Rambus, Inc.

Welcome to the Rambus third quarter fiscal year 2024 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. If you would like to ask a question, you may press star 1 on your touchtone phone at any time. If anyone should require assistance during the conference, please press star 0 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.

Thank you, Operator, and welcome to the RAMBIS third quarter 2024 results conference call. I am Desmond Lynch, Chief Financial Officer at RAMBIS, and on the call with me today is Luke Serafin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form 8K. We are webcasting this call along with 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 discussions today will contain forward-looking statements including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions and other market factors, and the effects of ASC 606 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 8Ks, 10Qs and 10Ks. 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 our 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 will end with Q&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. 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. And while we invest in our product and technology leadership, we continue to generate excellent cash from operations and deliver consistent returns of value to our stockholders. In Q3 alone, we generated $62 million of cash from our operations and repurchased $50 million of stock, marking our fifth consecutive quarter of share repurchases. In continued demonstration of our product leadership, earlier this month, we were the first to introduce complete chipsets for industry-standard DDR5 mRDIMs at 12,800 megatransfers per second and RDIMs at 8,000 megatransfers per second, which are commonly referred to as the mRDIM 12,800 and RDIM 8,000, respectively. Designed to meet the insatiable demand for higher memory performance in advanced data center and AI workloads, These new chipsets represent a significant expansion of our addressable market and long-term growth opportunity. In Q3, memory interface chips delivered revenue of $66 million, up 17% sequentially and 27% year-over-year. And in Q4, we anticipate our third consecutive quarter of double-digit sequential growth. 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 RCD products, where we continue to gain share and early contributions from new products. We are also very excited by the positive customer feedback on our new products with qualification shipments underway for both server and client applications. The rapid development of new leadership memory subsystem products is critical to the sustained advancement of powerful server architectures. And the growth of AI and other data-intensive applications are accelerating the cadence of new products. 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 the long-term growth of the company. The recent introductions of our complete chipsets for the industry standard DDR5M RDM12800 and RDM8000, which I mentioned earlier, are great illustrations of this strategy in action. These new chipsets enable the next wave of DDR5-based systems and incorporate the advanced clocking control and power management features needed for higher capacity and higher bandwidth modules. As a recap, our newly announced offerings for DDR5-based systems include the Gen5 RCD, enabling next-generation standard RDMs operating at 8,000 megatransfers per second, The multiplexed RCD or MRCD and multiplexed data buffer or MDB enabling industry standard MRDIMs running at 12,800 megatransfers per second. And finally, the second generation server PMIC designed for both the RDiM and MRDIM. Our SPD hub and temperature sensor are also utilized in both the MRDIM and RDiM memory modules, rounding out our comprehensive chipset offerings. These chipsets are designed to intercept future generation server platforms currently targeted for 2026 and beyond that will use the next wave of DDR5. As part of this next wave, the RDM8000 and MRDM12800 are designed around a common architecture that allows an end user to populate a server with either module type, enabling flexible and scalable server memory configurations. Addressing a broad range of traditional and AI servers, a DDR5 RDM8000 utilizes the Gen5 RCD and next-generation server PNIC to deliver more than 67% greater bandwidth versus the first generation of DDR5. This represents an important new benchmark in server main memory and supports the ongoing growth of AI and other compute-intensive workloads. As AI continues to scale with larger and more complex models demanding ever greater memory bandwidth and capacity, the industry standard MRDIM will be key to expanding the DDR5 roadmap to meet these needs. MRDIM does this by employing another and efficient module design that boosts data transfer rates and system performance by multiplexing two ranks of DRAM. In order to support the increased complexity of this functionality, Each DDR5-MRDIM12800 requires one MRCD and 10MDB chips to multiplex the memory channel and support more memory devices. This doubles the bandwidth and provides for greater capacity while using the same physical connections of DDR5-RDIMs. As I previously mentioned, our second generation server PNIC is part of the chipset for both the RDiM8000 and MRDIM12800. This new server PIMIC supports higher speeds as well as more DRAM and logic chips per module. The second generation server PIMIC 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. Turning to Silicon IP, AI continues to drive long-term momentum across our IP business. We further expanded our portfolio of leading AI-focused offerings with the introduction of the industry's first HBM4 memory controller IP. This new HBM4 controller IP provides a vital building block for cutting edge AI accelerators, graphics, and HPC applications. Looking ahead, The requirements for power, performance, and security will only intensify spurred by generative AI and other data-intensive workloads. Across all of our businesses, RAMBUS is strategically focused on advancing system memory bandwidth and capacity through innovative memory, connectivity, and power management solutions. In closing, Q3 was a strong quarter for the company. driven by excellent execution and double-digit product revenue growth from our chip business. Consistent with our view that we would see our performance strengthening throughout the year, we are poised for another quarter of double-digit product revenue growth in Q4 and are on track for greater than 30% product growth in the second half compared to the first half of the year. Through our continued leadership in DDR5 RCDs, growing momentum in new products, and the introduction of our industry-first MRDM and RDM chipsets, we continue to expand our addressable market and are well positioned to capitalize on secular trends in data center and AI. Our strong cash generation enables us to continue investing in innovative products and to pursue strategic initiatives that drive the long-term growth of the company while consistently delivering value to our stockholders. 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 Dev to discuss the quarterly financial results. Dev?

