Earnings call transcript: Rambus Q1 2025 sees strong revenue beat

Rambus Inc (RMBS) reported its first-quarter earnings for 2025, meeting earnings per share (EPS) expectations while surpassing revenue forecasts. The company posted an EPS of $0.56, matching analyst predictions, and achieved revenue of $166.7 million, outstripping the anticipated $161.5 million. Despite the positive revenue surprise, Rambus’s stock experienced a slight decline of 0.56% in aftermarket trading, settling at $51.93. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.42, supported by impressive gross profit margins and strong cash management. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued.

Key Takeaways

• Rambus’s revenue exceeded forecasts, driven by strong product sales.
• EPS met expectations at $0.56, reflecting stable profitability.
• The stock saw a minor decline in aftermarket trading by 0.56%.
• Product revenue surged 52% year-over-year, highlighting robust demand.
• The company maintains a strong cash position with $514.4 million in cash and equivalents.

Company Performance

Rambus demonstrated solid performance in Q1 2025, buoyed by substantial growth in product revenue, particularly from DDR5 RCD chips. The company continues to capitalize on the growing demand for high-performance memory solutions, positioning itself strongly in the server memory market. Compared to the previous year, Rambus’s revenue growth underscores its competitive edge and market leadership in DDR5 products.

Financial Highlights

• Revenue: $166.7 million, surpassing forecasts and up significantly year-over-year.
• EPS: $0.56, in line with expectations.
• Royalty Revenue: $74 million.
• Licensing Billings: $73.3 million.
• Product Revenue: $76.3 million, a 52% increase from the previous year.
• Non-GAAP Net Income: $64.6 million.
• Free Cash Flow: $65.7 million.
• Cash from Operations: $77.4 million.

Earnings vs. Forecast

Rambus’s Q1 2025 revenue of $166.7 million exceeded the forecast of $161.5 million by approximately 3.2%, indicating a robust market demand for its products. The EPS of $0.56 met expectations, showcasing consistent profitability. This revenue beat marks a significant positive deviation from the forecast, reinforcing investor confidence in the company’s growth trajectory.

Market Reaction

Following the earnings announcement, Rambus’s stock experienced a slight decline of 0.56% in aftermarket trading, closing at $51.93. This movement contrasts with the stock’s earlier performance, where it saw a 2.51% increase during regular trading hours. The stock remains within its 52-week range, with a high of $69.15 and a low of $37.42. Notably, analyst consensus shows significant upside potential, with targets ranging from $69 to $90 per share. InvestingPro data reveals the stock has delivered an impressive 18.55% return over the past week, suggesting strong momentum despite near-term volatility.

Outlook & Guidance

For the second quarter of 2025, Rambus provided revenue guidance between $167 million and $173 million, with non-GAAP EPS expected to range from $0.57 to $0.64. The company anticipates continued growth in companion chips and a ramp-up in the MRDIMM market by the second half of 2026. This outlook aligns with the company’s strong revenue growth trajectory, which InvestingPro data shows has maintained a robust 20% CAGR over the past five years. For detailed growth projections and comprehensive analysis, investors can access the full Pro Research Report on Rambus. Rambus remains vigilant regarding potential tariff impacts, although no immediate effects are expected.

Executive Commentary

CEO Luke Seraphin highlighted the company’s resilience, stating, "Our business model is quite resilient," emphasizing Rambus’s ability to navigate market challenges. He reiterated the company’s ambition to maintain a 40% to 50% market share in RCD chips, underscoring its leadership in DDR5 technology. Seraphin also noted, "We are agnostic to the type of processor or core that is being used," reflecting Rambus’s flexibility in adapting to various technological shifts.

Risks and Challenges

• Potential tariff impacts could affect future operations, though currently minimal.
• Market saturation in certain segments could limit growth.
• Supply chain disruptions remain a concern for product delivery.
• Economic downturns could dampen demand for high-performance memory products.
• Competitive pressures from emerging technologies and rivals.

Q&A

During the earnings call, analysts inquired about the timing of silicon IP revenue, which Rambus indicated depends on customer design cycles. The company also addressed its ongoing investments in technology leadership and the positive momentum in new product qualifications, signaling a focus on sustaining innovation and market relevance.

