Welcome to the Rambus First Quarter and Fiscal Year 2018 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. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Rahul Mathur, Chief Financial Officer. Please begin.

Thank you. And welcome to the Rambus first quarter 2018 results conference call. I'm Rahul Mathur, CFO, and on the call with me today is Dr. Ron Black, our President and CEO. The press release for the results that we will be discussing today have been furnished to the SEC on Form 8-K. A replay of this call will be available for the next week at 855-859-2056. You can hear the replay by dialing the toll free number and then entering ID number 939-2458 when you hear the prompt. In addition, we are simultaneously webcasting this call, and along with the audio we are webcasting slides that we will reference during portions of today's call. So, even if you are joining us via conference call, you may want to access the webcast with the slide presentation. A replay of this call can be accessed on our website beginning today at 5:00 PM Pacific Time. Our discussion today will contain forward-looking statements regarding our financial guidance for future periods, including Q2 2018 and full year 2018, prospects, product strategies, timing of expected product launches, demand for existing and newly acquired technologies, potential benefits of our past acquisitions, the growth opportunities of the various markets we serve, and changes that we will experience in our financial reporting due to our adoption of new revenue recognition standards starting in Q1 2018, amongst other things. These statements are subject to risks and uncertainties that are discussed during this call and may be 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 within our financials, we are using both GAAP and non-GAAP financial presentation in both our press release and also on this call. We have posted on our website a reconciliation of these non-GAAP financials to the most directly comparable GAAP measures in our press release and our slide presentation. You can see this on our website at rambus.com in the Investor Relations page, under Financial Releases. The order of our call today will be as follows. Ron will start with an overview of the business, I will discuss our financial results including the guidance we issued in today's press release, and then we will end with Q&A. I'll now turn the call over to Ron to provide an overview of the quarter. Ron?

Thanks, Rahul, and good afternoon everyone. We delivered a solid first quarter and are making strong progress across all of our businesses as we maintain our growth trajectory living up to our tagline Rambus; making Data Faster and Safer. From a financial perspective in Q1, we delivered revenues of $46.4 million which reflects the impact of the new accounting standard ASC 606. As a reference point under the prior ASC 605 accounting standard our first quarter revenue would have been $100.5 million which includes $2.5 million from our lighting division that was wound down during the quarter. If we compare under the same accounting standard and excluding lighting, this equates to 4% increase from Q1, 2017. We also delivered pro forma earnings per share in line with our expectations. So overall, we performed well the strong execution in our product groups, continued technology leadership on strategic programs and ongoing licensing of our broad IP portfolio. Q1 was a positive quarter for our memory and interfaces division in both chips and IP cores. Our DD4 memory buffer chip business continues to grow with further OEM in cloud customer qualifications leading to further design wins at our customers. Indeed, we remain on track to meet our targets for the business and drive significant revenue growth for 2018. As we look to the next generation, we believe we maintain our leadership position for DDR4 memory buffer chips being the first and only supplier with working silicon that supports the top end speeds for both the RCD and DB chips. We remain actively engage with our customers and the ecosystem leveraging our head start in product development and learning's to help enable the industry develop both the hardware and software infrastructure required to support the bring up of high quality DDR5 solutions. Moving to…

Thanks Ron. I'd like to begin with our financial results for the quarter. Let me start with some highlights on Slide 5, as Ron mentioned we delivered solid financial results in line with our revenue and EPS expectation. We've chosen to adopt the new accounting standard ASC 606 using the modified retrospective method which does not [indiscernible] prior period, but rather runs the cumulative effect of the adoption through retained earnings as beginning balance sheet adjustment. As a result any comparison between first quarter 2018 results under ASC 606 and prior results under ASC 605 is not the best way to track the company's progress. We're required to present a footnote that presents our 2018 results as if we continue to recognize revenue under the old standard. To make this transition easier to the readers of our financial statements, we will present our results under both ASC 606 and ASC 605. This way we can have a meaningful discussion regarding the performance of our business instead of focusing on accounting changes. Under our new accounting standard ASC 606, we delivered revenue of $46.4 million. Under ASC 605 we would have delivered revenue of $100.5 million which included roughly $2.5 million of revenue from our lighting division which we closed in the quarter. Excluding the benefits from our LD, our revenue was up year-over-year and in line with the midpoint of our guidance. Under ASC 606, we delivered non-GAAP dilutive loss per share of $0.10. Under ASC 605, we would have delivered non-GAAP earnings per share of $0.21 just above the midpoint of our expected range. We delivered solid results while continuing our investments in our business to drive long-term profitable growth. To drive this growth, we continue to leverage our high margin historic business to fuel growth in adjacent areas…

[Operator Instructions] your first question is from Suji Desilva with ROTH Capital

Just want to check, next quarter there will be zero lighting revenues, is that right? In the guidance.

Yes, Suji. The next quarter assumes zero revenue for lighting for the quarter, we may have some small immaterial amounts of revenue associated with lighting. Primarily associated to patent or technology licensing over the course of the year, but I don't expect that to be material and it's excluded from our guidance.

Okay, helpful. And then on the - as I look at the security business, the royalties there are down in the first quarter versus the fourth quarter and third quarter for security. Is that seasonality or is there some other trend going on there?

