Earnings Call Transcript - RMBS Q3 2024

Operator, Operator

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. 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 can begin your conference.

Desmond Lynch, CFO

Thank you, operator, and welcome to the Rambus third quarter 2024 results conference call. I am Desmond Lynch, Chief Financial Officer at Rambus. On the call with me today is Luc Seraphin, our CEO. The press release for the results that we will be discussing today has been filed with the SEC on Form 8-K. 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 5:00 pm 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 among 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 8-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 our operational performance. The order of our 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'll now turn the call over to Luc to provide an overview of the quarter. Luc?

Luc Seraphin, CEO

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. While we invest in our product and technology leadership, we continue to generate excellent cash from operations and deliver a consistent return 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 MRDIMM at 12,800 megatransfers per second and RDIMMs at 8,000 megatransfers per second, which are commonly referred to as the MRDIMM 12800 and RDIMM 8000, respectively. Designed to meet the increasing 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. 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 experience early contributions from new products. We are also very excited about 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 is accelerating the cadence of new products. As a fundamental pillar of 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 DDR5 MRDIMM 12800 and RDIMM 8000, which I mentioned earlier, are great illustrations of this strategy in action. These new chipsets will 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 Gen 5 RCD enabling next-generation standard RDIMMs operating at 8000 megatransfers per second; the multiplex RCD, or MRCD, and multiplex data buffer, or MDB, enabling industry standard MRDIMMs running at 12,800 megatransfers per second; and finally, the second-generation server PMIC designed for both the RDIMM and MRDIMM. Our SPD hub and temperature sensor are also utilized in both the MRDIMM and RDIMM 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 RDIMM 8000 and MRDIMM 12800 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 RDIMM 8000 utilizes the Gen-5 RCD and next-generation server PMIC 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 MRDIMM will be key to extending the DDR5 roadmap to meet these needs. MRDIMM does this by employing a novel 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 MRDIMM 12800 requires one MRCD and ten MDB 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 RDIMMs. As I previously mentioned, our second-generation server PMIC is part of the chipsets for both the RDIMM 8000 and MRDIMM 12800. This new server PMIC supports higher speeds as well as more DRAM and logic chips per module. The second-generation server PMIC, along with the Gen-5 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 MRDIMM and RDIMM 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 Des to discuss the quarterly financial results. Des?

Desmond Lynch, CFO

Thank you, Luc. I'd like to begin with a summary of our financial results for the third quarter on Slide 5. 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 with a summary of our non-GAAP income statement on Slide 6. 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, 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. Operating expenses of $55.3 million were in line with our expectations, and we ended the quarter with a total headcount of 685. GAAP 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 7. 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 were $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 8. 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 amounts invoiced to our licensing customers during the period adjusted for certain differences. As we have reported historically, licensing billings closely correlate 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 million and $160 million, we expect royalty revenue to be between $54 million and $60 million, and licensing billings between $57 million and $63 million. We expect Q4 non-GAAP total operating costs, which include COGS, to be between $86 million and $82 million. We expect Q4 capital expenditures to be approximately $11 million. Under ASC 606, non-GAAP operating results for the fourth quarter is expected to be between a profit of $68 million 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 million 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 $0.52 and $0.59. Let me finish with a summary on Slide 9. 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 our 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?

Operator, Operator

Thank you. And our first question today is from the line of Kevin Cassidy with Rosenblatt Securities. Please go ahead. Your line is open.

Kevin Cassidy, Analyst

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

Desmond Lynch, CFO

Hi, Kevin, thanks for your question. As we have sort of talked about previously, silicon IP revenue can show up under both contract and other, and licensing billings. If we customize IP, then it's classified as contract and other, and if the IP 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 million to $29 million. 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. If you add that to the contract and other revenue at around about $80 million, you will see a business that's growing in line with our expectations 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.

Kevin Cassidy, Analyst

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 expected a couple of years out. Do you get paid for this now? Is this a license that you had signed and get paid currently? Or do you have to wait for the device to be in production?

Luc Seraphin, CEO

Hi, Kevin, thank you for your question. Typically, we get paid when we deliver the IP to our customers. We've done this consistently over the years; we've actually been leading the HBM roadmap with this IP. We announced our HBM3 in 2021, and this year we are announcing our HBM4. Every time we have a wave of silicon companies that buy that IP in the form of a license. So, we do not wait for these products to go to production to be paid for these licenses.