Full transcript - Rambus Inc (RMBS) Q1 2025:

Conference Operator: Welcome to the Rambus First Quarter Fiscal Year twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. As a reminder, this conference call is being recorded. I’d now like to turn the conference over to Desmond Lynch, Chief Financial Officer.

You may begin your conference.

Desmond Lynch, Chief Financial Officer, Rambus: Thank you, operator, and welcome to the Rambus first quarter twenty twenty five results conference call. I’m Desmond Lynch, Chief Financial Officer at Rambus, and on the call with me today is Luke Seraphin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form eight ks. We are webcasting this call along with the slides that we will reference during portions of today’s call. A replay of this call can be accessed on our website beginning today at 5PM Pacific Time.

Our discussion today will contain forward looking statements, including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions, other market factors, including reflections of the geopolitical and macroeconomic environment and the effects of ASC six zero six on reported revenue amongst other items. These statements are subject to risks and uncertainties that may be discussed during this call and are more fully described in the documents we file with the SEC, including our eight Ks, 10 Qs and 10 Ks. These forward looking statements may differ materially from our actual results, and we are under no obligation to update these statements. In an effort to provide greater clarity in the financials, we are using both GAAP and non GAAP financial presentations in both our press release and on this call. A reconciliation of these non GAAP financials to the most directly comparable GAAP measures has been included in our press release, in our slide presentation and on our website at rambus.com on the Investor Relations page under Financial Releases.

In addition, we will continue to provide operational metrics such as licensing billings to give our investors better insight into operational performance. The order of our call today will be as follows. Luke will start with an overview of the business, I will discuss our financial results and then we

Luke Seraphin, CEO, Rambus: will end with Q and A. I’ll now turn the call over to Luke to provide an overview of the quarter. Luke? Thank you, Des, and good afternoon, everyone. Rambus had an excellent start to the year.

In Q1, we achieved great financial results and maintained our market leadership position in core DDR5 chips, delivering another quarter of record product revenue. As a cornerstone of our growth strategy, we continue to aggressively drive our product development roadmap of signal and power integrity solutions for next generation memory architectures that address the ever increasing needs of advanced workloads in the data center. As we navigate the dynamic environment in the near term, the Rambus business model is naturally resilient to turbulence. This resilience comes from the diversity of our business with revenue streams from chips, IP and patents. Our Patent Licensing business is highly predictable due to the long term nature of our agreements, which provides financial stability.

Our robust balance sheet and consistent track record of generating strong cash from operations strengthens our ability to navigate macroeconomic uncertainty and the potential impact of tariffs. As of today, there is no direct impact on our operations from tariffs. This is a rapidly evolving situation that we are actively monitoring and we are in continuous discussions with our customers and suppliers to understand the potential indirect impacts of tariffs. Given the current dynamics, we have limited visibility of the potential impacts beyond the current quarter. We remain very conscientious and focused on strategic execution.

Our robust business model and stable foundation allow us to sustain our strong investment in technology leadership and new product development, positioning us well for long term growth while consistently delivering value to our stockholders. Turning now to our Q1 results, we delivered revenue and earnings above our expectations and generated outstanding cash from operations of $77,000,000 Memory Interface chips drove the top line growth, delivering another quarter of record revenue at $76,000,000 up 52% year over year, driven by our continued strong leadership position in core DDR5 LCD products. We are delighted to see another quarter of increased sales for memory interface chips and expect further growth in Q2, putting us on track for a very strong first half of the year. As I mentioned in my opening remarks, we are also making steady strides in advancing our product roadmap. The record number of products introduced last year are each moving through the varying stages of the product adoption cycle.

Progress continues on the rollout of our expanding portfolio of new products, including our industry leading server PMICs and MRDIMM 12,800 chipset. We have broad based momentum and qualifications ongoing at the module and system level. The industry standard MRDM12800 chipset will enable a new wave of high performance DDR5 systems as the need for capacity and bandwidth continues to grow. Designed to Intercept’s future generation server platforms, we are providing qualification samples to customers and expect to see our chips ramp in line with compatible processes. As a critical component to managing power in high performance memory subsystems, our family of PMICs is also being very well received by customers.

