Rambus Inc. (RMBS) Q1 2021 Earnings Report, Transcript and Summary

Welcome to the Rambus First Quarter and Fiscal Year 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. At the conclusion of the prepared remarks, we will conduct question-and-answer session. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Rahul Mathur, Chief Financial Officer. You may begin your conference.

Thank you, Operator. And welcome to the Rambus first quarter 2021 results conference call. I am Rahul Mathur, CFO; and on the call with me today is Luc Seraphin, our 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 the 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, 3985069 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 p.m. Pacific Time. Our discussion today will contain forward-looking statements, including our financial guidance for future periods, products and investment strategies, timing of expected product launches, demand for existing and newly acquired technologies, the growth opportunities of the various markets we serve, the expected benefits of our merger, acquisition and divestiture activity, including the success of our integration efforts, risks and the potential adverse impacts related to or arising from the novel coronavirus or COVID 19 and the effects of ASC 606 on reported revenue, 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 to our financials, we are using in both GAAP and non-GAAP financial presentations in both our press release and also 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. We have adopted ASC 606 in 2018 using the modified retrospective method, which did not restate prior period, but rather ran the cumulative effect of the adoption through retained earnings at the beginning balance sheet adjustment. Any comparison between our results under ASC 606 and prior results under ASC 605 is not an accurate way to track our company's progress. We will continue to provide operational metric such as license and billing 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, including our guidance for future periods and then we will end with Q&A. I will now turn the call over to Luc to provide an overview of the quarter. Luc?

Thanks Rahul and good afternoon, everyone. Q1 was a strong quarter for the company delivering at the high end of expectations for revenue and profitability. We continue to meet or beat expectations, and I'm very proud of the team's continued execution. Our cash generation remained strong, with $39.5 million in cash from operations and continues to fuel our ongoing investments in our product roadmap. As anticipated, our memory interface key business rebounded to over $30 million. And we continue to expect our annual product growth to significantly outpace the market. We also see a positive trajectory in Silicon IP customer engagements with the opportunity to build enterprise level relationships. Ongoing share gains and strong demand in our target markets are driving growth for the company with data center as the primary catalyst across all of our businesses. We are actively building our ecosystem and expanding our reach through partnerships and collaboration and are confident in our ability to deliver profitable top line growth. Over the past few quarters, we've discussed some of the company's vectors for growth at a high level. And I wanted to provide more detail on some of the more exciting trends shaping our roadmap and market opportunity. We see three fundamental trends that are driving growth at the market, system and chip level. First, is the accelerating transition from enterprise to cloud; second, is the sustained increase in data generation and usage and third is the proliferation of AI and data intensive applications across all markets. Beyond the secular growth in data center, these trends are increasing demand for performance with rising AI, ML workloads driving server growth at the system level. And at the chip level, the need for more data to feed the systems is driving memory bandwidth and big growth. As a result, data delivery particularly in the memory subsystem is now on the critical path to meeting ongoing performance requirements. Additionally, the emergence of new architectures and growing need for privacy create the necessity for securing data at rest and in motion, where we have built a distinctive portfolio of IP offerings. The combination of these sectors has created an amplified market opportunity and a growing TAM for Rambus. Our company's TAM expansion is driven by a number of factors. In the near-term Intel's latest DDR4 platform supports a higher maximum memory module attach rate. This platform is currently ramping, and will enable an optional increase in corresponding modules to a box in high end systems. As the industry transition to DDR5 beginning later this year, the growing complexity at higher speeds will require additional companionships like temperature sensors, power management integrated circuits, also known as PMICs, and Serial Presence Detect Hubs also known as SPD hubs. Each of these provides an adjacent chip opportunity for Rambus and we expect to see an increase in our portion of chip content per module. Looking to next year and beyond, the industry is converging on the use of Compute Express Links or CSL as part of a differentiated memory interface architecture in addition to traditional DIMMs, to extend system bandwidth and capacity. We are actively engaged with the ecosystem on the design and development of these new memory interface products. And finally, as we look a bit farther out in the future, there are opportunities to leverage those same high-speed links as sort of new disaggregated architectures that can boost utilization and efficiency and reduce total cost of ownership for data center customers. It is also important to point out that security has become a critical concern that must be addressed at the hardware level to deliver both performance and protection in future architectures. We see a growing number of industry standard and customer requirements for security as part of chip and system specifications. As an industry pioneer with over 30 years of experience in high-speed interfaces and an extensive portfolio of security offerings, Rambus is ideally suited to address these challenges. We see many opportunities for our product roadmap and focused R&D investments to drive TAM expansion and expect the long-term profitable growth for the company to outpace that of the market. Now, let's get back to our product business. The industry has returned to healthy memory consumption levels following the short-term inventory digestion in the second half of last year. We remain confident that we have the supply chain in place to satisfy our ongoing customer demand and support share growth. As I mentioned previously, our first quarter product revenue returns to over $30 million and will continue to build as demand for server memory is expected to remain robust throughout 2021 and into 2022. We expect our annual product growth to significantly outpace the market, driven by share gains in DDR4 and renting volumes in DDR5. We continue to improve our market position in DDR4 through superior execution and expect incremental gains given our larger qualification footprints on Intel's most recent DDR4 platform. With respect to DDR5, we are in the leading position for qualification with our memory customers on both Intel and AMD DDR5 platforms. All of the major DRAM suppliers are shipping DDR5 modules with our chips for end customer qualification. And we expect volume to rank in the second half of the year. We continue to invest in the development of companionship for DDR5 platforms and look forward to sharing more in the near future. In closing, I'm very proud of the company's performance in the first quarter. We are well positioned for above market growth. And I'm excited about the many opportunities this year and beyond. The health and safety of our global workforce, customers and partners remain our top priority. We approach people, culture and diversity with the same level of passion and dedication as our technology leadership, profitability and capital investments. And we remain committed to responsible and sustainable environmental and social practices as we deliver products to our customers. With that, I turn the call over to Rahul to discuss the quarterly financial results. Rahul.