Operator, Operator

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

Blayne Curtis, Analyst

Hey, guys. Thanks for taking my question, and congratulations on the product revenue growth. Maybe I just want to follow up on Kevin's question. In terms of silicon IP, I'm not sure I followed the math, but I guess for the guide, 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. So 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 just hard to 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?

Desmond Lynch, CFO

Hi, Blayne, it's Des. You are correct, the correct way to think about silicon IP is, they're 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 across the two categories, one that is a component within licensing billings, let's just call it $40 million for the round number there. 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 normalize the PHY divestiture from there. We're really excited about the business going forward. We have released new products this year, which are really targeted towards the AI solutions, which includes HBM4, PCIe 7, and GDDR7 solutions. Going forward, I would expect the business to grow in that 10% to 15% range next year, and we've been executing at that sort of growth rate in 2024.

Blayne Curtis, Analyst

Thanks. And I just had a question on the 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 bit?

Luc Seraphin, CEO

DDR4 is still at small levels, as expected. We've seen the sixth consecutive decline of inventories in the channel. However, the sales of DDR4 remain modest. As I indicated in the last call, it's about $5 million a quarter, and we see this continuing. We see a long tail, but with low sales. The good news for us is that most of our sales, that's growing double digits quarter-over-quarter, is coming from DDR5. We were expecting this given the good design win footprint that we had on several generations of DDR5. That translates into the growth that you're seeing in Q3 and that we're expecting in Q4, but DDR4 plays a very modest role in that growth. Most of our sales are in DDR5.

Operator, Operator

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

Mehdi Hosseini, Analyst

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

Luc Seraphin, CEO

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 the 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, and Q4 should see an increase versus Q3. We're also very excited with the traction that we have on our first wave of PMIC products, which are in qualification with our customers and where we see qualification volumes into Q4. The main contributor is DDR5, followed by a modest contribution of companionship in the second half, but growing with the growing qualification footprint. I think we're going to see that pattern over and over again. That's why we announced the MRDIMM products, the second generation of PMICs as well, because being first in the market with these leading-edge products eventually translates into market share. That explains the growth that you saw between Q1 and Q4 of this year. We expect continued growth next year on our product revenue, probably with a similar pattern as this year. Granite Rapid has been announced. Typically, when a product is announced, it takes six months-plus before it's in full production. So, we're going to see qualification volumes, preproduction volumes into the first half and then full volume production in the second half. We're going to see a similar pattern as we saw with Emerald Rapid. Our companionships will continue to go through their qualification process with our customers and our customers' customers, and will continue to contribute growth quarter-over-quarter with them being in full swing in the second half of next year.

Mehdi Hosseini, Analyst

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

Desmond Lynch, CFO

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

Mehdi Hosseini, Analyst

Great. Thank you.

Desmond Lynch, CFO

Thanks, Mehdi.

Operator, Operator

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

Nam Kim, Analyst

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 the CXL market in general and your opportunity there?

Luc Seraphin, CEO

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. At the same time, what we see is there's a fragmentation of that market, as a lot of different custom chips are using the CXL interface. That's good for us on our silicon IP business. On the product side, we do have a product out with customers, and they are testing those products, more precisely testing the use case of those products. We believe, however, that the market will consolidate at the Diamond Rapid node at CXL 3.0. Until then, it is going to be very fragmented. That's our view. The other thing is that there are some use cases, such as memory expansion, that will be addressed by alternative solutions like the MRDIMM 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. This is a place that we are monitoring. We're 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.

Operator, Operator

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

Gary Mobley, Analyst

Hi, guys. Thank you so much for allowing me to ask a question. Sorry, I missed the last earnings call. Luc, you spent a lot of time in your prepared remarks talking about MRDIMM, and I think it's an important topic and 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, and Renesas initially. If I'm not mistaken, MRDIMM 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 you will have equal to or greater market share in MRDIMM that you have in current generations of DDR5 DIMM modules?

Luc Seraphin, CEO

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

Gary Mobley, Analyst

Thank you for that clarification. Seeing the product revenue up 30% second half versus first half, one thing you didn't mention that probably factors 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?

Luc Seraphin, CEO

That's a good question. Yes, you're correct. We did see a recovery of the standard server market in the second half, which is helping us. Our view of the server market is that this year is growing about mid-single digits. If you take the midpoint of our guidance for Q4, our product business should grow low-double digits. From that perspective, we believe we are gaining share. On the DDR4, and I'll come back to DDR5. On DDR4, we see long inventory depletion. We were starting from a very challenging point in early 2023. On DDR5, we are 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 the generations they are in, so the levels of inventory on the DDR5 side are reasonable at this point in time.

