Q3 2024 Rambus Inc Earnings Call
Music
Speaker Change: Welcome to the Rambys 3rd Court of fiscal year 2024 earnings conference call. At this time, all the disciplines are in a listen-only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If you would like to ask a question, may press star one on your touch-tone phone at any time.
Speaker Change: If anyone should require assistance during the conference, please press star zero at any time. 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.
Speaker Change: Thank you, Operator, and welcome to the Rambus Surt Quarter 2024 Results Conference call. I am Desmond Lynch, Chief Financial Officer at Rambus, and on the call with me today, it's Luc Seraphin or CEO.
Speaker Change: The press release for the results that we will be discussing today has been filed with the SEC on Form 8K.
Speaker Change: We are webcasting this call, along with slides that we will reference during portions of today's call.
Speaker Change: A replay of this call can be accessed on our website beginning today at 5pm Pacific Time.
Speaker Change: Our discussions today will contain forward-looking statements, including our expectations, regarding projected financial results.
Speaker Change: Financial prospects
Speaker Change: Market Growth, Demand for our solutions and other market factors, and the effects of ASE-606 are reported revenue amongst other items.
Speaker Change: These statements are subject to risks and uncertainties that maybe discuss during this call and are more fully described in the documents we file with the SEC including our eight-case 10-cuses in 10-case.
Speaker Change: These forward-looking statements may differ materially from our eye show results, and we are under no obligation to update these statements.
Speaker Change: In an effort to provide greater clarity in this and anxious, we are using both gap and non-gap financial presentations in both our press release and on this call.
Speaker Change: and Reconciliation of these non-gap financials to the most directly comparable gap measures.
Speaker Change: has been included in a press release.
Speaker Change: in our slide presentation and on our website at rampest.com on the Investor Relations page under financial releases.
Speaker Change: In addition, we will continue to provide operational metrics such as licensing billings to give it investors better and say into our operational performance.
Speaker Change: The Order of Air Call today will be as follows. Luc will start with an overview of the business, I will discuss our financial results, and then we will end with Q&A. I will now turn the call over to Luc to provide an overview of the quarter. Luc.
Luc Seraphin: and good afternoon everyone.
Luc Seraphin: In Q3, the company delivered strong sequential growth, fueled by a double-digit increase in product revenue, driven by continued market leadership from our DDR5 memory interface chips and sustained execution across our growing portfolio of products.
Luc Seraphin: and while we invest in our product and technology leadership, we continue to generate excellent cash from operations and deliver consistent return of value to our stock holders.
Luc Seraphin: In Q3 alone, we generated $62 million of cash from our operations and we purchased $15 million of stock, marking our fifth consecutive quarter of share repurchases.
Luc Seraphin: in continued demonstration of our product leadership.
Luc Seraphin: Area Dismond.
Luc Seraphin: We were the first to introduce complete chipsets for industry standard VDR5M-outdins at 1800 Mhz and audience at 8000 Mhz per second, which are commonly referred to as the M-outd in 1200 and all in 8000 respectively.
Luc Seraphin: Designed to meet the Insatiable Demand for High-Unlimory Performance in Advanced Data Center and AI workloads, these new chipsets represent a significant expansion of our dressable market and long-term growth opportunity.
Luc Seraphin: In Q3, memory intercised chief delivered revenues of $66 million, up 17% sequentially and 27% year over year. And in Q4, we anticipate our third consecutive quarter of double-digit sequentially growth.
Luc Seraphin: As expected, we are pleased to see that data center demand growth in the second half of this year is driving increased sales of our core DDR5 LCD products, where we continue to gain share and only contributions from new products.
Luc Seraphin: We are also very excited by the positive customer feedback on our new products with quantification shipments on the way for both server and client applications.
Luc Seraphin: The rapid development of new leadership memory set system, what has, is critical to the sustained advancement of powerful server architectures.
Luc Seraphin: and the growth of AI and other data-intensive applications are accelerating the cadence of new products.
Luc Seraphin: As a fundamental pillar to our growth strategy, we will continue to leverage our strong balance sheet to support our strategic investments in new products to expand our market opportunity and to drive a long-term growth of the company.
Luc Seraphin: The recent introductions of our complete chipsets for the industry standard DDR5 and Maldin 12800 and RD8000, which I mentioned earlier, are great illustrations of this strategy in action.
