Q4 2019 Earnings Call

Welcome to the Rambus fourth quarter and asked why night <unk> earnings Conference call.

This time, all participants are in listen only mode at the conclusion of our prepared remarks, we will conduct a question answer session. If you'd like to ask a question. You May proceed star one on your Touchtone pad at any time, if you should require assistance during the conference. Please press the star zero on your Touchtone pad at any time.

As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Robin Master Chief Financial Officer, You May begin your conference.

Thank you Christine and welcome to the rabbits fourth COVID-19 dissolves conference call on <unk> CFO and all the call with me today [noise] Ericsson CEO .

The press release for the results that we will be discussing thing habit furnished to the FCC I'm form eight k. a replay can call will be available for the next week at eight by 5.8592056.

In here the replay by dialing the toll free number and then entering I'd number three parts 76589, when you hear the prompt.

In addition, we're simultaneously webcasting this call it along with the audio webcasting slides that we will not constrained portions of today's call. So even if you're joining US via conference call you may want to access the webcast with the slide presentation.

Replay of this call can be accessed on our website beginning today at five PM Pacific time.

Our discussion today will contain forward looking statements, including our financial guidance for future period product in investment strategies timing because that could product launches demand for existing newly acquired technologies the growth opportunities at the various markets. We serve the expected benefits of our merger acquisition and divestiture activity.

Moving the success of our integration effort.

Effects of that you see six affects on reported revenue amongst other things.

These statements are subject to risks and uncertainties that are discussed during this call and maybe more fully described them documents, we filed the FCC, including our eight Ks and Qs and Ks.

These forward looking statements may differ materially from our actual results and we're under no obligation to update these comments.

In an effort to provide greater clarity in the financials were using both GAAP and non-GAAP financial presentation in both our press release and also on this call.

Reconciliations of these non-GAAP financial and the most directly comparable GAAP measures husband included in our press release in our slide presentation and on our website at <unk> Dot com on the Investor Relations page under financial releases.

Our call today will be as follows.

I'll start with an overview of the business I will discuss our financial result, including our guidance for future periods and then we will end with queuing day.

I'll now turn the call over the linked to provide an overview of the quarter <unk>.

Thanks, Rahul and good afternoon, everyone.

2019 was a year of tremendous progress propelled by strong execution across the company.

I did buy all strategic objectives, we continue to focus on our core strength in semiconductor.

He might the company for operational efficiency and to leverage all strong cash generation to reinvest for growth.

As a result, we had an excellent performance in Q4 and exceeded expectations with revenue of $59.9 billion delivering $224 million for the full year.

We also continued to strengthen our balance sheet generating $45.4 million in cash from operations in the fourth quarter.

These bolt on total cash from operations for the year to $128.5 million, which is up $41.4 million or 48% over 2018.

Into fall going on buying team, we do you find out perimeter with significant M&A activity throughout the year, focusing the company on silicon IP and sheep solutions for the semiconductor market.

We ended the year strong competing both with the sale of opinions and ticketing business to be though as well the policies of the secure citic and IP and politicos businesses from very matrix formally insights secure.

Much like the virtues of digital controlled company northwest logic earlier in the year.

Insight secure teams and offerings augment <unk> for you and expand all market positioning data center eylea networking and automotive.

As we hope mentioned previously neither acquisition materially impacted all 2019 results, but we expect both to how the positive impact on the business and be accretive to revenue and earnings in 2020 .

In addition to the successful closing and integration of all acquisitions, we continued to execute and demonstrate success across all product lines throughout the year.

2019 was the second consecutive year of record revenue from products.

Combined results from all cheap NCT can IP businesses, delivering over 64% growth year over year from 2018.

Memory interface cheap, what's the fastest growing segment of the business with revenue almost doubling year over year.

Driven by increased OEM and data center qualifications, we saw steady gains in all DDR for memory interface cheap marketshare and delivered the fourth consecutive quarter of record revenue.