Our industry leading extreme current PMIX will support high capacity systems with RDAMs running at 413,200 megatransfers per second. And our second generation server, PMIX, rounds out our offering for both industry standard DDR5 RDIMM 8,000 and MRDIMM 12,800. We are very excited by the positive progress at customers for our broad set of new products with early shipments underway for both server and client applications.

: Turning to Silicon IP, AI continues to drive design win momentum. And while quarter on quarter revenue may vary due to customer program timing, we

Luke Seraphin, CEO, Rambus: are pleased with our ongoing traction. As key building blocks for accelerating computing ICs, we continue to see strong demand for our industry leading memory and interconnect IP, including HPM4 and PCIe seven controllers, as well as our security IP. In March, we introduced our next generation CryptoManager security IP solutions that address an expanded set of customers and offer new levels of security, including Quantum Safe functionality. As we look ahead, AI and the ongoing evolution of

: the

Luke Seraphin, CEO, Rambus: data center will continue to drive demand across our chips and IP with advanced applications requiring unprecedented levels of performance and security. To enable the robust high performance and high capacity memory subsystems critical to meeting the needs of data intensive workloads, a growing number of specialized silicon solutions are required. With thirty five years of memory subsystem expertise, Rambus has strategically expanded our product portfolio to offer complete chipsets for all industry standard DDR5 server memory modules. Over the past year, we continued our track record of industry leadership in core DDR5 products, introduced new server power management solutions, and were first to market with a complete chipset for industry standard DDR5 MRDIMMs. We are also excited at the future prospect of our signal and power integrity technology water pulling into solutions for the clients’ market.

The strength of our business model enables us to continue this investment in new products for growth, and we look forward to sharing more as we make further progress on our roadmap and expand our addressable market. In closing, we had a very strong start to the year, exceeding guidance for revenue and earnings and continued product leadership driving record product results. Our dedicated product execution, continued conviction in our roadmap investment and resilient business model position us well for future growth and success. As always, I’d like to thank our customers, partners and employees for their ongoing support. And with that, I’ll turn the call over to Dez to discuss the quarterly financial results.

Dez?

Desmond Lynch, Chief Financial Officer, Rambus: Thank you, Luke. I’d like to begin with a summary of our financial results for the first quarter on Slide three. We delivered strong financial results in the quarter as we continue to make progress on our long term growth strategy. Our first quarter results exceeded our expectations for both revenue and earnings. In addition to these solid results, our resilient business model with diversified revenue streams and a stable foundation of our patent licensing business consistently generate strong cash from operations.

This enables us to invest in our long term growth as we navigate the current dynamic environment. Let me now provide you a summary of our non GAAP income statement on Slide five. Revenue for the first quarter was $166,700,000 which was above the high end of our expectations. Royalty revenue was $74,000,000 while licensing billings were $73,300,000 The difference between licensing billings and royalty revenue mainly relates to timing as we do not always recognize revenue in the same quarter as we bill our customers. Product revenue was $76,300,000 up 4% sequentially and up 52% year over year as we delivered another quarter of record product revenue driven by continued strength in DDR5 products.

Contract and other revenue was $16,400,000 consisting predominantly of Silicon IP. As a reminder, only a portion of our Silicon IP revenue is reflected in contract and other revenue and the remaining portion is reported in royalty revenue as well as in licensing billings. Total operating costs, including cost of goods sold for the quarter were $90,400,000 Operating expenses of $59,400,000 were in line with our expectations and relatively flat sequentially as we continue to be disciplined in our expense management. Non GAAP interest and other income for the first quarter was $4,500,000 Using an assumed flat tax rate of 20% for non GAAP pre tax income, non GAAP net income for the quarter was $64,600,000 Now let me turn to the balance sheet details on Slide six. We ended the quarter with cash, cash equivalents and marketable securities totaling $514,400,000 up from Q4, primarily driven by strong cash from operations of $77,400,000 First quarter capital expenditures were $11,700,000 while depreciation expense was $7,100,000 We delivered $65,700,000 of free cash flow in the quarter.