Luc Seraphin: These new chipsets enable the next ways of DDR5-based systems, and incorporate the advanced clocking, control, and power management features needed for higher capacity and higher bandwidth modules.
Luc Seraphin: As a recap, our newly announced offerings for DDR5 based systems include the Gen5RCD, enabling next generation standard ordains operating at 8,000 megatons per second.
Luc Seraphin: The multiplex RCD or MRCB and multiplex data buffer or MDB enabling industry standard M-RDs running at 12,800 megatron search with second.
Luc Seraphin: and finally, the Second Generation Server Pinnick designed for both the Arden and MRDIN.
Luc Seraphin: Our SPD hub and temperature sensor are also utilized in both the MRD and our D-memory modules, rounding out our comprehensive chipset offerings.
Luc Seraphin: This chief said he designed to intercept future generation server platforms, currently targeted for 20, 26 and beyond, that we'll use the next wave of DDR5.
Luc Seraphin: As part of this next wave, the Rdm8000 and Rdm8000 are designed around the common architecture that allows an end user to populate a server with easy module type, enabling flexible and scalable server memory configurations.
Luc Seraphin: A dressing abroad range of traditional NAI servers, a DDF5 RDM 8000, utilizes the Gen5RCD and next generation server T-NIC to believe in more than 67% greater bandwidth versus the first generation of DDF5.
Luc Seraphin: This represents an important new benchmark in server main memory and supports the ongoing growth of AI and other computing-consist workloads.
Luc Seraphin: As AI continues to scale, with larger and more complex models demanding ever greater memory bandwidth and capacity, the industry standard M-RDN will be key to extending the DVFI World Map to meet these needs.
Speaker Change: M. Arden, Dastis by employing a novel, an efficient module design that boosts data transfer rates and system performance by multiplexing two ranks of DRAM.
Speaker Change: In order to support the increased complexity of this functionality, each DDFI MRDM-12800 requires 1 MRCD and 10MDB chips to multiplex the memory channel and support more memory devices.
Speaker Change: with Divers the Bandwidth and provides for greater capacity while using the same physical connections of DDR5RDMS.
Luc Seraphin: As I previously mentioned, our second generation Seraphinic is part of the chipsets for both the Rdm 8000 and MRdm 8800.
Luc Seraphin: with new server Pinnock, support higher speeds as well as more DRAM and logic chips per module.
Luc Seraphin: The second generation server-timic, along with the Gen5 RCD, MRCD and MDB, are further demonstrations of Rambus product leadership and are exciting new additions to our chip portfolio that significantly increase our addressable market in the years to come.
Luc Seraphin: Turning to Silicon IP AI continues to drive long-term momentum across our IP business.
Luc Seraphin: We further expanded our portfolio leading AI focused offerings with the introduction of the industry's first HBM4 memory controller IP
Luc Seraphin: with new HVM4 control IP provides vital building block for cutting-edge AI accelerators, graphics and HPC applications.
Luc Seraphin: Looking ahead, the requirements for power, performance and security will only identify Spirited Generity AI and other data-intensive workloads.
Luc Seraphin: Across all of our businesses, Rambus is strategically focused on advancing system memory bandwidth and capacity through innovative memory connectivity and power and management solutions.
Luc Seraphin: Inclusive, Q3 was a strong quarter for the company, driven by excellent execution and double-digit product revenue growth for Mount Chip Business.
Luc Seraphin: Consistence without you that we would see our performance strengthening throughout the year, we are poised for another quarter of WGP, Puerto Ravini-Grosse in Q4, and our own track for greater than 30% product growth in the second half, compared to the stress half of the year.
Luc Seraphin: through our continued leadership in DDR5RCDs, growing momentum in new products and the introduction of our industry first emerging and our team chipsets.
Luc Seraphin: We continue to expand our dressable market and our well-positioned to capitalize on secular trends in data center NEI.
Luc Seraphin: Our strong cash generation enables us to continue investing in innovative products and to produce some strategic initiatives that drive the long-term growth of the company, while consistently delivering value to our stockholders.