Thanks Luc. I'd like to begin with a summary of our financial results for the first quarter on Slide 8. Once again, we delivered a solid quarter and are very pleased with the ongoing execution on our growth initiatives. We delivered financial results at the high end of our revenue and earnings expectations. Our product revenue grew 41% quarter-over-quarter. We generated 39.5 million in cash from operations, bringing our total cash position to 529.1 1 million. Our execution and operational discipline have yielded solid financial results and a strong balance sheet that enables us to support our strategic initiatives. Let me talk you through some financial highlights on Slide 9. We continue to be focused on profitable growth and have demonstrated this over the past many years. As Luc mentioned earlier, the significant growth in our chip and Silicon IP revenues is a result of our focused R&D investments in the exciting cloud and data center market. We have dramatically improved our cash from operations and free cash flow. This has allowed us to return capital to shareholders while also further strengthening our balance sheet. Let me walk you through our non-GAAP income statement on Slide 10. Revenue for the first quarter was 70.4 million towards the high end of our expected range. Royalty revenue was 28.9 million, while licensing billings was 63.5 million. The difference between licensing billings and royalty revenue primarily relates to timing, as we don't always recognize revenue in the same quarter as we bill our customers. Our buffer chip business rebounded in the first quarter. As we work through the inventory, digestion and supply chain we'd anticipated and discussed previously. Product revenue was 30.8 million consisting primarily of our buffer chip business. Our contract and other revenue was 10.7million consisting primarily of our Silicon IP business. Total operating expenses, including COGS for the quarter came in at 58.2 million. Operating expenses of 45.3 million were lower than our expectations due to our continued focus on operational efficiency. We ended the quarter with headcount of 589 lower than 623 in the previous quarter, as we continue to align our product programs with growth markets. Under ASC 606, we recorded 2.8 million of interest income related to the financing component of our fixed fee licensing arrangement for which we've recognized revenue, but not yet received payment. We incurred 0.7 million of interest expense primarily associated with our convertible notes. This was offset by incremental interest income related to the return on our cash and investment portfolio. After adjusting for non-cash interest expense on our convertible notes, this result is non-GAAP interest and other income for the quarter of 2.2 million. Using an assumed flat rate of 24% for non-GAAP pretax income, non-GAAP net income for the quarter was 10.9 million. With continued focus on cost and disciplined execution, we delivered profits that was nicely above our expectations. Now, let me turn to the balance sheet details on Slide 11. We have consistently generated cash. Cash, cash equivalents and marketable securities totaled 529.1 million, up from the previous quarter primarily due to cash from operations of 39.5 million. As we deliver on the top line and execute on operational efficiency, we expect to continue to deliver strong cash from operations in the future. At the end of Q1, we had contract assets for 344.7 million, which reflects the net present value of unbilled AR related to licensing arrangements for which the company has no future performance obligations. I expect this number to continue to trend down as we build and collect for these contracts. It's important to note that this metric doesn't represent the entire value of our existing licensing arrangement terms, as several customers have