Let me now review our non GAAP outlook for the second quarter on Slide seven. As a reminder, the forward looking guidance reflects our current best estimates at this time and our actual results could differ materially from what I’m about to review. While the geopolitical and economic environment is uncertain, we remain in constant communication with our customers and suppliers to navigate the evolving landscape. In addition to the non GAAP financial outlook under ASC six zero six, we also provide information on licensing billings, which is an operational metric that reflects amount invoiced to our licensing customers during the period adjusted for certain differences. We expect revenue in the second quarter to be between $167,000,000 and $173,000,000 We expect royalty revenue to be between $67,000,000 and $73,000,000 and licensing billings between $64,000,000 and $70,000,000 We expect Q2 non GAAP total operating costs, which includes COGS to be between $94,000,000 and $90,000,000 We expect Q2 capital expenditures to be approximately $13,000,000 Non GAAP operating results for the second quarter is expected to be between a profit of CAD 73,000,000 and CAD 83,000,000.

For non GAAP interest and other income and expense, we expect CAD 4,000,000 of interest income. We expect pro form a tax rate to be 20% with non GAAP tax expenses to be between $15,400,000 and $17,400,000 in Q2. We expect Q2 share count to be 109,000,000 diluted shares outstanding. Overall, we anticipate the Q2 non GAAP earnings per share range between $0.57 and zero six four dollars Let me finish with a summary on Slide eight. In closing, I am pleased with our strong financial results and continued execution.

Our diversified portfolio and disciplined business model continues to drive profitable growth with strong cash generation. Our robust balance sheet enables us to invest in market expansion opportunities in data center and AI, while consistently delivering value to our stockholders. Before I open up the call to Q and A, I would like to thank our employees for their continued teamwork and execution. With that, I’ll turn the call back to our operator to begin Q and A. Could we have our first question?

Conference Operator: Thank you. The first question is from the line of Gary Mobley, Loop Capital. Your line is now open.

Gary Mobley, Analyst, Loop Capital: Good afternoon, everybody. Thanks for taking my question. As we sit here today and think about the served available market for your product revenue, your memory interface chip revenue, I guess the baseline to consider is the market for general servers. But as far as socket configurations go, core count, and, the number of memory channels supported by these different server processors, what are you guys seeing in terms of trends out there that that’s driving memory density in in each specific server above and beyond just sort of the baseline general server market growth rate?

Luke Seraphin, CEO, Rambus: Thank you, Gary, for for for your question. There are actually a lot of factors coming into the view of the total available market for our products. Certainly, as you say, the number of sockets, the number of channels per processor, but also the mix between AI servers and standard servers. If we take all of this into account, we believe that the market is going to grow mid to high single digit for our product this year, taking into account all of these factors, including the memory density on each one of the DIMMs. It’s a complex equation, but with everything taken into account, we expect the market to continue to grow mid to high single digit this year for our products.

Gary Mobley, Analyst, Loop Capital: Okay. Thank you. Just a quick follow-up. In the past, you’ve always had your ASC six zero six compliant GAAP revenue lower than your adjusted revenue. And, now I would presume that most of your major patent licenses with your memory IDMs are on you have some embedded performance obligation.

And so, you know, I would expect them to convert to but now your ASC six zero six revenue is above your adjusted revenue. Maybe if you can just give us a sense of, you know, what’s driving that seemingly, you know, $5,000,000 a quarter of of revenue path that’s that’s in the numbers now.

Desmond Lynch, Chief Financial Officer, Rambus: Hi, Gary. It’s Des. In the quarter, we did see a small patent agreement that was renewed, which resulted in upfront revenue recognition from a six zero six perspective. The billings from this contract will follow in later quarters and will show up under licensing billings. And as you mentioned, am really pleased to see that all major patent license contracts have been renewed to long term agreements under a variable structure, which results in the strong alignment between both GAAP and non GAAP results.

We will continue to work on transitioning some of these smaller legacy contracts to our revenue recognition friendly structure under six zero six. But overall, we’re really pleased to see the convergence of our financials.