Speaker Change: As always, I'd like to thank our customers, partners and employees for their own doing support. And with that, I'll turn the call over to Des to discuss the quality financial results. Des.
des: Thank you, Luc. I'd like to begin with a summary of our financial results for the third quarter on slide five.
des: We are placed with our strong Q3 financial results. Our team delivered double-digit, product revenue growth, with strong cash generation in the quarter.
des: or profitable results and outstanding cash generation allows us to continue to strategically invest in our product roadmap and return capital to our shareholders through share repartuses.
des: Let me now provide you a summary of our non-gap income statement on Flight 6.
des: Revenue for the third quarter was 145.5 million dollars, which was in mind with their expectations.
des: Royal T-revenue with 64.1 million dollars, but licensing billings were 65.4 million dollars.
des: The difference between licensing, billings and royalty revenue mainly relates to timing as we do know always recognize revenue in the same quarter as we bill our customers.
des: Product revenue was $66.4 million, up 17% sequentially, and up 27% year over year, driven by continued strengths in DDR5.
des: Contract an other revenue with 15 million dollars consisting predominantly of silicon IP.
des: As a reminder, only a portion of a silicon IP revenue is reflected in contract and other revenue and the remaining portion is reported in royalty revenue as well as in licensing buildings.
des: Total operating costs including cost of goods sold for the quarter where 80.5 million dollars.
des: Operating expenses of 55.3 million dollars were in line with our expectations, and we ended the quarter with a total headcount of 680.
des: Gap Interest and Other Income for the Sir Quarter with $4.3 million, which includes $100,000 of ASE-606 Interest Income.
des: Using an assumed flat tax rate of 22% for non-gap pre-tags income, non-gap net income for the quarter would $54.1 million.
Speaker Change: Now let me turn to the Balanced Heat Details on Flight 7.
Speaker Change: We ended the quarter with cash, cash equivalents and marketable securities totaling $443.7 million.
Speaker Change: This is flat to Q2 as a strong cash from operations of 62.1 million dollars, was offset by stock free purchases and capital expenditures.
Speaker Change: In the quarter, we repurchase $50 million of stock, which retired approximately 1.2 million shares in our fifth consecutive quarter of executing share by-bikes.
Speaker Change: 4.4 capital expenditures was $13.5 million, but depreciation expense was $6.7 million.
Speaker Change: We delivered 4 to 8.6 million dollars of free cash flow in the quarter.
Speaker Change: Let me now review our outlook for the fourth quarter on flight 8.
Speaker Change: At the reminder, the forward-looking guidance reflects a current best estimate at this time.
Speaker Change: We continue to actively monitor the macro environment and our actual results could differ materially from what I'm about to review.
Speaker Change: In addition to the financial outlook under ASE-606, we also provide information on licensing buildings, which is an operational metric that reflects a amount of invoice to our licensing customers during the period adjusted for certain distances.
Speaker Change: As we have reported historically, licensing billings closely correlates with what we had historically reported as royalty revenue under AFC 605.
Speaker Change: Under AC606, we expect revenue in the fourth quarter to be between $154 and $160 million.
Speaker Change: We expect royalty revenue to be between 54 and 60 million dollars and licensing billings between 57 and 63 million dollars.
Speaker Change: Weeks spec Q4, non-gap, total operating costs, which include Cogs to be between 86 and 82 million dollars.
Speaker Change: Weekspect Q4, Capital Expandatures to be approximately $11 million.
Speaker Change: Under A.S.C. 606, non-gap operating results for the fourth quarter is expected to be between a profit of 68 and 78 million dollars.
Speaker Change: For non-gap interest and other income and expense, weeks back 4 million dollars of interest income.
Speaker Change: Weekspect to Proforma Tax Rate to be approximately 22% with non-gap tax expenses expected to be between 18 million dollars in Q4.
Speaker Change: Weeks back Q4 share count to be 108 million diluted shares outstanding. Overall, we anticipate the Q4 non-gap earnings per share range between 52 and 59 cents.
Speaker Change: Let me finish with a summary and slide 9. In closing, I am pleased with a financial results and continued execution.
Speaker Change: and Q3, our team delivered double-digit product revenue growth with continued strong cash generation.
Speaker Change: Through our leadership and our canic investments in DDR5 solutions, we are well positioned to capture the long-term opportunity ahead of us, we'll continue to deliver value to our stockholders.