royalty-based agreements that allow us to recognize revenue each quarter. First quarter CapEx was 6.6 million while depreciation was 4.7 million. We delivered 32.8 million of free cash flow in the quarter. Looking forward, I expect CapEx for the second quarter to be less than 5 million. I also expect depreciation of roughly 20 million for the full year of 2021. Now, let me turn to our guidance for the second quarter on Slide 12. As a reminder, our forward-looking guidance reflects our current best estimates that our actual results could differ materially from what I'm about to review. In addition to the financial outlook under ASC 606, we've also been providing information on licensing billing, which is an operational metrics that reflects the amounts invoiced to our licensing customers during the period adjusted for certain differences. As you see in the supplemental information, we provide on Slide 16 of our earnings deck, licensing billings closely correlates with what we had historically reported as royalty revenue under ASC 605. Under ASC 606, we expect revenue in the second quarter between 76 million and 82 million. We expect royalty revenue between 32 and 38 million. We also expect licensing, billings between 60 million and 66 million. As Luc mentioned, we continue to closely monitor a supply chain, we're upholding our lead time commitments to our customers. Additionally, we maintain inventory to respond to unforeseen events and customer upside. We remain confident in our ability to fulfill customer demand. Our expected Q2 non-GAAP total operating costs and expenses, which includes COGS, we expect to be between 51 million and 57 million as we continue to invest in programs. Under ASC 606, non-GAAP operating results for the second quarter is expected to be between $15 million and $25 million profit. For non-GAAP interest and other income and expense, which excludes interest income related to ASC 606, we expect approximately 1 million of expense, which includes 0.6 million of interest expense related to the notes due in 2023. We expect our pro forma tax rate to remain consistent at roughly 24%. That 24% is higher than the statutory rate of 21% primarily due to higher tax rates in our foreign jurisdictions. As a reminder, we pay roughly 20 million of cash taxes each year, driven primarily by our licensing agreements with our partners in Korea. We expect non-GAAP taxes to be between an expense of 3 million and 6 million in Q2. We expect our Q2 share count to be roughly 116 million basic and diluted shares outstanding. This leads you to between a GAAP profit per share of $0.09 and $0.16 for the quarter. Our product businesses are well positioned relative to market and we anticipate steady execution across our strategic priorities. With that said, while we don't provide guidance beyond Q2, consensus estimates for our top line and bottom-line growth in the remaining quarters of 2021 reflect our belief that our product growth will continue to outpace the broader semiconductor industry. Let me finish with a summary on Slide 13. We are proud of the excellent execution by our team. Over the past several years, we've made substantial progress strategically, operationally and financially. We've realigned our portfolio to address data center and cloud opportunities and to support our long-term growth strategy. We're consistently improving our profitability, investing in the growth opportunities Luc's mentioned previously, and delivering value to our shareholders. Before I open up the call to Q&A, I would once again like to thank our employees for their continued teamwork and execution resilience during these uncertain times. Everyone, please stay safe and take care of yourself and your families. With that, I'll turn the call back to our operator to begin Q&A. Could we please have our first question?