Conference Operator: Thanks, Doug. Thanks, Luke.

: Thanks, Gabby.

Conference Operator: Thank you. Thank you. The next question is from the line of Aaron Rakers with Wells Fargo. Your line is now open.

Aaron Rakers, Analyst, Wells Fargo: Yes. Thanks for taking the question, guys. A couple if I can as well. So first of all, I just want to go back and I can appreciate the commentary that you offered on the tariff situation and the uncertainty involved in what is obviously very fluid dynamics. But Luke, I’m curious as you’re engaging with your customers, what are the scenarios that they’re thinking about as it relates to tariffs?

Have you seen any indications or signs of kind of inventory builds or buying ahead based on this fluidity of tariffs? Any kind of context around what your dialogue spend would be very helpful.

Luke Seraphin, CEO, Rambus: Thanks for your question, Aaron. So the first thing I would say is that our business model, as I said in the opening remarks, is quite resilient. Our patent licensing is not going to be affected by the tariffs just because of the nature of these agreements. We see a lack or less visibility in terms of our SiP revenue because we don’t know what the indirect impact of the tariffs are going to be on the design starts of our customers, but we expect to grow our revenue on Silicon IP. And with respect to our product business, we build our products in Asia.

The front end is in Taiwan, the back end is in Taiwan and Korea, and we ship to our customers in Asia. So from that standpoint, there’s no direct impact of tariffs. What we’re looking at with our customers and suppliers are the indirect impact on the product space as depending on the situation, some other customers, some other companies may shift their production lines to areas with no tariffs and that could create some tension there on the supply chain. Finally, when we look at our backlog at the inventory level on our side, inventory level at our customer side, we don’t see any pull ins at this point in time, but we’re monitoring the situation. But as far as we’re concerned today, we do not see any pull ins from our customers.

Aaron Rakers, Analyst, Wells Fargo: Yes. That’s very helpful. And then kind of more on the product chipset growth, 52% growth is pretty notable. I’m curious as we think about the diversity within that business, where do we stand today with regard to RCDs and kind of really what I’m trying to get at is the diversity towards these PMICs and companionships really starting to ramp in the second half of the year. How do we think about the mix of that business and the progression of that mix?

And then I’ll slot in the final part of that is that MR DIMMs, just remind us real quickly of the timing of when that might be something that we should really start to consider in that product line? Thank you.

Luke Seraphin, CEO, Rambus: Thank you. Yes, sure. At this point in time, the vast majority of our business is still on the RCD chip, and the vast majority of that is on DDR5 RCD chips. And I think this is the result of the strategy we have put in place, which is to make sure that we have the right footprint in every generation of DDR5 that translates into the growth that we are seeing today. With respect to new products, we introduced eight new products last year, four of them in April, ’1 in July and the rest in October.

What we’re starting to see is some of the qualifications are calculating through the whole system. We’re starting to see modules qualified with our PMICs. They are on the high end of these modules, which is not a surprise because that’s how we position our product line to gain share. It’s taking its time, but it’s moving. I think the contribution I let Des comment, the contribution of these companionships in the first part of this year is probably single digit, low single digit by quarter.

But we expect this to continue to grow towards the end of the year. We do see the momentum. The later products take more time with respect to MRDIMM. We just sampled customers recently. And that MRDIMM market is going to ramp with a follow on generation of the computing platforms.

There’s going to be revenue in the second half of twenty twenty six to start with.

Conference Operator: Thank you. The next question is from the line of Blayne Curtis with Jefferies. Your line is now open.

: Hey, good afternoon. Thanks for taking question. I just want to follow-up on the tariff question. Maybe you can just walk us through kind of how the linearity of the quarter in the first few weeks here of April. I mean, I guess, your product business is growing.

I’m just kind of curious how kind of that order momentum has been. And it sounds like it hasn’t changed much, but if you could just kind of add a little color there, would be great.

Desmond Lynch, Chief Financial Officer, Rambus: Hi, Blaine. Thanks for your question. We’re really pleased with what numbers we were able to print for Q1 and also the guidance for Q2. If we look at our orders sort of backlog, we have high coverage going into the quarter. We’re probably at least over 90% covered on the midpoint of the backlog from there.