Thank you, Luke. I'd like to begin with a summary of our financial results for the third quarter on slide five. We are pleased with our strong Q3 financial results. Our team delivered double-digit product revenue growth with strong cash generation in the quarter. Our profitable results and outstanding cash generation allow us to continue to strategically invest in our product roadmap and return capital to our shareholders through share repurchases. Let me now provide you a summary of our non-GAAP income statement on slide six. Revenue for the third quarter was $145.5 million, which was in line with our expectations. Royalty revenue was $64.1 million, while licensing billings were $65.4 million. 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 $66.4 million, up 17% sequentially and up 27% year over year, driven by continued strength in DDR5. contract and other revenue was 15 million dollars 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 80.5 million dollars Operating expenses of $55.3 million were in line with our expectations, and we ended the quarter with a total headcount of 685. Gap interest and other income for the third quarter was $4.3 million, which includes $100,000 of ASC 606 interest income. Using an assumed flat tax rate of 22% for non-GAAP pre-tax income, non-GAAP net income for the quarter was $54.1 million. Now let me turn to the balance sheet details on slide seven. We ended the quarter with cash, cash equivalents, and marketable securities totaling $432.7 million. This is flat to Q2 as our strong cash from operations of $62.1 million was offset by stock repurchases and capital expenditures. In the quarter, we repurchased $50 million of stock, which retired approximately 1.2 million shares in our fifth consecutive quarter of executing share buybacks. Third quarter capital expenditures was $13.5 million, while depreciation expense was $6.7 million. We delivered $48.6 million of free cash flow in the quarter. Let me now review our outlook for the fourth quarter on slide eight. As a reminder, the forward-looking guidance reflects our current best estimates at this time. We continue to actively monitor the macro environment and our actual results could differ materially from what I'm about to review. In addition to the financial outlook under ASC 606, 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. As we have reported historically, licensing billings closely correlates with what we had historically reported as royalty revenue under ASC 605. Under ASC 606, we expect revenue in the fourth quarter to be between $154 and $160 million. We expect royalty revenue to be between $54 and $60 million. and licensing billings between 57 and 63 million dollars. We expect Q4 non-GAAP total operating costs, which include COGS, to be between 86 and 82 million dollars. We expect Q4 capital expenditures to be approximately 11 million dollars. Under ASC 606, non-GAAP operating results for the fourth quarter is expected to be between a profit of $68 and $78 million. For non-GAAP interest and other income and expense, we expect $4 million of interest income. We expect the pro forma tax rate to be approximately 22%, with non-GAAP tax expenses expected to be between $16 and $18 million in Q4. We expect Q4 share count to be 108 million diluted shares outstanding. Overall, we anticipate the Q4 non-GAAP earnings per share range between 52 and 59 cents. Let me finish with a summary on slide nine. In closing, I am pleased with our financial results and continued execution. In Q3, our team delivered double-digit product revenue growth with continued strong cash generation. Through our leadership and organic investments in DDR5 solutions, we are well positioned to capture the long-term opportunity ahead of us while continuing to deliver value to our stockholders. Before I open up the call to Q&A, I would like to thank your employees for their continued teamwork and execution. With that, I'll turn the call back to our operator to begin Q&A. Could we have our first question?