Citic of IP also delivered record revenue in Q4 and drill sustained growth throughout the year up 29% from 2018.

We had nurse design wins, a tier one is he customers across all target markets for both interface and security IP solutions.

Most recently, we announced a window and flame for both all H.B.M. to fly income quarter as part of their next generation AI training chip.

In addition, the team continued to be about the output for your solutions addressing defaults going and demanding applications in a high end Fiveg and data center with the launch of a comprehensive Bcr Aegion five interface solution in Q4.

In closing Q4 was a fantastic quarter, we delivered record revenue from both Jude MCT can IP and robust cash from operations.

2019, we executed on all strategic objectives and successfully realigned the company around our core strength in semiconductor while strengthening the product portfolio.

Now looking forward, we continue to capitalize on high growth market trend favorable jumbos.

With market share gains wood chips, I don't find the memory cycle upswing and growth industry thing Yankee market capitalize bite AI in Fiveg.

We will be very well positioned for continued success in 2020 and beyond.

With that I'll talk to quote you want to discuss the quarterly financial results Rahul.

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I'd like to begin with our financial results for the fourth quarter, Let me start with some highlights on the call six as Lou mentioned, we continue to execute our product businesses and delivered solid financial results above revenue and earnings expectations.

We've adopted easy fixes six using the modified retrospective method, which does not restated prior periods for southern runs the cumulative effect of the adoption through retained earnings at the beginning balance sheet adjustment.

In comparison between our results on or is it.

And prior results under 86, all five is not an accurate way to track our company's progress.

We will continue to provide the operational metrics, such as buys and billings to give our investors better in.

Our operational performance.

Delivered revenue of 59.9 million and licensing billings of 63.8 million.

Revenue was higher than our expectation due to strong buffer chip sales.

We have a very strong balance sheet and ended the year with cash cash equivalents marketable securities a 408 million from the previous quarter.

For the year cash from operations was 128.5 million up nicely from last year was 14.9 billion of capital expenses.

Cash flow for 29 team was $13.7 million.

Continued execution on our strategy and our operational discipline has yielded excellent financial results in a strong balance sheet, but afford us the flexibility on their strategic initiatives.

We continue to leverage our high margin historic distances to fuel growth and adjacent areas, where we have strong technical and market expertise.

Focus on chip and Silicon IP.

Now let me talk you through some revenue detailed on slide seven.

Revenue for the fourth quarter was 59.9 million above our expected range due to market share gains in our buffer chip business.

Well to revenue for the fourth quarter was 19.4 billion well licensing going was 63.8 million the difference between licensing billings and we'll see revenue primarily relates to timing as we don't always recognize revenue the same quarter, we pillar customers.

Going into additional detail our product revenue was 26.6 million consisting primarily of our buffer chip business our contract and other revenue was 13.9 million consisting primarily of our silicon IP business.

As we expected due to the timing of the close our acquisition of the so can I P secure protocols and provisioning business can bear matrix did not have a material impact on the fourth quarter.

For the year, our product revenue was 72.9 million almost doubling year over year. Similarly, our contract. Another revenue was 41.7 million up 29% year over year, our growth of these areas underlies the benefit of our focus in strategy. We recorded your point 9 million of revenue in 2.3 million in operating costs and expenses.

Associated with our payments and ticketing business in Q4 prior to the sale that either.

Let me walk you through our non-GAAP income statement on slide eight.

Along with our solid revenue performance in Q4, we met our profitability targets.

Basic.

Cost of revenue plus operating expenses are what we refer to as total operating expenses for the quarter came in at 62.3 billion.

This was towards the high end of our expectations due to higher Cogs related record buffer chip.

Higher revenue and disciplined execution on spending our profit was nicely above our expectation.

We ended the quarter headcount of 685 down from 840 in the previous quarter, primarily due to the divestiture of our payments of ticketing business.

That is approximately 65 employees through our acquisition of the Silicon IP secure protocols and provisioning business Parametrics.

