Q4 2020 Rambus Inc Earnings Call
Welcome and thank you for standing by today's conference is scheduled to begin moving currently and does.
And the times your lines will again be placed on hold and thank you for your patience. Once again today's conference is scheduled to begin momentarily and think that time your lines will again be placed on hold.
And please continue to standby.
[music].
Welcome to day, Rambus fourth quarter and fiscal year 2020 earnings conference call. At this time, all participants are in a listen only mode and that's the conclusion of our prepared remarks, we will conduct question and answer session. If you would like to ask a question and hear me from part one on.
And you touched on pad at any time, if anyone should require assistance during the conference. Please press star zero on your touched on paddock any time 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 fourth quarter, 'twenty and 'twenty results conference call on raw whole Mathur CFO and on the call with me today is Luc Sarafin, our CEO and 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 I'd number three seven and 441 and six nine when you hear the prompt. In addition, we are simultaneously webcasting this call and along with the audio we're webcasting slides that we will reference during portions of today's call. So even if you're joining us via conference call.
You may want to access the web surpassed with the slide presentation.
A 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 periods product and investment strategies timing of expected product launches demand for existing and newly acquired technologies the growth opportunities from the various markets. We serve the expected benefits of our merger acquisition and divestiture activity.
Including the successful integration efforts risks and the potential adverse impacts related to our rising from the novel Coronavirus or COVID-19 and effects on the 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 and the documents we file with the SEC, including our eight Ks 10, Qs and 10 Ks. These.
These forward looking statements may differ materially from our actual results and we're under no obligation to update these statements.
And in an effort to provide greater clarity on the financials, we're using both GAAP and non-GAAP financial presentations and 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.
And our slide presentation and on our website at Rambus Dot com on the Investor Relations page under financial releases.
We've adopted ASC 606, and 2018 using the modified retrospective method, which did not restate prior periods, but rather ran the cumulative effect of the adoption through retained earnings at the beginning balance sheet adjustment and.
And a 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 metrics such as licensing billings to give our investors better insight into our operational performance.
On 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 and with Q&A.
I will now turn the call over to Luke to provide an overview of the quarter Luke.
Thanks, Rahul and good afternoon, everyone.
Thousand 20 was a very successful year for the company.
And the ongoing shift to the cloud along with the widespread advancement of activity sort of intelligence across data center automotive and Iot has led to an exponential growth and data usage and increasing demands on the data and infrastructure.
Creating fast and safe connections both Ian on the system remains one of the most mission critical and design challenges and imaging performance and that's on call.
Called way and for these markets.
As a provider of industry, leading chips on.
That enabled critical performance improvements with data center and cloud Rambus is ideally suited to address these challenges.
With that it is no surprise that the cloud continues to be the primary demand driver across all of our businesses.
We see sustained investment from our customers and products and solutions that will help improve the performance and security of their global debt on infrastructure and expect this demand to continue to growth.
We had a strong finish to the year demonstrating great execution across our business lines.
In Q4, we delivered on revenue of $61 9 million.
In line with expectations, and we exceeded our profitability targets.
The full year in ahead of 2020 guidance for revenue and earnings.
On your cash generation was up 44% with $185 $5 million from operating activities.
With tremendous cash generation and fueling ongoing investment and our product roadmap. We are poised for continued profitable growth in 2021 and beyond.
Turning now to the businesses. This was another year of record growth from memory interface chips.
Annual product revenue was up 56% year over year, finishing well above the guidance provided at our analyst day in 2019.
This increase was driven by steady gains and DVR for market share, allowing us to significantly outpaced the growth and the overall market.
As we mentioned previously there was a short term inventory correction in the third and fourth quarter following the buildup and the first half.
We believe the bulk of this adjustment is being completed as consumption levels have begun returning to normal.
This year, we expect our growth to continue with some other gains and market share.
For DDR five we are in the leading position for qualification with al and memory customers and CPU partners.
We are shipping early volumes with all of the major DRAM suppliers company and DDR five modules without sheets to data center and cloud customers.