And what we will see is the normal sort of shipping patterns through month one, month two and month three within the quarter. So very pleased with how everything sort of playing out. As Luke mentioned earlier, we’ve not really seen a pull forward of demand from our customers, but that’s something we continue to watch here going forward.

: Perfect. And then I’m just kind of curious if you had a perspective. I know it’s a really tough thing for me to ask you about the full year or the second half. But I’m just kind of curious that we’re, if you could maybe talk about your visibility into some of the new products from server platforms in terms of your visibility and continued growth for the product revenue.

Luke Seraphin, CEO, Rambus: Yes. Sure. As we indicated earlier, the different products, the eight different products that we introduced at different stages of rollouts with our customers, we do see the first full modules using some of our products rolling out in the second half of this year. So our view is that quarter over quarter, we will continue to see increased revenue from our companionships with the caveat that we’ll see how the tariff situation evolves over time. And secondly, as for all of our products, we’re always dependent on the rollout of the platforms that use those products.

So but that’s the normal state of the business for us. But assuming that the rollout of our platforms go the way we expect them to go, we will see continuous growth quarter over quarter on our companionships and to and also in 2026.

: Thanks. I just want to clarify. Mean, you’re saying the companionships, but in terms of like RCD growth as well, is there some distinction you’re making? Or you just have better visibility companion off a low number?

Luke Seraphin, CEO, Rambus: Our CD chips, we are in very good position on the DDR5 generation of products. We continue to monitor the mix between Gen one, Gen two, Gen three. All the products are rolling out. Our view at this point in time is that if any platforms shift out from the processor vendors, then that demand is probably going to be covered by the prior generation. So the view we have on the RCD chip is that we will continue to maintain our market share.

Last year, we were a little short of 40% share a little higher than 40 share. The prior year, we were a little short of 40% share, and we continue to have the goal of 40% to 50% share. And that does not depend on the rollout of the different platforms at this point in time. The good news for Rambus is that DDR5 is in the market in earnest, and that’s where our footprint, whatever the generations is much stronger than DDR4.

Kevin Cassidy, Analyst, Rosenblatt Securities: Thanks a lot.

: Thank you.

Conference Operator: Thank you. The next question is from the line of Mehdi Hosseini with Susquehanna. Your line is now open.

: Yes. Thanks for taking my question. I want to start off with the product revenue. Was there a mix issue that led to a sequential decline in the gross margin? And if I just use the Q1 as a baseline, how should I think about progression of product revenue throughout the year?

And I have a follow-up.

Desmond Lynch, Chief Financial Officer, Rambus: Mehdi. It’s Dev here. So on the product gross margins, they continue to operate in line with our long term gross margin target. In Q1, our gross margins on the chip side were around 60%. This was down slightly compared to Q4, which was driven by the price negotiations with our customers, which effective at the start of the year.

These price reductions were in line with our expectation and we saw mid single digit erosion on production parts from there. If we look at the back half of the year, what I would expect to see is stronger gross margin performance compared to the first half. This would be driven by a combination of product mix improvements as well as manufacturing cost savings that will continue to ramp throughout the year. We did see this dynamic and similar profile in 2024. I think overall, when we look at an annual basis, we have a strong track record of delivering product gross margins in line with our long term target through a disciplined approach to pricing and the continued drive on the manufacturing cost savings side from there.

: Okay. Thanks for detail. And then one follow-up on silicon IP. Given the recent headlines of the past month or so, it seems like HBM4 samples will be available later this year and maybe high volume manufacturing next year. And I’m not asking you for a specific guide, but given my assumption that you have higher content with HBM4 compared to prior generation, should we expect a material step up in incremental revenue?

Or how else could we think about the contribution, especially as it relates to silicon IP?

Luke Seraphin, CEO, Rambus: Thank you, Mehdi. The nature of the silicon IP business is that we typically sell our IP twelve to eighteen months before our customers roll out their chips into the market. So our activity on HBM4 started last year. It continues throughout this year. That explains some of the good performance we had last year with total revenue of $120,000,000 on the ESIP side.