[Operator Instructions] Your first question comes from the line Sidney Ho with Deutsche Bank. Your line is open. You may ask your question.

Thank you for taking my question. My first question is really to supply constraints that we've been hearing all over semiconductor supply chain. Has that been a headwind for you? Or do you expect that to be a headwind either directly or indirectly for both your memory chipset business as well as the Silicon IP business?

Hi, Sidney. Great questions. At this point in time, we don't see this as a headwind. We hear what's happening in the market at large. But we have built for many years, our supply chain and inventory profile for growth. We knew that our strategy for buffet chip was to gain share. So the whole supply chain strategy has been built around that. And this means that today we feel confident that we can supply to our customers. We actually believe that we can supply higher than what their demand will be in the next few quarters. Yes, some lead times have increased a bit. But we also have increased our lead time for orders to our suppliers, and they can supply to us. So at this point in time we continue to be confident in our ability to supply. As I said, the whole supply chain on our side was built on a view that our share would grow and our business would grow and that holds true now. Now, you're absolutely right. There's always a possible risk that another device might disrupt supply chain. But in our case, again on the module, you don't have many devices. You have a circuit written boards, you have memories and you have closer chip, and a few other devices. So at this point in time, we've not seen any of these situations popping up. But that's something we are constantly watching.

Great, that's helpful. Maybe my follow up question is you talked about the Compute Express Link architecture. Maybe can you talk about what that means to your revenue opportunity versus the traditional DDR5 DIMMs from a product revenue standpoint as far as royalty licensing. And when do you expect the ramp of for CXL to begin understanding the DDR5 opportunity is already higher than DDR4? Thank you.

Correct. Yeah, that's a great question. So we do see the DDR5 opportunity and adding to the revenue growth potential starting next year. CXL is going to significantly contribute to revenue starting in 2023 into 2024. But the designs for CXL chips are going to start now - are starting now actually. So it's a bit like what happens in the buffer chip area, designs and architecture is done very early and three years down the road you start to see revenue ramp. But if you do add the DDR5 potential to which we currently see on DDR4 plus the CXL and potential we expect the TAM for our overall buffet chip business to more than double by 2024.

Great, thank you.

Thanks Sidney.

Your next question comes from the line of Mehdi Hosseini with SIG. Your line is open. You may ask your question.

Yes, thanks for taking my question. Just want to follow up to Sidney and want to dig into Silicon IP opportunities, especially with AI and machine learning. And this is something that, in my opinion, we're still in the early phase, but I want to see how much of those incremental opportunities are part of your expectation? Or would this actually provide any upside to your overall opportunities for this year and beyond and I have a follow up.

Hi, Mehdi. The AI and ML opportunities do add potential revenue for our IP cores, especially HBM where we do show a very high bandwidth capability. AI is going to be consuming a large portion of the data center growth going forward. So anyone building a chip for AI that goes into data center will eventually need these high-speed interfaces mostly HBM to some extent GDDR6. So these growth of AI into the data center, the data center market growth itself, driving growth for IP cores. IP core business is growing a double-digit growth that the AI through HBM GDDR6 are the main drivers for that.

But would it be possible that these were early in adoption and perhaps if it materializes it may provide an upside to your expectation for this year and beyond? Or is it already dialed into what you have communicated for opportunities?

Maybe it's dialed in what we have communicated for our opportunities. The Rambus strategy has always been to focus on data centers and high-speed interfaces. So what we've done over the last few years is we focused our portfolio on the IP that serve those market and HBM, GDDR6 conference sites, as well as a security IP are focused on to benefiting from that market growth. So this is dialed in our expectations.

Got it. Thank you. And just a quick follow up, your pro forma OpEx over the past four quarter has remained below 50 million. Is this something that we should be thinking of over the next four to eight quarters like at most 50 million of OpEx?

Hi, Mehdi, it's Rahul. Thanks very much for the question and we're delighted to have you on the call today. In terms of an OpEx perspective, look, I think we've done a fantastic job of improving our operational efficiency and in particularly taking cost out of SG&A. What you've seen is that we've taken probably about $20 million of cost out compared to where we were a couple of years ago. My expectation is that from an overall OpEx perspective our SG&A through the course of this year should stay roughly flat on a quarterly basis. There's always some ins and outs on a quarterly basis related to tax or hiring or other things as well. What I'd expect though, is that if we had some increases in spend, it would be on the R&D side. We are investing in these very exciting product programs that Luc was talking about earlier both on the chip side, as well as on the Silicon IP side. So you might see a little bit of increase on the R&D side from a quarter-to-quarter perspective. But I think that 15 million a quarter, we should be under that through the course of this year. But I'd like to see us continue to invest in R&D towards the back half of this year, and then out in the future to fuel these product plans that are growing very nicely. Maybe to the question you were asking earlier, we look at our Silicon IP business, on total, as Luc mentioned, growing kind of in the double-digit range on an annual basis. And that's embedded, I think, in the growth estimates that you see for analysts and consensus estimates, and I think I mentioned that in our prepared remarks.

