to-quarter. continued position

color question to the A follow-up Luc. that. there, Appreciate

that's AMD generation impending you which ushers intercept the couple a And begin believe have point and X with me processor your wrong, companion We Rapids I of I'm in Emerald for to of to Gen DDRX. from the correct products. Bergamo if ship chip

when of you the if you to to maybe companion just So speak timing more start material of can revenue see sort the chip and that? benefit from

Gary. Thanks,

of is market. first all, DDRX are we pleased momentum So the the in that taking with

public I of far. AMD's is so shipped think it's in the units high Sapphire in market also Genoa Rapids has volume. that in millions

Gen X creates that the demand products. So for

hit qualification you Rapids going positioned we will with product customers. our well are Gen which as generation generation are the next We into the X our Emerald partners, with next products of and Bergamo, said. our And of Gen in X, also for

approaching a have these share maintain times our DDRX believe them, with of again, a all different We used position in we on different own our they share. their customers products ramping generations, what blended DDRX, higher we own we And blended customers. -- we're with it in as them. XX%. basis, But be than different just to each seeing believe traction of with their one basis at And is again, as

have we side, on chip very companion have customers PMIC feedback all the PMIC. On to received sampled of our and our the positive

this So that chips. second half benefit all up of going we see in this we're the our of offering that rounds companion And year. to of the of believe

with the from of is Mehdi question next SIG. Hosseini line The

of here. couple follow-ups Yes. A

And QX is creeping the you of inventory wondering, I and to I'm should First, you and just have half inventory, more much million in RCD second your it's DDRX a in the as few ramp-up the about that how already think up next-gen about think quarter. by on how build inventory products?

here. Des it's Mehdi,

doing. of we're We have and is our increased very something this levels inventory have comfortable

If year, Luc time. probably same generations mentioned, have you lean the on inventory side. at too went And the we back of to ramping last DDRX were of as that we running sort multiple

to requirements, we the to DDRX. company, especially the very in of generations X we're a which are very customers' on responsive be to us well sheet, certainly But given as DDRX. the strategic enables and our balance inventory So happy hold positioned needs

As we're going grow forward. mentioned, share. Luc what be And doing so to our needs some we continue on [ stitching customers' our ] responsive is balance that to can inventory sheet of we

Great. And as follow-up... a

for our general. of burn is market. because ship inventory a increasing and happening our inventories, a really important of from add, of DDRX of when in that Mehdi, And in our of when DDRX ask us, what's may they ready DDRX see them generations products our are it's inventory inventory customers ramping mix I And slow we're generations to inventories slow with go we X X have strategic is products to to the We more these changing. burn If immediately. our see really,

inventory, So capture our the sure decline the generations to as market a but we make see capture on we to see that runs share DDRX a X the DDRX increase do of on strategic the we that DDRX. we inventory need

help question Luc, my then, you is And Great. maybe can me second here. actually,

a I much buffer your standardization DDRX XX more chip, relevant so As channel which around CPU to of map, into memory not bit. the per road is a I look see CPU.

between longer this CPUs -- no everyone is then to XX. to an be per channels X and going and CPU late market out XX most have X that per to coming seems are me of It the is channel. next year the bifurcated early a going So to year, DIMM

bifurcation CPU your with going model right remove to way about few per again, the DIMM XX thinking past the years. your especially scale, buffer this of Is core So the is RCD effectively, how chip? business you and would of that have will

Yes, you're correct.

the the They're capacity. bandwidth increasing and per think there -- the different all DRAM thing or our more DIMMs increasing DIMM say are I increasing of ways ways customers capacity channel the just and itself, or more of increasing of first channels. customers' the that And number capacity. number of bandwidth are is customers for I these capacity would increasing this, our and asking doing of

that's our are to DIMMs say processor channels run. how our -- per the of customers we long correct having capability channel. model with XX on that X to see in You're that And or converging the potential growth per

physical on each beyond also I think one go processors. are DIMMs XX there the constraints also physical of there than to channel. adding channels limitations X per There's -- are more with

I X So and and to think these the to current industry DIMMs architecture converge the going per channel. channels XX is

The of Cassidy Securities. from is question next Kevin the line Rosenblatt with

expand you the density, all? that about. Or modules they as themselves in talked to DRAM are a possibly higher increasing just much they as populate will at still the just on have Do Maybe will devices, DDRX you so density. what see headwind can? as The

DRAM density for Higher on industry thing in is general. the a good

DRAM Of course, higher DIMM. density density it a and has higher

of all But trumping for demand amount you this. of said, capacity fixed is a as fewer the use For I memory, would DIMM.

So we're using all vectors for capacity. to add to that more request

although thing. what's everyone capacity. because the the we as is of capacity first systems this limiting capabilities actually a at a lack It's good a to trying as So the headwind, this add look could It's system it today. look, see to

discussion for opening do AI-enabled Great. new your as up PC? And a been markets high-end even as say, see. or you follow-up, a just the popular what's I gaming RCD's, see

servers So all comes AI in storage caching, for AI servers as data we grooming. like servers, functions to basic earlier when indicated contain it traditional also calls,

servers AI within these going standard servers. of servers demand those all And standard are to high-capacity, drive for So high-bandwidth are box. an typically,

those DIMMs servers memory would So highest that memory, highest the of and density this latest typically per number box. use the the is

to going going driver So chips a for that's forward. the be RCD

a Okay. they're they AI-enabled in I about I to was CPU guess will DIMMs? need talked asking PC, PCs, manufacturers -- going if they're just our both having

those side. the high-end will the we PC gaming per exceed the the bus technology But on on is similar second, see is client space, X.X the you that regeneration inference. be a then or for chips, clock chips on similar is we we to client PC the exceeds the used a could which inference, X,XXX PC, second, see from function speed need engine when That what you standpoint about need when for RCD case RCD. megatransfers So to do very megatransfers per

we're because see, training of side going something AI this performance we requirements wave see client well. there higher on will as the AI be that's So in after applications of are as inference investing we a and wave for to that well,

we're area an investing that's in. So

Then the Nam with question Research. from is Kim of Arete next line the

part color you your be Sorry, companion momentum this X? Can I the I'm sure on I chip chips? companion some So share Q&A. year? on expecting missed start gaining was Would in update this would of chip the what's companion addressed. Or your if early not great. sales. expectation qualification was DDRX sales any they Gen your

Thanks, Nam.

we power the first We year. of to also happen have last expect shipments which the a chip very half of that power last revenue companion started feedback. for to the year. for our products of lot we to building year, But towards start later of ship time a part in the and recently in but with qualifications part sampled second the a team customers products bit building strong going management of of we into those management low the our the in which came year, in last have year. that have management generation of second we're We towards and spent the to We half QX power increase second volumes, chip, believe

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

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

conference. Thank This today's your for concludes participation. you

You disconnect. now may