Speaker Change: Before I open up the call to Q&A, I would like to thank your employees for their continued teamwork and execution.
Speaker Change: with that I'll turn the call back to our operator to begin Q&A. Could we have our first question?
Speaker Change: Thank you.
Speaker Change: and James Finne, if you have a question, please press star, follow by one on your touchstone phone and our first question today is from the line of Kevin Casti with Rosenblatt's securities. Please go ahead to your line as open.
Kevin Casti: Thanks for taking my question and congratulations on the good results.
Kevin Casti: But just on the results, maybe just to help clarify the guidance for the contract revenue with 17 to 23 million, and it came in at 15 million. You did much better on the licensing, but maybe you can just talk with some of the moving parts might have been there.
Speaker Change: Hi Kevin, thanks for your question.
Speaker Change: As we have talked about previously Silicon IP, where we can show up on the both contact and other.
Speaker Change: and Licensing Bellings.
Speaker Change: and if the IP is sold off to shells, it will show up on their licensing billing. If you really look at our Q3, what we did see is silicon IP revenue was relatively flat, quarter over quarter, at 28 to 29 million dollars. However, you did see a shift in revenue between the classification. It's been sold more off the shell-fi P, which resulted in higher licensing billing, which was all set by a war contract and other days and years.
Speaker Change: If you zoom out from an annual prospective cabin, I would expect around $40 million of silicon IP
Speaker Change: to show up under the licensing billings number and if you add that to the contract in others, raise a new version of it and end about $80 million.
Speaker Change: You will see a business that's growing in line with our expectation and continuing to operate at scale But over all of us, very pleased with our performance in Silicon IP And we're on track to meet our annual Grocery targets here
Speaker Change: Okay, great. Thanks for that explanation. And maybe just for further explanation, the UNS having the HBM4 controller. That's, I guess.
Speaker Change: CPUs using that is expected a couple years out. Do you get paid for this now? Is this a license that you would sign then get paid currently or do you have to wait for the device to the CPU to be in production?
Speaker Change: I'm Kevin, thank you for your question. Typically we get paid when we deliver the IP to our customers.
Speaker Change: and we've done this consistently over the years with been actually leading the HDM roadmap with this DCP.
Speaker Change: in a non-HBM3 in 21.
Speaker Change: our HBM3 in 23, and this year we're announcing our HBM4. And every time we have a wave of silicon companies that buy, that IP in the form of license. So we do not wait for these products to go to production to get paid for these licenses.
Speaker Change: Okay, great. Okay, I'll get back in the queue with other people ask questions.
Speaker Change: The next question today will be from the line of blank Curtis with Jeffries. Please go ahead. Your line is open.
Speaker Change: Hey guys, thanks to your question, I progress on the product revenue growth. Maybe I just want to follow up on Kevin's question. In terms of the Silicon IP, I'm not sure I follow the math, but I guess for the guide, it's kind of lumpy in contract revenue and you have a backup.
Speaker Change: Now you've talked about this look and IP growing at like 10-15% I don't think it's been growing that fast. I'm just kind of curious.
Speaker Change: is this kind of a base that it grows off of or is it kind of lumped being comes back down. It's a sort of kind of reconciling a quarterly base that's there, but maybe you can talk about there's anything in December and then if that 10, 15% growth is still the right number.
Speaker Change: I believe that Des, you are connected to the gateway to think about Silicon IT as the growing that 10 to 15 percent.
Speaker Change: This year we do expect a silicon IP to grow around 10%, which is in line with that 10 to 15% expectation.
Speaker Change: When you look at the revenue at S.L.C.I.P, as I mentioned earlier, of course, with two categories.
Speaker Change: and one that is a component within licensing buildings, let's just call it $40 million for the right numbers there.
Speaker Change: and you also have around $80 million within contract and others that takes the business care about 120 million this year, which is up about 10% compared to last year when you normalize for the five-day visit to the turf from there. And we're really excited about the business sort of going forward and we have released a new product this year, which are really targeted towards the AI solutions, which includes the HPM4 PCIe 7 and GDPR 7 solutions. So going forward I would expect the business to grow that 10 to 15% going into certain next year and we're going to be executing it that sort of growth rate in 2024.