Looking forward, we continue to invest and the development of companion chips for DDR five platforms to expand the value of our portfolio.
Additionally, we on the forefront of innovation for new architectures and memory subsystems and are actively being sold by ecosystem leaders as a development partner.
In our Silicon IP business, we continue to drive road map alignment with overall market trends and deliver best in class solutions for demand and cloud and edge applications.
2020 was a strong year with annual revenue up 14% and continued design win momentum and data center <unk> and edge.
This performance was supported by the successful integration of the former northwest logic and very matrix teams acquired in 2019 with both ending the year on the targeted run rate for revenue.
Lastly, we signed multiple new patent license agreements and renewals with DRAM and this will see manufacturers throughout the year.
In addition to the DRAM license agreements with <unk> and Micron and discussed in previous quarters. We also renewed our agreements with Vega and D for an additional five years.
Supported by our growing patent portfolio. These agreements are a great Testament to the ongoing strength and relevance of our program.
With these licensing agreements secure we have solidified our foundation and a sustained cash generation other.
And now this too few and all critical roadmap and invest in organic growth.
Looking forward the and.
Facebook demands of performance hungry applications and that that's a sign.
And I know other growing markets drive our research and development we.
We continue to produce products and innovations that are critical to the memory industry and address the fundamental challenges of exit Harrington desktop.
As we begin 2021 I am very pleased with the steady progress. The team has made over the last few years.
Strategically focus the business and continuously improved our operating performance.
This has allowed us to better serve our customers and return capital to our shareholders.
In closing I am proud of the company's performance and excited by the growing opportunities ahead of us.
With that I'll turn the call over to Rahul to discuss the quality and financial results Rahul.
Thanks, Luke I would like to begin with our financial results for the fourth quarter and for 2020, let me start with some highlights on slide five as Luc mentioned, we delivered a solid quarter and are very pleased with the ongoing execution on our strategic initiatives.
Once again in Q4, and we delivered financial results in line with our revenue expectations and at the high end of our earnings expectations. We had great financial results and 2020 and ended the year very well positioned as we continue to make progress on our long term growth strategy.
This performance was coupled with continuous improvement and our balance sheet. We ended the year with $502 6 million and cash and after implement after implementing a $50 million share repurchase program and Q4.
Our continued execution on our strategy and our operational discipline have yielded solid financial results and a strong balance sheet that affords us the flexibility to support our strategic initiatives.
We are focused on the compelling data center and cloud market opportunities in front of us and are well positioned for profitable growth and 2021 and beyond.
Now let me talk you through some revenue details on slide six.
Revenue for the fourth quarter was $61 9 million in line with our expected range.
Royalty revenue was $27 7 million, while licensing billings was $64 2 million.
The difference between licensing billings and royalty revenue primarily relates to timing.
As we don't always recognize revenue and the same quarter, we bill our customers.
Going into additional detail our product revenue was $21 8 million, consisting primarily of our buffer chip business our contract and other revenue was $12 4 million, consisting primarily of our silicon IP business.
For the year Theres, roughly $40 million of our silicon IP business, that's being reflected in our licensing billings. This is almost twice what we expected at our analyst day in 2019.
Strength across our IP businesses enabled us to meet our revenue expectations and Q4.
Multiple revenue streams and enable us to offset quarterly variances and any particular business.
We had a strong fiscal year.
We are pleased with our execution and saw product revenue increased 56% significantly outpacing the market as we continue to gain share, notably we made these gains while also improving our margins and generating cash.
Let me walk you through our non-GAAP income statement on slide seven.
We again exceeded our profitability targets as we have done consistently over the past many years.
Total operating expenses, including Cogs for the quarter came in at $55 8 million operating.
Operating expenses of $46 7 million were lower than our expectations due to our continued focus on operational efficiency.
We ended the quarter with headcount of 623 lower than 679, and the previous quarter as we continue to align our product programs with growth markets.