Thank you. Ladies and gentlemen, if you have a question, please press star followed by one on your touchtone phone. And our first question today is from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead. Your line is open.

Thanks for taking my question, and congratulations on the good results. But just on the results, maybe just to help clarify, the guidance for the contract revenue was $17 to $23 million, and you came in at $15 million. Now, you did much better on the licensing, but maybe can you just talk what some of the moving parts might have been there?

Hi, Kevin. Thanks for your question. As we've sort of talked about previously, Silicon IP revenue can show up under both contract and other licensing billings. If we customize IP, then it's classified as contract and other. And if the IP is sold off the shelf, it will show up under licensing billings. So if you really look at our Q3 results, 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 as we sold more off-the-shelf IP, which resulted in higher licensing billings, which was offset by lower contract and other revenue. If you zoom out from an annual perspective, Kevin, I would expect around $40 million of silicon IP to show up under the licensing billings number. And if you add that to the contract and other revenue of around about $80 million, you will see a business that's going in line with our expectation and continuing to operate at scale. But overall, we're very pleased with our performance in silicon IP, and we're on track to meet our annual growth rate targets here.

Okay, great. Thanks for that explanation. And maybe just for further explanation, you announced having the HBM4 controller. That's, I guess... CPUs using that is expected a couple of years out. Do you get paid for this now? Is this a license that you would sign and get paid currently? Or do you have to wait for the CPU to be in production?

Hi, Kevin. Thank you for your question. Typically, we get paid when we deliver the IP to our customers. And we've done this consistently over the years. We've been actually leading the HBM roadmap with this IP. We announced our HBM3 in 21, 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 be paid for these licenses.

Okay, great. Okay, I'll get back in the queue, but other people ask questions.

The next question today will be from the line of Blaine Curtis with Jefferies. Please go ahead. Your line is open.

Hey, guys. Thanks for your question 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 followed the math, but I guess For the guy that, you know, it's kind of lumpy in contract revenue and you have it back up, you had talked about kind of the Silicon IP growing at like 10%, 15%. I don't think it's been growing that fast. I'm just kind of curious, is this kind of a base that it grows off of or is it kind of lumpy and comes back down? It's hard to kind of reconcile on a quarterly basis there, but maybe you can talk about if there's anything in December and then if that 10%, 15% growth is still the right number.

Hi Blaine, it's Des. You are correct. The correct way to think about Silicon IP is that growing that 10 to 15%. This year, we do expect Silicon IP to grow around 10%, which is in line with that 10 to 15% expectation. When you look at the revenue, it is split. Silicon IP, as I mentioned earlier, across the two categories One, there is a component within licensing billings, let's just call it $40 million for a round number there. And you also have around $80 million within contract and others. That takes the business to about $120 million this year, which is up about 10% compared to last year when you normalised for the FI divestiture from there. And we're really excited about the business sort of going forward. We have released new products this year. which are really targeted towards the AI solutions, which includes HBM4, PCIE7, and GDDR7 solutions. So going forward, I would expect the business to grow that 10% to 15% going into sort of next year. And we've been executing at that sort of growth rate in 2024. Thanks.

And I just had a question on product. DDR4 had been quite small. I was just kind of curious within this pickup, is it still small levels or has it recovered any fit?

DDR4 is still at, you know, small levels, you know, as expected. We've seen this consecutive decline of inventories, you know, in the channel. However, you know, the sales of DDR4 remain modest, you know, and as indicated in the last course, about $5 million a quarter And we see this continuing. We see a long tail, but with slow sales. The good news for us is that, you know, most of our sales, you know, that's growing, you know, this double-digit quarter of a quarter is coming from DDR5. And we were expecting this given the good design with footprint that we had on several generations of DDR5. So that translates now into, you know, that growth that you're seeing in Q3 and that we're expecting in Q4. But DDR4 plays a very modest role in that goal. Most of our stairs are in DDR5. Thanks so much.