Under 86 effects, we recorded 4.5 million of interest income related to the financing component of our fixed the licensing agreements for which we recognize revenue, but not yet received payment.

We incurred 0.6 million of interest expense related to the convertible notes issued in Q4 from 17.

This was offset by incremental interest income related to the return on our cash portfolio.

After adjusting for non cash interest expense on a convertible notes. This resulted in non-GAAP interest in other income for the first quarter of 5.5 million. Excluding the interest income related to the significant financing components really the 86 effects this would've been $1 million.

Using an assumed flat rate of 24% for non-GAAP pre tax income non-GAAP in net income for the quarter 2.4 million.

Now, let me turn off the balance sheet details on slide nine.

We're very pleased with the strength of the balance sheet cash cash equivalents marketable securities totaling four 7.7 billion up significantly from the previous quarter, that's cash from operations of 35.4 million and the proceeds from the sale of our payments and ticketing business to be that.

Offset by cash use for the acquisition of the Silicon IP secure protocols and provisioning business from their matrix.

Year over year, we've grown cost $530 million, our strong balance sheet allows us the flexibility to invest strategically in a patent portfolio and are growing product profile as well as provides power firepower for additional inorganic.

At the end of Q4, we had contract assets worth $528 million, which reflects the net present value of unbilled costs related to license agreements, which the company has no future performance obligations I expect this number to continue the trend down as we go and collect for these contracts. It's important to note this matter.

It doesn't present, the entire value of our existing licensing agreement that several customers have lucky disagreements that allow us to recognize revenue each quarter Andre Agassi 66.

As a sale of our payments and ticketing business did not close until October 21st at the end of Q3, we classified assets and liabilities for this business as held for sale, but not carrying amount of this business as in the third quarter was 86.5 million considering assets liabilities and cumulative translation adjustments after.

Considering to 75 million purchase price and transaction costs, we recorded a rapid recovery of 1.9 million in Q3 that offset the impairment charge in our Q2 GAAP results.

In Q4, we reported another recovery of 7.7 million upon the sale of this business, which resulted in the cumulative year to date loss of 7.4 million. After considering the decorating amount of this business of 86.1 million and that proceeds of 70.6 million.

Fourth quarter, Capex was 6.4 million and depreciation was 4.9 million.

Full year 2019, Capex was 14.9 million and depreciation was 15.2 million.

As I mentioned earlier, we delivered 113.7 million a free cash flow and 29 team.

Looking forward I expect roughly 16 million of Capex for the first quarter and roughly 26 million for the full year 2020 half of that total amount is related to the relocation or headquarters facility.

Also expect appreciation of roughly 5 million for the first quarter and roughly 20 million for the full year of 2020.

Overall, we have a strong balance sheet limited debt and expect to continue to generate strong cash from operations in the future.

Now, let me turn to our guidance for the quarter on slide 10.

As a reminder are forward looking guidance reflects our current best estimates and our actual results could differ materially from what I'm about to review.

In addition to financial outlook under his these six so six we've also been providing information on licensing billings, which is an operational metric that reflects a mountain boys to our licensing customers. During this period adjusted for certain differences.

As you see in the supplemental information we provided on slide 15 of our earnings deck licensing billing closely correlated with what we have historically reported as royalty revenue under 86, so far.

That said under AC six to six we expect first quarter between 40 450 million, we expect well see revenue between seven and 13 million. We also expect licensing though between 60 66 million.

We expect Q1, non-GAAP total operating expenses, which includes cogs to be between 64 and $68 million.

Under 86 to six non-GAAP operating results for the first quarter is expected to be between a loss of 24 and $14 million.

non-GAAP interest and other income and expense, which excludes interest income related to 86 to six we would've expected 1 million and income which include zero point Sixmillion of interest expense related to the notes due in 2023.

Based on the new tax legislation passed at the end of 2017.

We expect our pro forma tax rate in 2020 to remain consistent with our 2019 pro forma tax rate of roughly 24%.