Under ASC 606, we recorded $2 9 million of interest income related to the financing component of our fixed fee licensing arrangements for which we had recognized revenue, but not yet received payment.
We incurred <unk> 6 million of interest expense, primarily associated with our convertible note. 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 resulted in non-GAAP interest and other income for the fourth quarter of $2 3 million.
And.
Excluding the interest income related to the significant financing component related to ASC 606. This would have been <unk> 6 million of interest and other expense.
Do you think and assumed flat rate of 24% for non-GAAP pretax income non-GAAP net income for the quarter was $6 4 million.
With continued focus on cost and disciplined execution, we delivered profit that was nicely above our expectations.
Our financial results for 2020 are substantially better.
And then what we expected at 2019 at Analyst day.
Despite the unprecedented challenges presented by COVID-19, we are delighted by the continued execution from our team.
Now, let me turn to the balance sheet details on slide eight.
Over the past several years, we've built a very strong balance sheet cash cash equivalents and marketable securities totaled $502 6 million down from the previous quarter as cash from operations of $42 1 million was offset by the $50 million.
<unk> share repurchase program, we announced in Q4.
This brings the year to date cash from operations to $185 5 million well above last year's full year total of $128 $5 million, even with $23 million of capital expenditures related to our new headquarter facility free cash flow of $142 5 billion was well above last year's total of one.
<unk> hundred $13 7 million.
As we continue to deliver on the top line and execute on operational efficiency, we expect to continue to deliver strong cash from operations and the future.
At the end of Q4, we had contract assets worth $368 million, which reflects the net present value of Unbilled AR related to licensing for which the company has no future performance obligations.
I expect this number to continue to trend down as we bill and collect for these contracts.
It's important to note that this metric doesn't represent the entire value of our existing licensing arrangements as several customers have royalty based agreements that allow us to recognize revenue each quarter as we signed new agreements and renew others, we endeavor to transition renewals and extensions to variable agreements that could allow us to take revenue over time as opposed to upfront.
As we announced previously we were pleased to extend our existing licensing agreement with Micron and September at our existing financial terms.
Including the agreement with <unk> announced from Q1 last year, we announced two DRAM licensing agreement that extend beyond the next renewal dates for Samsung and SK Hynix and our success in completing these contract with both new and existing partners serves as a testament to the ongoing strength and relevance of our patent portfolio.
Going forward, we expect to recognize $10 million of revenue related to the micron and licensing convention on a quarterly basis, starting on the first quarter of 2021 between this extension and continued buffer chip growth. Our revenue is poised for strong growth and 2021.
Fourth quarter, Capex was $13 million and depreciation was $6 8 million, we delivered $29 1 million of free cash flow and the quarter.
Full year 2020, Capex was $42 9 million of which $23 million was related to our new headquarters building.
Looking forward I expect 'twenty, one 'twenty and 'twenty, one capex to be less and $5 million as our spend will be offset by the refund of a tenant improvement allowance related to our new headquarters I also expect depreciation of roughly $20 million for the full year of 2021.
Now, let me turn to our guidance for the first quarter on slide nine as.
As a reminder, our 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 the financial outlook under ASC 606.
Also been providing information on licensing billings, which is and operational metric that reflects amounts invoiced to our licensing customers. During this period adjusted for certain differences.
And do you see in the supplemental information we provided on slide 13 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 and the first quarter between <unk> 63 and $69 million.
We expect royalty revenue between 23 and $29 million. We also expect licensing billings between 60 and $66 million.
Our guidance reflects the contract terms that the patent licensing and extension with Micron and I mentioned previously as well as the expectation we will see a return to normal buffer chip inventory consumption levels and the spring.
Sequential growth projected thereafter.
We expect Q1, non-GAAP total operating costs and expenses, which includes cogs to be between 61% and $57 million as we continue to invest in programs and.
And ASC 606, non-GAAP operating results for the first quarter is expected to be between two and a $12 million profit.
For non-GAAP interest and other income and expense, which excludes interest income related to ASC 606, we expect this to be approximately $1 million of expense, which includes <unk> 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%.
