Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rambus Inc (RMBS, Financial) reported strong sequential growth in Q3, with a double-digit increase in product revenue driven by DDR5 memory interface chips.
- The company generated $62 million in cash from operations and repurchased $50 million of stock, marking the fifth consecutive quarter of share repurchases.
- Rambus Inc (RMBS) introduced industry-first chipsets for DDR5 MRDIMMs and RDIMMs, expanding their addressable market and long-term growth opportunities.
- The company anticipates a third consecutive quarter of double-digit sequential growth in Q4, with a projected greater than 30% product growth in the second half compared to the first half of the year.
- Rambus Inc (RMBS) continues to leverage its strong balance sheet to support strategic investments in new products, enhancing its market opportunity and driving long-term growth.
Negative Points
- Silicon IP revenue showed a shift in classification, with more off-the-shelf IP sales resulting in lower contract and other revenue.
- The DDR4 market remains small, with modest sales and a long tail of inventory depletion.
- The CXL market is fragmented, with Rambus Inc (RMBS) expecting consolidation at the CXL 3.0 node, potentially delaying significant product volumes.
- The company faces challenges in maintaining product gross margins, with fluctuations depending on the product mix shipped each quarter.
- Rambus Inc (RMBS) is investing heavily in JEDEC standard products, which require significant ecosystem traction to justify the investments.
Q & A Highlights
Q: Can you clarify the discrepancy in contract revenue guidance versus actual results, and explain the moving parts?
A: Desmond Lynch, SVP & CFO, explained that silicon IP revenue can appear under both contract and licensing billings. The shift in revenue classification was due to more off-the-shelf IP sales, resulting in higher licensing billings and lower contract revenue. Overall, silicon IP revenue was flat quarter-over-quarter, and the business is on track to meet annual growth targets.
Q: Regarding the HBM4 controller, do you get paid now or wait for the CPU to be in production?
A: Luc Seraphin, President & CEO, stated that Rambus gets paid when they deliver the IP to customers, not when the products go into production. The company has consistently led the HBM roadmap, and each new release results in a wave of licenses sold.
Q: Can you explain the growth expectations for silicon IP and its lumpiness in contract revenue?
A: Desmond Lynch noted that silicon IP is expected to grow around 10% this year, aligning with the 10-15% growth target. The business is projected to reach about $120 million this year, up 10% from last year. New AI-focused products like HBM4 and PCIe 7 are expected to drive future growth.
Q: How is DDR4 performing, and what is its impact on product revenue growth?
A: Luc Seraphin mentioned that DDR4 remains at small levels, with sales around $5 million per quarter. The growth in product revenue is primarily driven by DDR5, which is expected to continue growing due to a strong design win footprint.
Q: What is the outlook for CXL controller chip development and the market sentiment around CXL?
A: Luc Seraphin explained that Rambus sees CXL playing a role in silicon IP growth, with many chips using the CXL interface. However, the market is fragmented, and Rambus expects consolidation at the CXL 3.0 node. The company is ready for CXL 3.0 but is also investing in MRDIMM for memory expansion applications.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