And the next question today will be from the line of Mehdi Husseini with SIG. Please go ahead. Your line is open.

Yes. Thanks for taking my question. First one is for Luca. When I look at your product revenue, you've had a very nice incremental increase from Q1 to Q4, from 50 to 75, 25 million of incremental increase. What I want to learn from you is how much of these 25 million of incremental increase is driven by companionship and how much of it is just a migration to DDR5. And if we were to looking to next year, should we assume kind of a scaling from the 75 million that you're exiting 24 from?

Thank you, Mehdi. In terms of the second half of this year, you're correct. Our product revenue for the second half of this year is going to be about 30% higher than the first part of this year. There are two contributors to that. The main contributor is, as I said earlier, DDR5. We've worked over the last few years in making sure that we're leading the DDR5 race by introducing DDR5 products first in the market to secure the footprint. And that footprint is translating now into market share. So that DDR5 market share is explaining the growth in the second half compared to first half. We also have the initial sales of companionships. We know we missed the first generation of products, but we're starting to ship those companionships. Q4 should see an increase versus Q3. And we're also very excited with the traction that we have on our first wave of PNIC products, which are in qualification with our customers and where we see qualification volumes into Q4. So the main contributor is DDR5. you know, followed by a modest contribution of companionship in the second half, but growing with growing qualification footprint. And I think we're going to see that pattern over and over again. That's why we announced, you know, the MRDM products, the second generation of PNICs as well, because, you know, being first in the market with these leading edge products eventually translates into market share. So, That explains, you know, the growth that you saw between Q1 and Q4 of this year. We expect continued growth next year, you know, on our product revenue, probably with a similar pattern as this year. You know, Granite Rapid has been announced. Typically, when a product is announced, it takes, you know, six months plus before, you know, it's in full 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. So we're going to see a similar pattern as we saw with Emerald Rapid. And, you know, our companionships will continue to, you know, go through their qualification process with our customers and our customers' customers. And we'll continue to contribute growth quarter over quarter with, you know, them being in full swing in the second half of next year.

Great. And just a quick follow-up for Desk. You're exiting the year with a product cost margin of low 60. Should we think of product cost margin trending towards the higher end of your guided range of 60 to 65?

Hey, Mehdi. Good question. You know, what I would say is we were pleased with the gross margin performance in Q3. We ended around 63%, which was up 3% against Q2, driven by stronger product mix in the quarter. As a company, we have a real strong track record of being disciplined in our approach to pricing and continuing to drive cost savings, which have led to us driving and leading these strong product gross margins. You know, for the full year of 24, I would expect gross margins to be around 61 to 62% on this sort of chip side, which is both in line with our historical performance of 22 and 23. And they're also a long-term target of 60 to 65%. So that's really where we've been operating sort of maybe in any given quarter, we could see the margins moving up or down. depending upon what products are shipping. But again, over the longer term, in the course of a year, we have a really strong track record of driving towards these gross margins.

Great.

Thank you.

Thanks, Mehdi.

The next question today is from the line of Nam Kim with Arity Research. Please go ahead. Your line is open.

Hi. Thanks for taking my question. Can you give us an update on CXL controller chip development and timeline? Recently, I feel the market sentiment of CXL doesn't seem very strong compared to a few years ago, maybe due to HBM. What's your view on CXL market in general and your opportunity there?

Hello, Nam. Thank you for your question. First of all, we do see CXL playing a role in our silicon IP growth. We continue to see people buying from us CXL IP or PCIe IP for that matter, which is a sign that a lot of chips are actually using CXL interfaces. But at the same time, what we see is there's a fragmentation of that market. A lot of very different chips you know, custom ships are using this CXL interface. And that's good for us from a Silicon IP business. On the product side, you know, 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. We believe, however, that, you know, the market will consolidate at the diamond rapid node at CXL 3.0. Until then, it's going to be very fragmented. That's our view. The other thing is that there are some use cases, such as memory expansion, that are going to be addressed by alternative solutions like the MRDIMS that we've just announced, which allows actually to use more bandwidth and more capacity on existing infrastructure, where the whole ecosystem has agreed on the same solutions for the industry. So this is a place that we understand that we are monitoring. We are enjoying the growth on the silicon IP side for CXL IP. We are ready for the CXL 3.0 node on the product side, but we don't believe it's going to be sufficient volumes on a standard type of product until CXL 3.0 is out. But we're also investing in MRDIMM for applications such as memory expansion.