4% is higher than the statutory rate of 21%, primarily due to higher tax rates and 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 and Korea.
We expect non-GAAP taxes to be between and expensive zero and $3 million and Q1.
We expect our Q1 share count to be roughly 116 million basic and diluted shares outstanding.
This leads you to between a non-GAAP profit per share of 1% and <unk> for the quarter.
With that said, while we don't provide guidance beyond Q1, we are comfortable with analysts' consensus estimates at the topline and bottom line for each quarter of 2021, while.
And while the near term macroeconomic conditions are difficult for any of us to predict consensus estimates are currently in line with our long term strategy and current assumptions, reflecting our belief we will continue to gain share and that our product growth will continue to outpace the broader semiconductor industry.
Let me finish with a summary on slide 10.
We are proud of the excellent performance by our team and this unpredictable macroeconomic environment over the past several years, we've made substantial progress strategically operationally and financially we realigned our portfolio to address data center and cloud opportunities and support our long term growth strategy, while consistently improving our balance sheet generating cash.
And delivering value to our shareholders.
Our 2020 results represent the beginning of the absolute growth, we expect to see and the coming years.
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 and 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.
Yeah.
Thank you Rahul ladies and gentlemen, if you have a question. Please press star one on your Capstone telephones.
Your first question comes from Gary Mobley with Wells Fargo Chemo ask your question.
Hey, guys. Thanks for taking my question and congratulations on the strong execution throughout all of 2022.
<unk>.
First tackle the topic on on the buffer chip sales and the outlook for the balance of 2021.
Now if I'm not mistaken Intel recently rolled out Inc. Cascade Lake and that increases the memory channel count from six to eight and I realize not every customer for that particular processor generation will utilize all channels, but assuming a large portion of them do how does that impact your growth and on us.
Well related to that.
What is your best estimate as to the timing of mass shipments of <unk> five thank.
Thank you.
Hey, Gary Thanks for your question, Yeah, So I'll start by saying that on buffer chip last year was a great year for us as well with 50% growth on the product side and we expect to continue to grow on.
On the basis of a continued improvement on design win suites are our customers.
Cascade Lake as you said he is going to be introduced this year, there's going to be a.
Transition between.
And the current and Skylake version and Cascade Lake, but because our footprint and Cascade Lake was better than what we had and skylake, we see that transition as being positive for us and we expect to continue to grow and grow share in that in that market.
And when it comes to DDR size as you remember we were the first ones to invest and DDR five chips. We were the first ones to introduce those to market we have received.
And small orders from all customers, who build modules that they ship to their customers and we expect.
<unk> five to start to ship in volume next year, we expect to get the first orders towards the end of this year.
The crossover between <unk>, four and <unk>, five and the market and I'm going to happen before 2023, but that market and is a good market for us and we expect to continue to gain share in 2021.
Following the trend that we established over the last three years.
Okay, Thanks, Luke and related to the buffer chip business I can't help but noticed that the gross margin for that product category or that revenue category continues to trend up and I'm mistaken and the fourth quarter was above 70% and and.
Crept up each and every quarter, even and the high 60% net proceed three quarters and so maybe if you can share with us just a little more detail, what's driving that stronger gross margin for those.
Buffer chip sales.
Yes, that's a great question.
His operational discipline, we switched that over the last few years.
We've insisted on having high quality products that drives to high yields and we continue to see improve our cost base on the operations side and supply chain side, and we have a pricing on the controls. So that's really operational discipline that allows us to keep those margins, which as you see on <unk>.
And good margin and so these type of products in that market.
Hey, Gary It's Rahul Thanks first for your very kind words at the beginning recognizing just the performance over 2020, I think on a long term basis.
And that will maintain those gross margins kind of in that 60 per cent range, obviously margin shift from product to product platform to platform.
Where you are and the cycle as you ramp as well I think our strong margins also show the value that we're bringing to our partners through a lot of the improvements that Luke mentioned in terms of performance as well as quality.