Speaker Change: Thanks and I just had a question on products. DBR4 had been quite small. I just kind of curious what it's going to take up is it's still small levels or is it recovered any bit.
Speaker Change: in the Air Force, you know, small levels, you know, as expected, we've seen the six complexities decline of inventories, you know, in the channel.
Speaker Change: However, you know these sales of video fully made modest, you know, and Desmond decayed in the last course about $5 million a quarter.
Speaker Change: and we see this continuing with your long tail.
Speaker Change: but with slow sales. The good news for us is that in most of our sales, you know, that's growing, you know, this double digit quarter of the quarter is coming from DDR5 and we were expecting this given date.
Speaker Change: Good design with foot point that we had on several generations of CDR5.
Speaker Change: So that's one state now into, you know, that growth that you, you're seeing in Q3 and that we're expecting in Q4. But, you know, DDR4 plays a very modest role, you know, in, in that growth, most of us there as I engage the R5.
Speaker Change: Thanks a lot.
Speaker Change: and the next question today will be from the line of Medi Hesene with SIG. Please go ahead your line as open.
Speaker Change: Yes, thanks for thinking my question. First one is for Luke. When I look at your product revenue, you've had a very nice and commitment increase from Q1 to Q4.
Speaker Change: from 50 to 75 and 25, the million of incremental increase.
Speaker Change: What I want to learn from you is how much of these 25 million of the income links have increased driven by companion chip and how much of it is just a migration to the DBR5 and if we were to look into next year to re-assume kind of a scaling from the 75 million that you actually in 24 from.
Speaker Change: Thank you, Maddie.
Speaker Change: In terms of the second half of this year, you're correct. You know, our product revenue for the second half of this year is going to be about 30% higher. And the first part of this year, the two contributors to that, the main contributor is, as I said earlier, DDSI.
Speaker Change: We've worked over the last few years in making sure that we were leading the DDR5 race that I introduced in the DDR5 product first in the market.
Speaker Change: to secure the footprint, and that footprint is conclating now into market share. So that DDR5 market share is explaining the growth, you know, second house compared to first house.
Speaker Change: We also have the initial sales of companionships. We know we missed the first generation of products.
Speaker Change: but we're starting to ship those companionship, Q4 which is an increased versus Q3.
Speaker Change: and we also very excited with the traction that we have.
Speaker Change: on our first wave with teenage brothers.
Speaker Change: which are in, in qualification, you know, with our customers and where we see qualification volumes into Q4.
Speaker Change: So the main contributor is DDR5, you know, followed by a modest contribution of companionships in the second half-but growing with growing qualification putwing. And I think we're going to see that pattern over and over again. That's why we announced, you know, the MRD in product, the second generation of...
Speaker Change: of Phoenix as well because you know being first in the market with his leading edge products eventually translates into market share.
Speaker Change: So that explains the growth that you saw between two ones.
Speaker Change: and two-four of this year. We expect continued growth next year, you know, on our product revenue, probably with similar pattern as this year, you know, Grinot's rapid has been announced.
Speaker Change: Typically, when a product is announced, it takes six months plus before, it's in good production. So, we're going to see qualification volumes, pre-production volumes into the first half and then, you know, full volume production in the second half.
Speaker Change: and we're going to see a similar pattern as we saw with MRI rapid.
Speaker Change: and our companionship will continue to go through the air-qualification process without customers and our customers and we continue to contribute growth quarter of the quarter with them being in food swing in the second half of next year.
Speaker Change: Great, and just a quick follow-up with Des, you know, exiting the year with the product course margin of low 60.
Speaker Change: should we think of the product course margin trending towards the higher end of the year's range of 6065.
Speaker Change: Hey mate, and good question, you know why would say it will please us across margin performance in Q3, we ended around 60% which was up.
Speaker Change: 3% against acute to dread and by stronger product necks in the quarter.
Speaker Change: As a company we have a real strong track record that being disciplined and approached to placing and continuing to drive cost savings which have led to us driving and leading these as strong products or smartens.
Speaker Change: You know, for the film year of 24, I would expect gross margins to around 61 to 62% on this sort of chip side, which is both in line with her historical performance of 22 and 23, and are also a long-term target of 60 to 65%. So that's really where we've been operating for a many day, and any given quarter we could see the margins moving up or down, depending upon for a longer time in the course of a year with a really strong track record that's driving towards these gross margins.