24%, it's higher than the statutory rate of 21%, primarily due to higher tax rates in our foreign jurisdiction.

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 the benefit and six of six and 3 million in Q1, we expect our Q1 share count to be roughly 115 million basic and diluted shares outstanding. This leads to you.

Looking ahead to 2020.

I expect you to down 2% because of our typical seasonality and then modest growth in Q3.

I expect Q4 to be roughly flat with Q3 due to the structure of our licensing agreements.

As we communicated previously structural step downs and several of our long term license agreements impacted our 2019 revenue last year, our excellent product growth and operational efficiencies offset the structural step downs.

2020 , we had the last two the structural step downs under our current license agreements after which patent licensing billing will level off as we look to the future I expect subsequent revenue growth in our product businesses to provide growth on both the topline and bottomline.

We expect to deliver gross margins in the 55% to 60% range.

So that's perspective, we expect Cogs move in line with product shipments through the year.

I anticipate operating expenses will come down gradually easier due to the operational efficiencies we've already implemented.

All told these changes reflect $5 million at higher revenue and two cents in higher easier than current analyst consensus estimates.

And expectations for 2020.

Let me finish with a summary on slide 11, we're proud of the solid performance by our team and the progress we continue to make against our strategic initiatives to drive long term profitable growth. We've had a significant amount of M&A activity as we focus our company and are very pleased with our execution on organic and inorganic growth.

While we understand that AMC success that added a level complexities for financial reporting its important to reiterate the underlying financial strength of our business remains strong reflected in our demonstrated the ability to generate cash.

We have refocused our product portfolio around brand buses core strengths in the semiconductor industry improved our operational efficiency and profitability generated solid cash from operations and leverage our strong balance sheet to support a strategic initiatives. We continue to focus on our core markets and are well positioned for 2020 and beyond with that.

I'll turn the call back over to Christine to begin today could we please have a first question.

Thank you ladies and gentlemen, if you have a question. Please press Star then one and you touched on telephone. Your first question comes from the lives Sidney Ho from Deutsche Bank. Your line is open.

Great. Thank you and congrats on solid results and Guy.

My first question is your licensing billing is better for both Q4 results. In Q1 guide can you talk about what's driving the upside other than maybe timing of some of the contracts and relates to that Oh I see I. Appreciate you are going through a right who going through the quarter by quarter Airport next few quarters, but are you kind of look past beyond look.

That's 2020, I think you talked about there being a licensing to only being roughly flat after seeing structural stepped up 2020 are there any other steps down that we should be aware off going forward and what type of licensing structures are you seeing these recent deal.

Sure exiting and let me see if I can answer your question first in terms of the trends of licensing billings and come back and forth. It's really just related to the structural agreements that we signed over the last several years, our existing agreement all have disparate terms and conditions in terms of how.

We bill and invoice our partners in some cases there they are royalty based and that will show up in are recorded revenue in other cases, there fixed payments that are consistent on a quarterly basis and that May just show up in our and our licensing billing and another cases the payments are structured in a stair step action, either going up and down or.

Coming this.

Going straight or even coming down in some cases in any case I wouldn't read too much into the quarterly changes between royalty revenue in licensing billing I'd refer you back to the guidance that we provided at our analyst day, where I think we said at the midpoint licensing billings for us in 2020 would be about $230 million.

So that's what I kind of anticipate over the course.

Here.

If I recall your your other question you specifically talk about what's happening it looks like going forward as I mentioned in prepared remarks. After 2020, we expect us to be very stable over the next several years. We now see the last of the structural changes in 2020 and that was part of the quarterly guidance that I gave in my prepared.

Remarks, where I expect Q4 to be roughly flat with Q3, otherwise I would've expected Q4 to be up nicely from Q3 due to increased product revenue.

Looking forward most of our.

Licensing billings are related to the three big agreements with you have industry and I think we can talk certainly there in terms of our expectations for renewals out in the future, but we feel very confident about our patent portfolio and the investments we make their ability to maintain that that very.