I think the other thing I've been very pleased with is what you've seen over the last year is that we've been able to grow our product business. While also maintaining those high gross margins and dramatically improving operating margins as well so moved and very pleased with that performance and you see it show up and our operating cash flow.
Alright. Your next question comes from the line of Sidney Ho.
Deutsche Bank. Your line is now open.
Thanks, and thanks for taking the questions and congrats on a good quarter.
And I know you don't guide based on ASC 605, but if I want to follow ASC 605, replacing royalty revenue with licensing billing it would suggest revenue about $98 million and EPS 2008.
For the Q4 is that about right and similarly for <unk> and that would imply revenue on one of those three and EPS of <unk> 28, I just want to make sure that I'm in the ballpark.
Hi, Sidney Thanks, very much for your question, obviously, we only provide numbers under ASC 606, but if you were to substitute licensing billings from what we've historically reported as royalty revenue and I think you get numbers that are closer to what we used to report under ASC 605, and if I were to do your math I think I get the same numbers that you do.
Okay. That's good sticking on.
My follow up question is at the last Analyst Day, you gave us a sense about revenue expectations for calendar 2020, both day.
Range for each category and obviously you guys did much better and that.
Are you and are positioned to give us an idea of what you're thinking for 2021 by segment and maybe qualitatively.
Quantitatively and maybe a follow up to that question.
And typically relate to silicon IP business, which had growth 14% year over year.
One how much of that is organic versus inorganic and two how should we think about the growth rate for that business longer term.
And what is the right based on where to start off with and 2020.
Hi, Sidney and lots of questions. Let me see if I can go through them one by one one in terms of annual numbers for 2021 as I mentioned in our prepared remarks, we only provide guidance one quarter at a time with that said and I'm comfortable with consensus estimates for each quarter on the topline and bottom line for 'twenty and 'twenty. One if you were to look at consensus estimates.
You would see some fairly nice growth over the course of 2021, I think predominantly that's going to come again from our chip business I think most analysts have our trip and thats growing from.
Product revenue of 114 in 2020 to something like 140, and 145 and 2021 I think from a patent licensing perspective, what we've said consistently is that Q4 of 2020 represented the last of the significant structural step downs that we saw and our licensing program.
In 2021 and for several years past I expect patent licensing to be roughly flat.
So that should be somewhere between 202 hundred $20 million a year, so call it about $210 million a year at the midpoint.
And the reason there is a range is that we're perpetually in the process of renewing with our partners as well as signing new partners and so just based on the timing and structure of those renewals go see some quarterly variability, but expect patent licensing to stay at that kind of 220 per several years as a reminder, as Luc mentioned, we signed with <unk>.
<unk> and Micron and 2020.
And the Micron extension now pushes them through the end of 2024. So the next major renewal for US is Samsung and 2023, and that's why we have comfort in terms of what that number looks like so then if you look at those pieces in terms of product revenue and patent licensing. The remainder then is the silicon IP business.
As I mentioned in our prepared remarks, and 2020 because of the structure of our agreements and because of as you mentioned the acquisitions that we closed in 2019, there was about $40 million related to our silicon IP business that really showed up and licensing billings.
So if you take that $40 million and added to what we reported for.
Contract and other it certainly provides a silicon IP business, that's very much and the range of what we discussed at our 2019 analyst day for.
And so the growth that we saw and 2020.
And certainly the inorganic benefit was there and and that's what's represented the majority of the growth that we saw in 2020 going forward I'd like to see this business continue to grow and in the double digit range I think there's a great market opportunity for us and particularly as we narrow our focus both on memory and security into the <unk>.
That's where we have create differentiation I think we can continue to support that growth.
So I think I hope I answered all the questions that you had there.
Yes, Thank you guys congrats.
Congrats again.
Thank you again I appreciate the support.
Your next question comes from the line of John Pitzer with Credit Suisse and ask your question.