Okay, got it. Thanks for detail. Appreciate.

Your next question comes from the line of Gary Mobley with Wells Fargo Securities. Your line is open. You may ask your question.

Hey, guys, thanks for taking the question. I want to ask about your supply chain. I noticed that in first quarter your product gross margins were down about 400 basis points from where they were last year. And I know they were exceptionally high last year. Is that a function of having to pay for higher input costs, in particular finished wafers? And I wanted to ask the converse, I guess go from a different angle from a question asked earlier. And I know your two main competitors and buffer chips are also fabulous, any chance that you could benefit from those two competitors perhaps being capacity constraint?

Hey, Gary, it's Rahul, great to hear from you. I think in terms of your questions, we've been very consistent that we think our buffer chip gross margins should be in the 60% or 65% range. As you mentioned, we had a couple few quarters earlier that were higher than that, which was wonderful to see. But I think a stropping in any period is really related more to product mix more than anything else. It's not associated with any expedite or other cost that we have associated with the supply chain, it really is mix. And the margins that we printed last quarter; I think are very consistent with what we expect from a longer-term basis. Does that help answer your question?

Sure and just a question about your competition and their supply chain.

So I think we've done a very nice job of gaining share from our competitors. If you see our numbers for Q1 versus Q4, versus some of the other competitors who have announced, clearly, we've bounced back up. And other folks haven't shown that 41% growth quarter-over-quarter. I think it's really more associated with design win activity. This is one of the things that we've talked about fairly consistently is that we get access to the design wins. And that's what gives us confidence in our ability to continue to grow. And that actually gives us confidence in talking about the back half of this year, and growth and things like DDR5 as well. So I think it's really designed win, which is a key part of it is winning at the socket with the technology and speed and performance. As Luc mentioned earlier, certainly, we've designed a supply chain to grow with us. And so maintaining some of that strategic inventory to quickly satisfy demand has helped us. I think that was one of the reasons that we had such nice growth, particularly in the first half of last year as well. So hopefully that answers that part of that question as well.

Gary, I think demand grew because of our design win activities. And as we said earlier, from day one, we build a supply chain and inventory profile for growth, so that we could benefit from those design wins. And what it means is that we have built redundancy in our supply chain. We have strategic inventory placed in our supply chain. And we also own more and more own testing. So we can maintain that growth trajectory through these markets share at least.

Appreciate that. A follow up question about DDR5, you mentioned some revenue in the back half of this year, I would assume a fairly immaterial amount, correct me if I'm wrong there. And then you mentioned a three-day solution in DDR5 and I believe for DDR4 it's a two days solution. Is this too simplistic to think that that translates into a 50% boost in your bill material per DIMM? If not, could you give us some sense of the ASP boost for you?

Sure. So to the first question DDR5 is going to run in the market in earnest in 2022. But we should expect customers to place orders before that to fill their channels. So we should see some pre-production orders in second half of this year. And the large production orders in 2022. We are currently shipping DDR5 in some volume to the memory module vendors as they go through their qualification process with their own customers. So that's the profile we see for DDR5. So you should expect some revenue in the second half of the year, but this ramping in earnest in 2022. With respect to the ASP, there's a combination of a new generation of product coming to market that typically gives a pop to the ASP and the potential for additional chips. So we will certainly see overall an increase of ASP on the DDR5 platform, which yeah, you I think you mentioned 50%. That could be in that range. And then over time, just like every generation, this will decay, at least on the same chips, but we have the opportunity for additional chips. You're right.

Appreciate that. Thanks.

Thank you. Your next question comes from the line of John Pitzer with Credit Suisse. Your line is open.

Yeah, good afternoon, guys. Thanks for letting me ask the question. I'm curious in your opening comments you talked about Ice Lake in the benefit of moving up the number of memory channels. I would be curious though, if you could talk a little bit about your opportunity to grow in the memory buffer space outside of Intel in either x86 or ARM. And I sort of asked the question, because you're putting up good year-over-year growth at a time where the server - Intel server business isn't. And so I'd be curious as to kind of helping to better understand your opportunities outside of the largest provider right now.