It's a combination of seasonality and also just timing of our arrangements and agreements. I tell you Suji one of the benefits of our business is because we do have so many different growth opportunities is we're not dependent on any one of them in order to make our commitments to you on a quarterly basis. So in this case, it was just simply timing of agreements.

Okay, helpful there. And then the OpEx, if I look at your guidance versus the revenue guidance. It seems like it's up with percent of revenues, additional investment going on there or any other factors?

So we're continuing to invest in both our memory and security businesses, but it's also changing is that as our buffer chip revenue grows, there's more COGS associated with it and so you'll see a little more of the total operating expenses related to those COGS.

And that's kind of lead to another question, which is on the cost, on the gross margin. What would be the drift down there as the memory buffer business grows? What would you expect that to exist the year at or just some quantification there would be helpful?

Sure. I wouldn't be surprised to see our overall pro forma gross margins under 605 drop a couple of points towards the end of the year just as our buffer chip business grows. Now that said, we still have a lot of other very exciting interesting opportunities on the licensing and core side, which is almost 100% gross margin. But by design at that chip business grows, I wouldn't be surprised to see a couple of ticks down from gross margin on a year-over-year basis.

Okay and then my last question, I'll get back in the queue. For Ron perhaps, on the RISC-V CPU you guys have developed here, is there extensible use for that beyond the CryptoManager Root of Trust where it's showing up here?

Yes I'm very pleased to say that we've had unprecedented interest in it, part of it we found the Spectre and Meltdown issues when we were developing this last year, a brilliant technologist in the security division. And announce of it the new initiative has generated interest in both licensing as a core but also us using it as a chip in various applications or very broadly exploring that with a lot of very high profile names unfortunately I can't reveal them.

Okay, thanks for the color guys.

Your next question is from Sidney Ho with Deutsche Bank.

My first question is, you've said in the past that you expect the security revenues to grow 10% to 15%, is that still you target? Maybe a little color on how of that growth comes from IP and cores and how much from tech implementation and maybe how much from subscription model that you're hoping to transform it through?

Sidney it's Ron. It's exactly what we expect I mean obviously we're targeting more aggressively than that, but that's the - what we expect. I think we've said in the past. The licensing in core is more of flattish and the growth is really about the CryptoManager, the IoT security service, the software side of things, then the payments and ticketing which are tokenization solutions. So again software based security parts. Now what can change that trajectory is the announcement that we just made with the RISC-V core given the demand that we have, that may see a significantly higher uptick in more of these embedded security solutions overtime.

That's helpful. My follow-up question is, if you look at your royalty revenue for your memory division, it has accelerated in the past few quarters to now I think, if my math is right it's close to 14% year-over-year. Is there any one-time benefits in those numbers or is that more sustainable going forward? Just looking at the royalties and within MiB. [Technical Difficulty]

Your next question is from Gary Mobley with Benchmark.

Are you guys there Rahul, Ron? Operator, I think we lost them.

Speakers I do have your lines still connected. You may place the line on mute. We're unable to hear you.

Can you hear us Gary?

Ron, I can hear you now.

Okay. We are here.

Rahul, are you there?

Yes, Gary. Go ahead thanks for your patience.

Sure. You should apologize to the last caller. But with respect to the mobile interface division and this relates to the last question asked. I was hoping that you could break down the slip between the buffer chips IP core licensing and just straight patent royalties and give us a sense of the growth of the IP cores and the buffer chips as the year progresses.

Sure, so if you look at Slide 15 and the deck that we're provided Gary, we break down revenue under both 606 as well as 605. And what you'll see on the mid-side in terms of what we report as product revenue that's predominantly what we do in - from a buffer chip perspective. Now the royalty in technology revenues are in the royalty revenue line and we also have [indiscernible] cores in the contract and other revenue line as well, so those aren't broken out as cleanly. But what you'll see is that we had about $6 million in buffer chip revenue in Q1 and what I'd expect is that, I'd expect that to grow in each subsequent quarter of 2018 to get to the $35 million to $40 million for the total year. I think from the patent side particularly in mid for the royalty contract and other. I'd expect that to continue to be maybe roughly flat go up or down just based on timing of renewals for different partners and customers.

Okay and on the China Resistive RAM that you announced last week, can you give us a sense of how that may impact the P&L statement and the balance sheet as well looking out over the next couple quarters?

Sure what I'll tell you is that's still relatively new and I think it's going to take us a while to get to traction from a product perspective, so we did make a small investment into that JV and we invested not just cash, but patents as well. But I expect it's going to take at least a year or two, [technical difficulty] to really come out with some sort of product revenue. So there's a small bit of cash that was deployed for that JV that we announced last week. But I don't expect it to have material benefit from revenue for at least one or two years.

Okay, last question from me. You mentioned on your last earnings call that your intent was to get out of the lighting business. but your hope was to find a buyer for the business and as soon as that you add restructuring charge and basically winding down the business that you were unable to find buyer or is that still perhaps in the cards?

We ended up, Gary it's Ron. Really breaking it into pieces and selling different parts of the business, but there wasn't a sustainable long-term business there from our perspective and as a consequence there was no buyer the whole asset.

Got it. Okay, that's it from me. Thanks.

[Operator Instructions] and there are no further question. Ron, do you have any closing remarks.