Kevin Cassidy, Analyst

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

Luc Seraphin, CEO

It really depends. That's a good question, Kevin. It really depends on the use cases. Typically, the MRDIMM will provide large capacities and very high bandwidth. For instance, in an AI box, standard CPUs that do all the preprocessing are the typical type of application that would use an MRDIMM, because in that AI box, the CPUs require a lot of memory and very high bandwidth. So that's a natural place for MRDIMM. You'll find it in other applications where the loads are significant. However, they will not cannibalize the standard RDIMM market, as there are many applications that don't need that type of bandwidth. That's why we see MRDIMM as an addition to our current offerings in 2026. It will start in very high-end data intensive applications such as AI boxes.

Mehdi Hosseini, Analyst

Yes. Just two quick follow-ups for me. On HBM4, thanks for highlighting opportunities, but is there any way you can help me better understand and compare Rambus's content, IP content in HBM4 and how it compares to HBM3? One follow-up for Des. How should we think about operating leverage looking into next year? I'm not asking for a specific 2025 OpEx guide, but I just wanted to get a feel for the leverage given all the investments that you have made internally?

Luc Seraphin, CEO

Mehdi, yes, thank you for the question on HBM. First of all, we've been developing HBM controllers for many years. What we provide is actually the HBM controller that sits right before the PHY. We've had a history of providing HBM ahead of the market. We announced our HBM2E in 2020, HBM3 in 2021, HBM3E last year, and HBM4 this year. The difference between HBM3 and HBM4 is really a question of speed on that interface. Typically, when we release a new version of our HBM controller, we try to beat the speed that is defined by JEDEC so that our customers have room for their designs. 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, and ASIC vendors can use to integrate into their chips.

Desmond Lynch, CFO

Hi, Mehdi. It's Des. Let me jump into the OpEx 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 has been achieved under a similar operating expense envelope as we've reinvested the divested PHY R&D expense back into the product programs. As Luc mentioned, this has significantly increased the market opportunity. But looking ahead into next year, I would say that R&D, we've been operating $36 million to $38 million per quarter on the R&D side. You will see additional investment to support our new product roadmap. The correct way to consider this is being around 23% to 25% of revenue might be a reasonable framework. In terms of the SG&A side, we've been relatively stable at $19 million to $20 million per quarter. You will see some inflationary increases, but as the top line grows, you get to see some nice leverage on the SG&A side. Overall, we've been very happy with our investments into the business. They are paying off as a result of the new products that we're releasing, which are increasing our future opportunities.

Nam Kim, Analyst

Hi. Thank you. Sorry, another question related to the MRDIMM. I understand the industry has been developing two new DIMMs like MRDIMM and the other one is MCR DIMM, if I recall correctly. Now, I'm not sure if those two standards emerged recently, but I understand Rambus is not part of MCR DIMM initiatives. So, can you explain why, and what's your view on MRDIMM versus MCR DIMM?

Luc Seraphin, CEO

Hi, Nam. To my knowledge, we are participating in every JEDEC standard that relates to MRDIMM or MCR DIMM. We are, like many other companies, part of JEDEC. We're participating in those definitions, and our objective as a company, just like we did for the MRDIMM, is to be present for every JEDEC product that is out there.

Nam Kim, Analyst

So, are you also involved with MCR DIMM? I think MCR DIMM is not JEDEC standard, but I'm curious about the opportunity...

Luc Seraphin, CEO

We are developing JEDEC standard. That's our strategy, because as we said earlier, the investments for these types of solutions are huge, not only on our side but also on the part of our partners in the ecosystem. It's important for us to make sure that there is traction in the whole ecosystem for the development of high-volume solutions as opposed to custom solutions. When you add up custom solutions, the market may be large, but every single player might not have revenues that justify the investments. By focusing on JEDEC standards, whether it’s for RDIMM, MRDIMM, or all the products we make, we ensure adoption across the industry, which drives revenue growth as opposed to depending on custom solutions for different customers. Our strategy is to develop products that are JEDEC specified to assure we have momentum and traction from the ecosystem and address a market that everyone is participating in, allowing us to capture the growth we expect, as we did with the DDR5 generation of products.

Operator, Operator

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 Seraphin for any closing remarks.

Luc Seraphin, CEO

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.

Operator, Operator

Thank you. This now concludes today's conference.