Speaker Change: Thank you.
Speaker Change: Thanks, Mary.
Speaker Change: The next question today is from the line of Nam Kim with RIT research. Please go ahead. Your line is open.
Speaker Change: Hi, thanks for taking my question.
Speaker Change: Can you give us the update on the CXR controller to develop a month and timeline?
Speaker Change: Recently, I feel Marcus Sentiment of the Sixth End of the St. very strong compared to a few years ago, maybe due to HBM. Now, what you're viewing Sixth End of the St. Market in general and your opportunity to deal.
Speaker Change: Hello, Madam. Thank you for your question.
Speaker Change: First of all, we do see, you know, see accepting or rolling our silicone IP growth. We continue to see people.
Speaker Change: you know buying from a DXLIP.
Speaker Change: or PCI-A-D for that matter, which is a sign that a lot of chips are actually using the XR interfaces. But at the same time what we see is there's a fragmentation of that market, a lot of very different chips.
Speaker Change: Customships are using this EXR interse. That's good for us when we're a Silicon IP business.
Speaker Change: On the product side, we do have a product out with customers, in the hands of our customers, and they are testing those products and more precisely testing the use case of those products.
Speaker Change: We believe, however.
Speaker Change: that the market will consolidate.
Speaker Change: at the Diamond repaid node at 6thfv.v. until there is going to be very fragmented. That's our view. The other thing is that they are some use cases.
Speaker Change: such as, you know, memory expansion that are going to be addressed.
Speaker Change: by Altarapy's solutions like the M-R-Dins that we've just announced.
Speaker Change: which allows actually to use more bandwidth and more capacity on existing infrastructure where the Holy Cosystem has agreed on the same solutions for the industry.
Speaker Change: So this is a place that we understand that we are monitoring.
Speaker Change: We enjoy the growth on the Silicon IP side for the SLIP.
Speaker Change: We ready for the CXF-3.0 mode on the product side, but we don't believe it's gonna be
Speaker Change: you know sufficient volumes on a standard type of product until you know six or three dot zero is out, but we're also investing in MRD for applications such as memory expansion.
Speaker Change: Thank you.
Speaker Change: Our next question today will be from the line of Gary Mobley with Loop Capital. Please go ahead to a line of open.
Speaker Change: I thank you so much for allowing me to ask a question sorry I missed the last earnings call.
Speaker Change: I did Luc, you spent a lot of time in your prepare-view mark talking about M.R.D.M. and I think it's a pouring topic in the consequential market evolution over time. But the way I think the technology, first evolved, was...
Speaker Change: specific to grant rapid tremendous.
Speaker Change: as I make it some joint development between Intel, Hynix.
Speaker Change: in Renaissance initially.
Speaker Change: and if I'm not mistaken, MRDM has moved its way into the J-DX standard set and thus has become more open for folks like you to develop products.
Speaker Change: and Crockney from Wrong in that review of the market evolution. But my question for you is that do you think given how that market evolves that you will have equal to or greater market share in M.R.D.M that you have in current generations of DDR5 Dimodrals?
Speaker Change: Thanks Gary, we're coming back up.
Speaker Change: You're correct on your first statement that there were points solutions in the amounting that were not jadec compliance, that we're probably proof of concepts for the ability to increase bandwidth on existing infrastructure.
Speaker Change: and the one we are announcing is the first jet accident of MRDIN.
Speaker Change: at 2018 Road, which is...
Speaker Change: You know, not higher than the current speeds.
Speaker Change: which is also adopted by the holding industry. And, you know, while we were not participating to the custom solution in the first generation, we were working on that jet-exclusion, you know, from day one. Because we think this is the one that is going to get traction in the market.
Speaker Change: as you said correctly with Diamond Rapid note.
Speaker Change: and for this generation, not only are we developing the RCD chipset that the DB chipset, but as I said in my prepared remarks, we've got very good feedback on our first generation of Pinnick. The Pinnick is becoming more complex, so I'm on them. So we're also developing the Pinnick for the MRD insertion.
Speaker Change: and our objective there is all the time to get the similar market share as we have in the LCD market.
Speaker Change: Um...
Speaker Change: You know, this is a market that is going to show early volumes in 2026 for us.
