Rambus(RMBS)2023-05-01 22:31Financial Data and Key Metrics Changes - The company reported Q1 revenue of 63.8 million, up 33% year-over-year [100][21][5] - Cash from operations for the quarter was 86.3 million [22][9] - Non-GAAP earnings per share for Q2 is expected to range between 0.26, with a projected share count of 112 million [11] Business Line Data and Key Metrics Changes - Product revenue primarily from memory interface chips was 21.8 million [21] - The company expects a slight improvement in product gross margins in Q2, driven by a favorable product mix, with Q1 product gross margins at approximately 59% [32][33] - Silicon IP gross margins were just over 90% in Q1, expected to remain around that level going forward [34] Market Data and Key Metrics Changes - The transition from DDR4 to DDR5 is projected for the first half of 2024, with initial orders for DDR5 expected to start shipping in late Q2 [18][54] - The company anticipates a stronger second half of the year as DDR5 demand ramps up and DDR4 inventories normalize [97][48] Company Strategy and Development Direction - The company is focused on advancing data center memory performance to meet the growing demands of generative AI and other advanced workloads [6] - A strategic licensing agreement with SK Hynix was extended for an additional 10 years, effective Q3 2024, which is expected to enhance revenue recognition under ASC 606 [8][51] - The company is making investments in differentiated, high-quality products to address performance bottlenecks between processing and memory [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strategy and ability to drive long-term profitable growth despite a challenging macroeconomic environment [20][19] - The company expects the second half of the year to show growth compared to the first half, driven by the ramp of DDR5 [48][18] - Management noted that while the transition to DDR5 will be lumpy, they are encouraged by initial orders and the overall market dynamics [54][24] Other Important Information - The company ended Q1 with cash, cash equivalents, and marketable securities totaling 292.1 million, a decrease due to convertible note repayment [101] - The company continues to maintain a disciplined approach to ASP management and product cost reductions [33] Q&A Session Summary Question: Can you provide insights on product revenue for the second half of the year? - Management indicated that product revenue was 64 million in Q1, a 33% increase year-over-year, and expects a resurgence in DDR5-related revenue in the second half [24] Question: What is the outlook for gross margins outside of licensing and royalty? - Management expects product gross margins to improve slightly in Q2, with a long-term target of 60% to 65% [31][33] Question: Can you discuss the licensing activity for CXL? - Management noted that CXL has been a strong driver for Silicon IP growth, despite current macroeconomic headwinds [61] Question: What is the expected pricing trend for DDR5 compared to DDR4? - Management confirmed that DDR5 is expected to carry a price premium over DDR4 initially, with potential erosion over time as volumes grow [67] Question: When will the company ship its PMIC devices? - Management stated that they are developing their own PMIC devices and expect to hit the market next year [69] Question: How does the company benefit from generative AI applications? - Management highlighted that generative AI applications are driving demand for high bandwidth memory and are expected to positively impact both IP and product revenue [88]