Profitable that business for us in the future.

Great. That's Super helpful. My follow up question is home Fiveg infrastructure in the past you talked about benefiting from the deployment of LTE infrastructure, especially based on what Pciethree. Gen. Five interface can you give us an update on that market, what you've seen there, especially after a very strong built in second half of last year and do you have any issues.

Given given a big portion of that build is coming from about one big Chinese customer there.

Yeah, Hi, Cygnet since you.

So we continue to see traction from the Heidi Fiveg infrastructure development and deployment and as we explained in earlier calls. The reason is that we are further down into value chain, we actually provide IP to people, who build a cheap so that fiveg infrastructure. So we can kind of either.

Revenue before you know the others do one of the things that are happening to us.

Over the last year is the acquisition of northwest logic allowed us to develop a complete solution to fiveg. So we have combined all five we sell a controller to how to complete five GPC a gen five.

Solution and we continue to see traction with several customers as as we move forward.

Okay, maybe one last question sticking with the Fiveg chipset side, but never chipset side I think you mentioned the revenue in the $75 million to $95 million range and that's up from roughly 70 million 2019.

Which doesn't seem like a lot of growth how much DDR five revenue are you expecting into 2020 outlook and can you talk about your market share expectations stays on the design wins design win activity for the next generation 14, nanometers, and 10 nanometer server products.

I mean any color would be helpful. Thanks.

Yes. Good question to me so I think the revenue from DDR fog is going to be very modest in 2020.

We will see the ER.

Very initial shipments towards the end of the year, even in the volume. So 2020 is still going to be a DDR for market for who who buffer chip.

The growth wheels that depends on on a couple of factors, we see the upswing of the market. After you know a soft year last year.

In General terms. In addition to that you know the speed of the Bulls will depend on how fast to market is green to transition from the tolerance impact platform to next generation platform. So we certainly see growth potential for you know for fall fall business, which we give you. We gave you just gave you guidance.

Great. Thanks, so much.

Thank you could.

Your next question comes from the line of John Pester from Credit Suisse. Your line is open.

Yeah. Good afternoon, guys. Thanks, Let me ask the question well I guess my first question I think you said in your prepared comments at the very matrix acquisition that is very little to the calendar fourth quarter I'm wondering how we should think about its contribution both to the calendar first and to the full year.

Sure that's great questions on yes, because of the timing of the close there was minimal impact for our Q4 financial statements regarding the their matrix acquisition.

What we said at our analyst day is that we expected roughly $20 million of revenue associated with that acquisition in 2020, and I think both that as well as the acquisition of northwest logic, We said would be marginally accretive for us in 2020, right now I would just simply anticipate a a roughly linear trend in terms of.

How much additional revenue we'd see in 2020 associated with without acquisition at the their matrix assets. So I'd say from $4 million to $5 million a quarter through 2020, hopefully that helps answer your question.

It does and then maybe just as a follow up to Luke just given the cash flow generation of the business model should we think about 2020 is being another year of additional tuck in acquisitions or is this a year, where you kind of try to rationalize and exploit the acquisitions you did last year and if the former how should we think about the acquisition strategy.

Good potential targets.

Yeah, Hi, Thank you John .

So in terms of rationalizing the acquisitions, we just made with moving really fast the integration of both companies is going quite well and fast and I think both Oh, you know up and running I I would say at this point in time.

So so we quite piece weeks that was that when really really fast in terms of the of integration and focus on growing the business. Now we will continue to look very actively at possible acquisitions to strengthen our position ever in the memory interface eylea now or in the embedded.

Security Arena or this is very very activities activity that we have internally and because we do have its ability to generate cash we have the ability to move fast if any of these opportunities yeah I've come to two to two us with a high level of interest. So we will continue to do what we do and.

We've been very fast and integrating the two we did last year, so no change though.

Thanks, a lot guys.

