Rambus(RMBS)2024-10-29 08:41Financial Data and Key Metrics - Q3 revenue was $145.5 million, with product revenue at $66.4 million, up 17% sequentially and 27% YoY [24][25] - Royalty revenue was $64.1 million, while licensing billings were $65.4 million [24] - Non-GAAP net income for Q3 was $54.1 million, with a 22% assumed tax rate [26] - Cash from operations was $62.1 million, and free cash flow was $48.6 million [27] - Q4 revenue guidance is between $154 million and $160 million, with non-GAAP operating profit expected between $68 million and $78 million [29][30] Business Line Performance - Memory interface chips delivered $66 million in revenue, up 17% sequentially and 27% YoY, driven by DDR5 products [10] - Silicon IP revenue was relatively flat at $28 million to $29 million, with a shift toward off-the-shelf IP sales [33] - DDR5 RCD products gained market share, with early contributions from new products [10] - DDR4 sales remained modest at around $5 million per quarter [40] Market Performance - Data center demand growth in H2 2024 drove increased sales of DDR5 RCD products [10] - The server market is expected to grow mid-single digits in 2024, with Rambus gaining share [63] - DDR5 inventory levels are reasonable, while DDR4 inventory depletion continues [64] Strategy and Industry Competition - The company introduced industry-first DDR5 MRDIMM 12800 and RDIMM 8000 chipsets, expanding its addressable market [9][12] - Rambus is strategically focused on advancing system memory bandwidth and capacity through innovative memory, connectivity, and power management solutions [19] - The company aims to achieve similar market share in MRDIMM as it has in RCD, with MRDIMM expected to contribute significantly to SAM expansion [59][61] Management Commentary on Operating Environment and Future Outlook - Management expects double-digit product revenue growth in Q4 and over 30% growth in H2 compared to H1 [20] - The company is well-positioned to capitalize on secular trends in data center and AI, driven by DDR5 leadership and new product introductions [21] - AI and data-intensive workloads are accelerating the cadence of new product development [11] Other Important Information - The company repurchased $50 million of stock in Q3, marking the fifth consecutive quarter of share buybacks [8] - Q3 capital expenditures were $13.5 million, with depreciation expense of $6.7 million [27] - Q4 capital expenditures are expected to be approximately $11 million [29] Q&A Session Summary Kevin Cassidy (Rosenblatt Securities) - Asked about the shift in silicon IP revenue classification and received clarification on off-the-shelf vs. customized IP [33] - Inquired about HBM4 Controller IP payment timing, with Luc Seraphin confirming payment upon IP delivery [35] - Followed up on MRDIMM market share expectations, with Luc explaining its use cases and market potential [65] Blayne Curtis (Jefferies) - Asked about silicon IP growth and lumpiness in contract revenue, with Des confirming 10% growth expectations [38][39] - Inquired about DDR4 recovery, with Luc stating DDR4 sales remain modest, while DDR5 drives growth [40] Mehdi Hosseini (SIG) - Asked about the drivers of product revenue growth, with Luc attributing it to DDR5 market share gains and initial companionship sales [43][44] - Inquired about product gross margin trends, with Des confirming a long-term target of 60%-65% [47][48] - Followed up on HBM4 content and operating leverage, with Luc explaining HBM4 speed improvements and Des outlining R&D and SG&A expectations [67][69][70] Nam Kim (Arete Research) - Asked about CXL controller chip development and market sentiment, with Luc discussing fragmentation and future consolidation at CXL 3.0 [51][52] - Inquired about MRDIMM vs. MCR DIMM, with Luc emphasizing Rambus's focus on JEDEC standards [72][74][75] Gary Mobley (Loop Capital) - Asked about MRDIMM market evolution and Rambus's market share expectations, with Luc detailing the company's strategy and content per module [57][59][61] - Inquired about the impact of server market recovery on product revenue, with Luc confirming share gains and reasonable DDR5 inventory levels [62][63]