Speaker Change: So we have, you know, next year to introduce the products to the market to go through the standard qualification without customers, customers, customers. But we're going to have a complete sheet set, including the clinic. And, you know, our goal is to reach the similar market shares we have on this kind of our CD.
Speaker Change: is the other.
Speaker Change: aspects of Mardinis that the content increases just by the nature of what it is.
Speaker Change: We have one LCD chip per module and 10 DB chips per module
Speaker Change: We would also have a complete empowerment, management and companionship offering there. So the content for module is going to be at least four times which is seen on the current audience. That's what we talk about when we say it's going to be a tantann of a Sam expansion for us.
Speaker Change: Thank you for that clarification.
Speaker Change: The, um, seeing the product revenue up 30% second-at-first-sisters tap, one thing you didn't mention that probably is factoring into that, is it general market recovery?
Speaker Change: General Seraphin, Desmond Lynch, as well as some inventory depletion.
Speaker Change: in the specific channel.
Speaker Change: So, to what?
Speaker Change: Degree is that impacting your outlook here and in your trends in the second half of the year for a product revenue. And how can you be sure that this isn't maybe another situation of an inventory rebuild and setting up for a situation like we saw back in the May 2022?
Speaker Change: Questions? Yes, you correct? We did see a recovery of the standards of our market in second half, so that's helping us.
Speaker Change: are you of the server market? Is that, you know, this share is going about?
Speaker Change: the mid-singual digit.
Speaker Change: you know if you take the midpoint of our...
Speaker Change: Guidance, Q4, our product business should grow low double digit. So, it is just from that standpoint.
Speaker Change: We believe we are getting in share.
Speaker Change: on the DDR4, and I'll come back to DDR5, on DDR4 we do see in long inventory depletion, we were starting from a very challenging point in early 23.
Speaker Change: On VDR5, we're not too concerned about the levels of inventory. You know, they are in line with what we would expect for people to start production or pre-production depending on what generations they are in.
Speaker Change: So the levels of inventory on the DDR5 type of things are reasonable at this point in time.
Speaker Change: Thank you guys.
Speaker Change: Thanks Gary.
Speaker Change: As we're reminded to ask your question, please press star one on your touch-tone phone and our next question today will be from the line of Kevin Cassidy with Rosenblatt research.
Kevin Cassidy: Thanks for taking my follow-up question.
Kevin Cassidy: and appreciate the details on the MRDIM being four times the content of the Arden. What are the expectations for my guess the number of CPUs or Willis be the new standard? Will most servers use?
Kevin Cassidy: the MRDM architecture versus our DEM.
Speaker Change: It really depends, so good question, Kevin. It really depends on the...
Speaker Change: Use cases, you don't typically...
Speaker Change: The Mardin will provide in large capacities and very high bandwidth.
Speaker Change: So, you know, at the first approximation, one would say that if you take.
Speaker Change: and AI box, for processes, standard CPUs that do all the pre-processing. That's the typical type of application that would use in MRD.
Speaker Change: in that AI box, the CPUs requires a lot of memory and very high bandwidth. So that's a natural play, so MLDs. And you'll find it in other applications where the loads are important.
Speaker Change: But they will not cannibalize distance or market as there are a lot of applications that don't need that type of bandwidth.
Speaker Change: So that's why we see, you know, a morning as a addition to our current San Du, you know, in 2026 and it will stop in the very high end, that high intensive type of application, such as AI boxes.
Speaker Change: Okay, great. Thank you.
Speaker Change: Our next question today is from the line of Mediosamey with SIG please go ahead to your line in token.
Speaker Change: is too quick follow-up for me.
Speaker Change: and the other one.
Speaker Change: on HVM4, thanks for...
Speaker Change: Highlighting opportunities but just is it anywhere you can healthy.
Speaker Change: and compare the Rambuses content IP content in HP and foreign how it compares to HP and 3E and then one follow up with Des. How should I think about operating leverage looking into next year?
Speaker Change: I'm not asking for a specific 2025 up-X Guide but just want to give it to you for the leverage, giving them all the investment that you have made in general.
Speaker Change: Yes, thank you for the question on HBM. First of all, we've been developing HBM or a coin forters.
Speaker Change: for many years. So what we provide is actually the HBM controller that sits right before the the FI. You know, we've had a history of providing HBM ahead of the market.