Thank you. Thank you John .

Your next question comes from the line and Suji de Silva from Roth Capital. Your line is open.

I look favorable congratulations on the progress you're showing in.

The strategy of focusing on the core so congrats on that Rahul I just want to sharpen their pencil here on some of the that maybe the six so five kind of equivalent numbers here fourth COVID-19, I was getting 104.3 million and EPS around 20, 829 cents is that sounds like it's in the ballpark.

So to the weekend produced six or five numbers anymore, but I think what you're doing is your substituting licensing billings for what we have corns royalty revenue and I think when you make that substitution and run it through I get the same numbers that you would get great and most importantly, the guidance I think you're coming in it's implying something around 100 million. Despite.

Actual declining 23 cents as you start out there I think that's kinda.

I wanted just make sure that that's also ballpark sounds reasonable as well.

And again, that's not numbers that we provide but if I wanted to do the same not that you did I get in the same place and that decline. It's really just just seasonal between the Q4 in Q1, we were delighted with our Q1 results both on the topline as well as from a cash perspective.

Fair enough and then switching to some of the business segments Silicon IP. This was up 29% year over year, how much of that is organic versus inorganic was that all organic and if so what is a more normalized growth opportunity that's sustainable for that business. It sounds like it's not a chair really from a design ramp perspective, so curious how that can flow through the next year too.

Yeah, No. That's a great question. So as I mentioned, we had minimal revenue from the assets we purchased from from their matrix. We didn't have a a couple of million dollars of revenue associated with the acquisition of northwest logic that closed in Q3, I think even without the acquisition, though it was very strong growth year over year.

Sure and we're very pleased with the performance our our memory IP business has grown very nicely over the last several years.

And delighted with that growth rate and I think we have a a great opportunity to have grown in our security business as well.

Looking forward I would expect both of those to continue to grow and with the acquisition of those businesses, we could be in a in a similar growth rate 2020 over 20 nicely.

Okay. That's helpful color, there and then on and memory buffer you started to talk about this but where what do you think you share is now and what do you think it can go as you as you ramp up here in 2020, obviously that the size the market B factor there and then or is there any concentration in your current revenue run rate from a hyperscale customer too or is it diversified kinda.

From the end comes because perspective, not the memory customers.

Yes, great questions, who do you look.

We have to me to our share in 29 team to get around 15%.

You know and it keeps growing.

We will you know shortly go to 30% when we go to DDR hard because we were the first India. Five so we expect to have at least one sort of the market.

We know and then we will continue to increase share in terms of you know the structure all of our customers.

Over time I'll end customer profile has diversified so the rest of the business as diminished.

As we grow the business.

And customer as diversified and as such risk is diminished.

In that area.

Okay, great. Congrats again guys. Thanks.

Thank you Susan.

Your next question comes from line of Gary Mobley from Wells Fargo Securities. Your line is open.

Hey, guys. Congrats on a strong quarter strong finish to the year [laughter] well I wanted to go back to your Sumit comments about fiscal year 20 gotten site.

Recall correctly at your analyst day in September .

You gave sort of a preliminary 2020 outlook, which included billings of 230 million contracted amounts of revenue.

80 million product driven 85 million for total 395 knowing.

Just to clarify you're suggesting that perhaps now we see we're starting the year out maybe that's $25 million better and if so where does it come from in that three different categories.

Sure and again, Gary you know, we don't have those numbers up because that would or wouldn't be something you do from a GAAP perspective, but what I said in our prepared remarks, as we think we're going to be about 5 million better than where crop analysts' estimates are that I think that's going to come predominantly from buffer chip and silicon IP.

As I mentioned previously you know the structure of our patent licensing agreements are fairly set so those are largely predictable.

But I think it's going to come from buffer chip and potentially the silicon IP businesses.

Okay.

Want to switch gears and talk about the profitability of everything other than your patent licensing business and so in that just reported fourth quarter on [laughter] using that that's going to numbers the substitute for royalties.