Yeah, correct. We mentioned the platforms from Intel. We do have the same types of engagements with AMD. So we are at the same levels of qualifications on Intel's platforms or AMD platforms. So when there's a market share change between the two, we continue to grow. And that's also true for the next generation of memories. We engaged with the two main vendors there. We also engaged with I'd say, nascent vendors who are starting to develop their own processors for data centers. And that will create some additional opportunity down the road not this year or next year, but the year after. So we try to engage with everyone developing chips for data centers, whether it's the traditional AMD or Intel, or the people developing their own chips, especially the cloud guys.

And then, as my follow up, you've talked about kind of the long design cycles as we go from DDR4 to DDR5 and your optimism around kind of your ability to continue to grow share through that transition. I'm curious, is it too early on the CXL side to talk about what the design funnel looks like and kind of what your position is in that design funnel.

It's a bit early to say where we are in the design funnel. What I would say is we've seen the industry first has converged mostly to the CXL interface. The architecture of the chips for CXL interfaces are being defined as we speak. And we are central to those discussions with memory vendors, process vendors and the cloud guys. So I think we are in the phase of defining chip architectures and memory subsystem architecture. And we're taking a good part or central part of those discussions. Then we will go into a phase of development and market ramp. As I said the volume for CXL buffers in earnest will start sometime in 2023 and 2024. But the thing that has changed since last time we talked is that the industry has aligned around CXR interfaces. The architectures are being defined, and we are part of those discussions with the industry. The other thing that is happening for Rambus and I think we're uniquely positioned for that is that a lot of the IP containers CXL buffer are IP that we have developed as part of our IP business. A CXL interface is actually a 32 gig PHY and a controller. We have part as - we have this as part of our offering in our IP core business. The CXL buffers will require security functions. We have this as part of our IP business. So from an IP content standpoint, that goes into these chips. I think we're uniquely positioned to be successful in that space.

Perfect, thank you.

[Operator Instructions] Your next question comes from the line of Mark Lipacis with Jefferies. Your line is open. You may ask your question.

Hi, thanks for taking my questions. A couple of questions, Luc, you had - in the past you successfully used inventory strategically to meet upside and today you had mentioned again that you often have - or you have like some strategic inventory placed in the supply chain. Can you - if I look at your balance sheet it looks like your inventories are kind of flattish year-on-year, but you're expecting more revenues this year. So where's the strategic inventory? Is it on other - is there other places in the supply chain not showing up on your balance sheet where you have access to it? If you could help explain like how you're positioned right now with the ability to meet upside should it manifest?

Hey, Mark, it's Rahul. Thanks and it's a great question. What I'll tell you is that inventory report is at a point in time at the end of the quarter and so clearly over the - some part of the quarter, it'll go up a little bit higher and sometimes, it'll go a little lower. We do have some inventory that's placed with some distributors. And that helps us solve the inventory or request from partners on a quick basis. And so that's not going to show up in our balance sheet. But hopefully, that's a little bit of additional color.

That's helpful. Thank you. And then a follow up if I may. Can you talk about, like, the visibility, you see and again on the DVR product side, the visibility you have into orders from hyperscale customers that it seems like these are products that you're making, that would go into the hyperscale data centers and we hear from other semiconductor companies that supply to hyperscalers that the planning is fairly robust and they typically get very good visibility and most we spoke with have - believe that there's very good visibility into growth in the second half of the year. So I guess I'm wondering can you characterize the visibility you see from that kind of classic customer, does it come directly? Do you get visibility directly from the consumer here, the hyperscale company or you get it through your - the memory module makers themselves or the PC OEMs? Thank you.

Yeah, thanks. We see it from both. From the cloud guys what we see is the aggregate growth, especially driven by the need for their AI applications. So that confirms the growth that we see in our forecast. Then from the memory vendors, we do see how this growth translates into different types of platforms. Especially this year, where there's an introduction to the lot of different platforms the last generation of DDR4 platforms on both AMD and Intel and is the first generation of DDR5 platforms from the same vendors. So that transition is going to translate into demand mix that we watching carefully for the second half of the year. But in aggregate all of these fuels the growth driven by the data center guys, which are the end users.

Thank you. It's very helpful. Appreciate the help.

Always welcome Mark.

At this time, there are no further questions. This concludes the question-and-answer session. I would like to turn the conference back over to Luc.

Thank you for your interest in Rambus. And we wish you all health and I hope to talk to you soon. Thank you.

Thank you. This now concludes today's conference. You may now disconnect.