OK, thank you.

Our next question today will be from the line of Gary Mobley with Loop Capital. Please go ahead. Your line is open.

Hi, guys. Thank you so much for allowing me to ask a question. Sorry, I missed the last earnings call. Luke, you spent a lot of time in your prepared remarks talking about MRDM, and I think it's an important topic and a consequential market evolution over time. But the way I think the technology first evolved was specific to Granite Rapids from Intel, and then maybe some joint development between Intel, Hynix, in Renaissance initially, and if I'm not mistaken, MR-DIMM has moved its way into the JEDEC standard set and thus has become more open for folks like you to develop product. Correct me if I'm wrong in that review of the market evolution, but my question for you is that do you think, given how that market evolved, that you will have equal to or greater market share in MR-DIMM that you have in current generations of DDR5-DIMM modules?

Thanks, Gary. Welcome back. You're correct on your first statement that there were some point solutions in MRDIM that were not JEDEC compliant that were probably good proof of concepts for the ability to increase bandwidth on existing infrastructure. And the one we are announcing is the first JEDEC standard MRDIM at 12,800, which is you know, a notch higher than the current speed, which is also adopted by the whole industry. And, you know, while we were not participating to the custom solution in the first generation, we were working on that JEDEX solution, you know, from day one, because we think this is the one that is going to get traction in the market, as you said correctly, with, you know, with Diamond Rapid nodes. And for this generation, not only are we developing the RCD chipset, the DB chipset, but as I said in my prepared remarks, we've got very good feedback on our first generation of PNIC. The PNIC is becoming more complex for MRDIM, so we are also developing the PNIC for the MRDIM solution. And our objective there is, over time, to get a similar market share as we have in the RCD market. You know, this is a market that is going to show, you know, early volumes in 2026 for us. So we have, you know, next year to introduce the products to the market, to go through the standard qualification with our customers, our customers' customers. But we're going to have a complete chipset, including the PIMIC. And, you know, our goal is to reach the similar market share as we have on the standard RCD. The other... aspect of MRDIM is that the content increases just by the nature of what it is. We have one RCD chip per module and 10 dB chips per module. We will also have a complete power management and companionship offering there. So the content per module is going to be at least four times what you see on the current RDIM. So that's what we talk about when we say it's going to be a SAM expansion for us.

Thank you for that clarification. Seeing the product revenue up 30% second half versus first half, one thing you didn't mention that probably is factoring into that is the general market recovery and general server demand as well, some inventory depletion in that specific channel. So to what degree is that impacting your outlook here and your trends in the second half of the year for 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 maybe 2022? That's a good question.

So, yes, you're correct. We did see a recovery of the standard server market in the second half. So that's helping us. Um, the, you know, our view of the server market is that, uh, you know, this year is growing about the mid single digit. Uh, you know, if you take the midpoint of our guidance or Q4, you know, our product business should grow, you know, low double digits. So, you know, just from that standpoint, uh, you know, we believe we are gaining share, um, on the DDR four and I'll come back to DDR five, you know, on, on DDR four, we do see. in long inventory depletion. We were starting from a very challenging point in early 23. On DDR5, we're not too concerned about the levels of inventory. They are in line with what we would expect for people to start production or pre-production, depending on what generations they are in. So the levels of inventory on the DDR5 side of things are reasonable at this point in time.

Thank you, guys.

Thanks, Gary. As a reminder, to ask a question, please press star 1 on your touchtone phone. And our next question today will be from the line of Kevin Cassidy with Rosenblatt Research.

Yeah, thanks for taking my follow-up question. And I appreciate the details on the MRDIMM being four times the content of the RDIMM. What are the expectations for I guess the number of CPUs, or will this be the new standard? Will most servers use the MRDIM architecture versus RDIM?