We get to roughly non-GAAP operating income of $42 million in years past quarters past, even maybe as recently as mid point in this past year I.

I would imagine that 90% of your operating profit came from the patent licensing side, but seemingly now you're getting a much much larger contribution presumably from your buffer chip business. So can you speak to the profitability that business, where it sits today, where do you see it.

Yes, you're realizing in 2020.

Yes, so I'll I'll stop thanks, Gary.

We're pleased with the performance of our buffer chip business as we grew the business other business would become profitable.

And this is a high leverage business. So we can marginally invest in that business to continue to generate growth. So as we move forward and look forward you know that business is going to continue to be profitable and more profitable on the IP side, what we've done over the last year is we have we focused our portfolio.

You have offerings on to our products and solutions that show high demand in the market, we mentioned earlier the PC agent side.

Solution, using our high and our controller.

So by.

Focusing the portfolio and making portfolio decisions, we going to accelerate the profitability of that IP business, that's the way to get it.

Okay and it related to that.

I think in the second half of fiscal year 19, your product gross margin was around 65% and that's about 10 percentage points higher than the first half and so I'm curious to know.

How much above trend line is the buffer chip business running compared to what you hear it had most recently been guiding for and so can you give us sort of an update on how you view the gross margin profile of that business into 2020.

Sure area. That's that's a great question I think what I mentioned in his prepared remarks as I expect that gross margin for that our product business to be in the 55% to 60% range. In 2020, we had some quarters with particularly high margins and that's just simply a function of product mix.

Well as.

Which we were shipping I think as we become larger and larger and I hope to the beat the estimates that we provided today, but as we become larger and larger than any small variation in mix will have a muted impact in terms of what the gross margins look like but I feel pretty comfortable the 55% to 60% gross margin and as Lou mentioned earlier.

Earlier and your question about leverage on the on the product portfolio, because we have that a product portfolio and as we wrap there's minimal incremental investment and so there's a pretty nice fall through the end to the bottom line and I think thats. What you saw so in Q4 [laughter].

[laughter] I just sort of final off the wall question about IP protection. So it's part of this phase one just trying to trade agreement with some IP protection call. Just pause is built into the to try to green So I'm wondering.

If that changes any enforceability of your patterns as it relates to some of the developers of China memory.

So you know carries an interesting question I think it's something that still continue to develop in terms of really what's going to happen.

And the trade down.

The way I look at it is that we are unique in that our direct exposure to China has actually relatively small, though obviously anything that impacts our customers. The long term will impact us.

I think for US China is actually an opportunity from a path.

What we see is as the tech industry in China continues to grow and diversify and we're making great progress in our business areas on that it becomes an opportunity not specific to licensing China's investing tens of billions of dollars in the semiconductor industry and as the industry grows so does our relevance and opportunity in the March.

So there are strategic options, we have for patent licensing and I think engage in the earlier will actually yield benefits to us as well as our partner I think one of the thing that that we see is that for our partners taking a an early license provides credibility and allows them to compete in the global marketplace.

So I you know all told we're actively from China and continue to monitor the geopolitical environment, but we remain optimistic we'll continue to grow I think one of the thing that I would see is that if we are able to announce a license from China typically our license terms or five to seven years.

That's an early demonstration that the ongoing global relevance ability of our portfolio will be there for many years to calm.

Well beyond the terms of our existing licensees and I think that would be a nice external validation, but to what you said earlier I think we also continue to monitor what happens from a global macroeconomic perspective, but continue to invest in our portfolio until we're going to be very well positioned to take advantage of of China as well as the country.

We need to maintain our patent before noon renewals going forward.

Okay. Thank you guys and again congrats to a strong finish Didier.

Thank you. Thank you.

At this time there are no further questions. This concludes the question answer session I would now like to turn the conference back over to Luke for closing remarks.

Thank you for your continued interest in time and have a very good day. Thank you.

Thank you. This now concludes today's conference.