But that business is lumpy in nature because we get the revenue when actually people license our IP. So we’re dependent on the design starts, new tape outs and these kind of things. But the HBM four wave started months ago for us in preparation for chips that are going to roll out in the market. And as we do with the rest of our SiP product, we continue to work on the follow on generation, which will generate revenue. But again, we were pleased with the revenue last year of $120,000,000 but that was partially due to the HBM four rollout last year.

: If I may ask a quick follow-up here. Yeah. I see Q4 is a big step up in silicon IP. So with HPM and this licensing agreement, it’s nothing to do with customer diversification. You have already licensed, and now the next step is for, like, a HPM 4E.

Is that is the licensing revenue, yes, I understand it happens earlier, but is that product migration driven or is that customer diversification or both? The the the between q ’4

Luke Seraphin, CEO, Rambus: and q one on the silicon IP business, you know, has mostly to do with customer timing of of, you know, of these different tape outs and these different products more than, you know, a generation of change. Because when you introduce a new technology like h b m four and h b m four e, it can be adopted at different times by our customers. And every time one of our customers adopts it, we see a spike in our revenue, but that can be a bit lumpy. So that Q4 to Q1, we just happened from a timing standpoint to have customers rushing through their designs in Q4 being a little slower in Q1. That has more to do with timing than it has to do with the rollout of new technologies.

: Okay. Thank you. Thanks for details.

Conference Operator: Thank you. The next question is from Natalia Winkler with Evercore. Your line is now open.

Natalia Winkler, Analyst, Evercore: Hi, thanks for taking my question. I was wondering if, Luky, could speak a little bit about what you’re seeing from the standpoint of x86 versus ARM CPU servers? And specifically, how you think that sort of market share shift may be playing into your product portfolio? Would you please kind of describe what you think the expectation from the performance standpoint for the ARM servers are? And if there additional benefits from the standpoint of the companion chips for you guys or if it’s actually a risk?

Luke Seraphin, CEO, Rambus: Thank you, Natalia. Way we look at it is that you know, we are agnostic to, you know, the type of processor or core that is being used. You know, whether it’s an a x 86 core based product, you know, AMD or Intel, or whether it’s an ARM core based product, the interface to the module remains the same. So we are agnostic to the changes of or the shift of share between Intel and AMD on the x86 side and between x86 and ARM processors at this point in time. But that doesn’t change the content on the module as well.

So what we have to do at Rambus is make sure that we are engaged with all of these customers. But the interface is exactly the same. The product line doesn’t change for us. So we kind of immune from a revenue ramp or design win standpoint.

Natalia Winkler, Analyst, Evercore: Thank you. That’s very helpful. And from the standpoint of the client project, Luke, you mind reminding us, like, what’s the sort of time line for ramp of those client products? Is it any different than server product?

Luke Seraphin, CEO, Rambus: Sure. So the idea on the client side is that some of the technologies that were necessary in the data center for performance reasons are going to be required on the high end client side. So the TAM is limited at this point in time because this is limited to the very high end of the market. And the first product that we’re introducing or that we introduced last year is the Client Clock Driver. We introduced that product in July of last year.

And it’s going to it’s being sampled to customers and it’s going to hit the market starting end of this year, beginning of next year, but in reasonably low volumes, to be honest. But that’s very important for us because if you look at this more strategically in the long run, power integrity or signal integrity, which is the what what the CKD or the client cloud driver does, are going to be critical to the performance of client systems in the future. So waterfalling the data center technologies into clients is important for us. CKD is the first product and it’s going to it’s sampling to customers with good reactions so far.

Natalia Winkler, Analyst, Evercore: Thank you.

: Thank you.

Conference Operator: Thank you. The next question is from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.

Kevin Cassidy, Analyst, Rosenblatt Securities: Yes. Thanks for taking my question and congratulations on the great results. And going back to the Silicon IP, I see you did have a lumpiness on the upside in the first quarter, but it looks like your guidance for the second quarter is up also. Do you expect that to continue through the second half?