It really depends. That's a good question, Kevin. It really depends on the use cases. Typically, the MRDIM will provide large capacities and very high bandwidths. So, you know, at a first approximation, one would say that if you take an AI box, for example, you know, for, you know, processors, you know, standard CPUs that do all the preprocessing, that's the typical type of application that would use an MR-DIMM. Because, you know, in that AI box, you know, the CPUs, you know, requires a lot of memory and very high bandwidth. So that's a natural place for MR-DIMMs. And you'll find it in other applications where the loads are important. But they will not cannibalize the standard Ardyn market, as there are a lot of applications that don't need that type of bandwidth. So that's why we see MRdyn as an addition to our current SAM view. you know, in 2026, and it will start in the very high-end data-intensive type of applications, such as AI boxes. Okay, great.

Thank you. Our next question today is from the line of Mehdi Hosseini with SIG. Please go ahead. Your line is open.

Yes, just a quick follow-up for me. On HPM4, thanks for highlighting opportunities, but just is there any way you can help me better understand and compare Rambis' content, IP content in HPM4 and how it compares to HPM3e? And then one follow-up for Des, how should I think about operating leverage looking into next year? I'm not asking for a specific 2025 OPEX guide, but Just wanted to get a feel for the leverage given all the investments that you have made internally.

Mehdi, yes. Thank you for the question on HBM. First of all, we've been developing HBM controllers for many years. So what we provide is actually the HBM controller that sits right before the PHY. You know, we've had a history of providing HBM ahead of the market. We announced our HBM2E in 20, you know, HBM3 in 21, HBM3 last year, HBM4 this year. And the difference between HBM3 and HBM4 is really a question of speed, you know, on that interface. And typically when we release a new version of our HBM controller, we try to beat the speed that are defined by JEDEC so that our customers 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 that CPU vendors, NPU vendors, DPU vendors, ASIC vendors can use to integrate into their chips.

Hi, Mehdi. It's Des. Let me jump into the OPEX sort of question that you asked. I think as a company, we've done a very nice job in managing our expenses where we've really struck a good balance between being disciplined and really investing at the right level to support our future growth opportunities. In 2024, I've been delighted with our R&D execution and new product rollout, which really has been achieved under a similar operating expense envelope. is we've reinvested the divested FI R&D expense back into the product programs. And as Luke mentioned in his prepared remarks, this has significantly increased the market opportunity from there. But looking ahead into sort of next year, I would say that R&D, we've been operating, you know, 36 million to 38 million per quarter 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 is being around 23 to 25% of revenue might be a reasonable framework for you to think about. 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.

Thank you.

Thanks, Mehdi. Our next question is from the line of Nan Kim with RSA Research. Please go ahead, your line is open.

Sangyoon Han, hi I think it's already another question related Mr Dean, I understand industry has been developing to new game like Mr Dean and the other one mcr D if i'm recall correct. Sangyoon Han, Now i'm not sure if those two standards emerged recently, but I understand rambos is not part of mcr the initiative so the can you explain why and what's your view on Mr Dean versus mcr Dean.

Hi, Mehdi. To my knowledge, we are participating in every, you know, JEDEC standard that, you know, that is related to MRDM or MCRDM. You know, we are, you know, like many other companies, we're part of JEDEC. You know, we're participating into those definitions and our objective as a company, just like we did for the MRDM, is to be present for every JEDEC product that is out there.

So are you also involved with MCRDM? I think MCRDM is not JEDEC standard, but I'm curious.

We are developing JEDEC standard now. We are developing JEDEC standard. That's our strategy. Because as we said earlier, the investments for this type of solutions are huge, not only on our side, but also on the part of our partners in the ecosystem. And it's important for us to make sure that there's traction in the whole ecosystem for, you know, the development of, you know, high volume solutions as opposed to, you know, custom solutions, which, you know, 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. By focusing on JEDEC standards, whether it's for Ardim or MRDim or for all the products we make, we're sure of the adoption of the whole industry, which drives revenue growth, as opposed to depending on a custom solution for a set of different customers. So our strategy as a whole, and that's a very good question, our strategy as a whole is to develop products that are JEDEC or specified by JEDEC, 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 have the growth that we expect to have as we did in the DDR5 generation of products.

Thanks, Luke. It's pretty clear. Thanks.

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 Luc Serafin for any closing remarks.

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. This now concludes today's conference.