Yeah. Good afternoon, guys. Thanks for let me ask the question looks at other railroads congratulation on the solid results look in your prepared comments you talked about the inventory correction and cloud being mostly Q3 Q4, and clearly with your product revenue guidance from March that's playing out I am kind of curious.
How do we think about kind of growth from March relative to your ability to continue to capture share this year and again, there's some Asian competition, that's heating up a little bit on the memory buffer.
And of the business I couldn't be kind of curious how you think about competition over the next several years.
Yes, that's a great question, so I think and the short run.
As we said the inventory correction is behind us.
We see consumption resuming.
The first step for us is to.
Use the introduction of Cascade Lake to a market, where we have a better design win share as we head on skylake, So thats going to growth the.
And the revenue beyond Q1 the.
The second thing that is going to happen to us. This year is that we are introducing new product and the DDR for NIM.
Memory family, especially the D b product, which will kick in and the second half of the year and finally, the initial demands of DDR five where the contents of the dollar content on every module is higher than on DDR four he's going to kick in towards the end of the year. So we have a series of trigger points throughout the year.
Will allow us to continue to grow share quarter over quarter over quarter in terms of competition ways.
<unk> gained share.
Based on the quality of our products and our ability to ship and.
And without any disruptions on the current generations of products on the next generation of products.
And we started development and way early.
And that market, we have engaged with the ecosystem very very early and the feedback we have from the ecosystem is that we are ahead in terms of performance for these new products. So that makes us feel comfortable and what I would add to this is in the longer run.
We see potential with new buffer chip architectures that are being driven by the cloud guys and.
And we expect to play a key role there as well based on the focus we have on the type of IP and the type of products that are required for these these new markets. So we see the steps that we have to go through to generate that growth.
Perfect and then as my follow up.
Guys did a great job on the quarter on the ASR, but you've got revenue growth accelerating I think your capex requirements come down and 21 versus 'twenty. How do we think about use of cash from here on the stock still looks relatively cheap, but I know you also have other sort of corporate goals around potential M&A, but just kind of frame that.
<unk> for the balance of 'twenty one.
Sure John It's a great question and great to hear from you we've been very consistent in terms of our capital allocation. The first is to continue to support our organic growth.
I've been very pleased with our ability to take cost out of the company and specifically around infrastructure and you've seen that show up and our P&L and spend what.
And what I'd like to do is to kind of maintain SG&A in 2021, net roughly a flat level, but then continue to grow and invest in R&D and specifically for products that will help us continue to show very strong growth and in the years to come and and our product and IP businesses. So the first goal from a capital allocation perspective is to continue to invest.
And that organic growth and now that we have the step downs from out licensing behind us and I'm really looking forward to seeing absolute growth both on the top line as well as on the bottom line and in the years to come.
The second thing that we look at from a capital allocation perspective is inorganic growth. We are very pleased with the transactions, we did and in 2019, specifically in terms of the acquisitions of the matrix business and northwest logic, those have supplemented and complemented our offerings very nicely and you've seen that in terms of customer engage.
And you've seen it in terms of employee and partner engagement as well. So we continue to be very active in terms of looking at different acquisition opportunities with the cash that we have on hand, and relatively little leverage there and we certainly have firepower that's on.
And significantly bigger than you would expect FERC a company of our size. We will continue to be very thoughtful in terms of any and transactions, but certainly have an ambition to do things that are larger and I'm, not just and a smaller as well but of course it depends on what's there, but we'll continue to look at that strategic operational and financial fit.
The third priority, we have from a capital allocation perspective is return on capital to our shareholders, but we've talked about is returning 40% to 50% of our free cash flow back to our shareholders. If you look at our investor presentation and not the earnings deck that we have up and I hope at our Investor presentation, What you see it's fantastic growth and cash from.
<unk> free cash flow and free cash flow per share over the past several years. What you also see is that consistent commitment to returning capital. So as you noted we announced a $20 million share repurchase program and Q4.
As part of our results. After after announcing Q3, and then we also announced afterwards and $50 million accelerated share repurchase program and in Q4.