Desmond Lynch, Chief Financial Officer, Rambus: Hi, Kevin. It’s Dez here. We were pleased with the overall sort of results in Silicon IP in the first quarter, which was in line with our sort of expectations. What we did see is that we did sell more off the shelf IP, which explains the strength in licensing billings and royalty revenue in the quarter, which was offset by more customizable sort of IP, which shows up under the contract and other sort of line from there. What I do expect going into the second quarter, the silicon IP revenue to be relatively flat to Q1 would be a good expectation from there.

And as Luke mentioned, we did have a really strong fourth quarter of last year, which was really driven by the HBM4 results. But overall, I think the business is performing in line with expectation and we would expect to see the second quarter revenue being flat to sort of Q1 from there.

Kevin Cassidy, Analyst, Rosenblatt Securities: Okay, great. Going to the MRDIMM, when you’re talking to your customers now about the MRDIMM, what kind of adoption rate are you expecting? Is it say if a CPU has 12 memory channels, will all 12 of them use the MRDIMM or will it be just a certain percentage or is it just a certain percentage of CPUs?

Luke Seraphin, CEO, Rambus: It’s early to say, Kevin, to be honest, but what’s driving the adoption of MRDIMM is the need for more capacity and sorry, more capacity and more bandwidth. What the market sees is that it’s a nice bridge between the DDR5 generations of modules and the DDR6 generation of modules. It kind of bridges those two generation of products in terms of capacity and bandwidth. It’s going to be used in very high end system where those needs are required. In support of the AI deployment, for example, are going to be the first adopters of these types of MRDs.

Kevin Cassidy, Analyst, Rosenblatt Securities: Okay. Thanks. We’ll wait and see.

Conference Operator: Thank you. The next question is from the line of Tristan Gerra with Baird. Your line is now open.

Tristan Gerra, Analyst, Baird: Hi. Quick question. You talked earlier about the gross margin and catalyst for the rest of this year directionally. How should we look at operating margin? Is it going to be similar and really tied to what you described in gross margin?

Or is there anything else that could act as a driver of operating margin and including on the licensing side?

Desmond Lynch, Chief Financial Officer, Rambus: Hi Tristan, it’s Bez here. As I talked about earlier, I do expect that the second half gross margin profile on the chip side will improve as a result of a stronger product mix in the second half as well as manufacturing cost savings kicking in from there. We’ve been really pleased with our overall model, which is operating at the sort of mid-forty percent op income level and continues to generate really strong cash from operations, dollars 77,000,000 last quarter. I think if you look at the progression of the business over the sort of last year, you can see that the business continues to improve both on the top and bottom line. And that’s what we expect to continue to see going forward.

We have a really robust business model, as Luke mentioned in his prepared remarks, and we continue to generate strong cash from operations as well. So we can see that continuing here going forward.

Tristan Gerra, Analyst, Baird: Okay. And then as far as the price renegotiation that you talked about in Q1 and the mid single digit price adjustment, is there any is that typical of what you see every year? Or was there any specific factors this year that didn’t happen in prior years? If you could maybe elaborate on what we should expect in terms of patterns from this? And is it just normal pricing renegotiation?

Or I know that you’re not really impacted by supply demand dynamics, but I don’t know how that really compares with what we’re seeing in prior years.

Desmond Lynch, Chief Financial Officer, Rambus: Tristan, it’s Dez again. What I would say is that the sort of mid single digit price erosion is really in line with normal cycles from there. This is a sort of normal cadence at the start of the year that we will see the price down on the products. And really, that is in line with our expectations from there. So nothing untoward on the sort of price side.

As you’re correctly sort of point out, we’re not really tied into the DRAM pricing sort of cycles in terms of the price from there. So mid single digit erosion is the right way to sort of think about the ASP erosion of the business.

Tristan Gerra, Analyst, Baird: Great. Thank you very much.

: Thanks, Tristan. Thank you.

Conference Operator: Thank you. At this time, there are no further questions. This concludes our question and answer session. I’d now like to turn the conference back over to Luc Seraphine to conclude.

Luke Seraphin, CEO, Rambus: 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. Thank you.

Conference Operator: Thank you. This now concludes today’s conference.

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