Speaker Change: We announced our HBM-2E in 2021, HBM-3E in 3 last year, HBM-4 this year. And the difference between HBM-3 and HBM-4 is really a question of speed on that interface.
Speaker Change: and typically when we release a new version of our HBN controller, we try to beat the speed that are defined by Jdac.
Speaker Change: so that you know, altruist tumors have room for their designs. So the main difference is the speed, but the basic offering is the same. That's an HBM memory controller.
Speaker Change: that you know, CPU vendors, GPU vendors, you know, AZek vendors can use to integrate into their chips.
Speaker Change: Hi, Merdy, it's Des. Let me jump into the topic for a question that you asked. I think it's a company we've done a very nice job in managing our expenses. There was really a good balance between being disciplined and really investing at the right level to support a future. It could also opportunities.
Speaker Change: and 2024, I've been delighted with our R&D execution and new product for a while, which really has been achieved under the similar operating extent envelope. As we've reinvested the divested five R&D expense back into the product programs.
Speaker Change: [inaudible]
Speaker Change: on the R&D side and you will see additional investment to support a new product roadmap. Maybe the correct way to think about this as being around 23 to 25 percent of revenue might be a reasonable framework for you to think about.
Speaker Change: And then in terms of the SG&A side, we've been relatively stable at that $19 to $20 million per quarter. You will see sort of inflationary increases here. But really, as the top line grows, you'll get to see some nice leverage on the SG&A side from there. But overall, I think we've been very happy with our investments into the business. They're paying off as a result of the new products we're releasing, which are increasing the future opportunities for us going ahead.
Speaker Change: Thank you.
Speaker Change: Thanks, Maddie.
Speaker Change: Next question is from the line of Nam Kim with RSA Research. Please go ahead, your line is open.
Speaker Change: Hi, thank you. Sorry, another question related to the MRDN.
Nam Kim: I understand the industry has been developing two new DIMMs, like MR-DIMM and MCR-DIMM, if I recall correctly. I'm not sure if those two standards merged recently, but I understand REMbus is not part of the MCR-DIMM initiative. Can you explain why, and what's your view on MR-DIMM versus MCR-DIMM?
Speaker Change: Hi, Mehdi. To my knowledge, we are participating in every, you know, GEDx standard that, you know, that is related to MR-DEMO.
Speaker Change: MC Ardyn. You know we are we are you know like many other companies we part of GEDEC you know we participating in into those definitions and our objective of the company just like we did for the M Ardyn is to is to be present for every GEDEC product that is out there.
Speaker Change: So, are you also involved with MCR-DEM? I think MCR-DEM is not JEDEC standard, but I'm curious.
Speaker Change: We are developing JEDxStandard now, that's our strategy.
Speaker Change: As we said earlier,
Speaker Change: The investments for these type of solutions are huge, not only on our side, but also on the part of our partners in the ecosystem.
Speaker Change: And it's important for us to make sure that there's traction in the whole ecosystem for the development of high-volume solutions, as opposed to custom solutions, which, you know,
Speaker Change: When you take custom solutions and you add them up, you know, the market may be large, but every single player in the market might not have, you know, revenues that justify the investments.
Speaker Change: By focusing on GEDx standards, whether it's for RDIM or MRDIM or for all the products we make, we're sure of the adoption of the whole industry.
Speaker Change: which drives revenue growth as opposed to depending on a custom solution for a set of different customers.
Speaker Change: So our strategy as a whole, and that's a very good question, our strategy as a whole is to develop products.
Speaker Change: that are...
Speaker Change: Jeddak
Speaker Change: or specified by GEDEC so that we know we do have the momentum and the traction from the ecosystem and we address a market that everyone is participating to, allowing us to, you know, have the growth that we expect to have as we did in the DDR5 generation of products.
Speaker Change: Thanks, Luke. It's pretty clear. Thanks.
Speaker Change: At this time, there are no further questions. This concludes our question and answer session. I would now like to turn the conference back over to Luke Seraphin for any closing remarks.
Luc Seraphin: Thank you to everyone who has joined us today for your continued interest and time. We look forward to speaking with you again soon. Have a good day.
Speaker Change: Thank you. This now concludes today's conference.