And so continue to look at that as a consistent part of our capital allocation.
And hopefully that is complete and hopefully not to complete and answering your question John.
Perfect. Thank you Ronald.
Yeah.
Ladies and gentlemen, if you have any questions. Please press star one on your capstone and sounds like town.
Your next question comes from the line of <unk> de Silva with Roth Capital You May now ask your question.
Hi, Luc and Rahul congratulations on the strong end of the year.
So in the.
You can ask questions about the cloud and the memory buffer business I'm curious and Phil talked about the digestion persisting till the second half of 'twenty one, whereas your you guys are feeling like it'll come out earlier can you maybe kind of contrast, the difference there and maybe where you're positioned and Intel versus AMD, if thats a helpful element here.
And so that's that's a great question, we kind of agnostic to who ships these processes to the cloud guys.
Some are strongly and the in.
And the cloud space, Oh, there's a stronger or weaker.
Sorry, guys.
We are engaged with all processes and manufacturers, we have strong relationship with all of them and as long as the market growth and we continue to grow share on that market.
You know, whether it's internal A&D is kind of we kind of immune to this I mean different to this so.
We are happy to see that.
Isolate is going to start ramping we are happy to have a relationship with AMD as well and.
And I think between the two we'll continue to gain share in and <unk>.
'twenty 'twenty one.
Okay. That's helpful. And then I think you talked about opex and being able to.
Redeploy R&D to some extent and play kind of coming down just wondering what areas are you emphasizing the investment and redeployment into so we understand what your growth investments focuses are and is there any further opportunity there just to understand the opex trajectory.
Sure absolutely so in terms of where we're spending and more cash it certainly and growth and our business as well as our silicon IP business.
On the product business it continues to be and the buffer chip program as well as the companion chips related to DDR five I think that's an exciting opportunity for us and the years to come to really grow that business very nicely.
Does that help answer your question on suiting.
Yes, and I just want to understand if there was more opportunity and the redeployment or whether kind of you're reaching a steady state there.
And this is one thing that that that is working nicely for us and we explained this at our analyst day and in 2019.
Is that.
We have a very focused for you. These days and that's where we are investing and we are gaining share in attractive high growth markets. The market's about customers on high growth markets and.
Keep listening hearing are saying about AI and <unk> Iot auto clouds.
On data centers all of these markets use high speed interface technologies, a lot of them use high speed memory interface technologies and all of them use security. So as we focused on product portfolio. We focus also market.
Targets to these.
High growth markets that have a great potential for us and this has been really really good for us and the other thing that is happening.
In the background is that every activity we have you're seeding the other.
Patent licensing activity feeds IEP development for those markets on IP development feeds our product development and vice versa, what we're developing products and IP feeds on patent portfolio. So we've gone into this virtuous cycle of focusing too high growth market developing IP that have high demand for those markets and having.
And the virtuous circle between all of our activities to address those those markets.
And that explains the growth that we've enjoyed last year and we continue to see the year Cummings and.
And the upcoming okay helpful.
Our brand and thank you.
Excuse me, what I was going to add.
I think this is what youre going for is that on a longer term basis and years out what I'd expect is that we'll try to keep SG&A roughly flat from a dollar perspective, and 2021, you might see a small growth related to the normal small percentage increases every year and the years out, but youll continue to see us spend and R&D as we invest and nuc.
Graham.
I think from a overall margin perspective, as we continue to ship more products, we've been delighted with our product gross margin, but as we shipped more products you might see gross margin ticked down, but I would like to maintain the strong operating performance that you saw in 2020.
Okay. Thanks, guys.
Thank you Cindy.
At this time there are no further questions I will hand, the call back to look for any closing remarks.
Thank you everyone, who has joined US today for your continued interest and time, we hope each of you stay safe and healthy and the new year and look forward to speaking with you again soon have a great day. Thank you.
Thank you. There's now concludes today's conference you may now disconnect.
And on.
And then.
Yes.
And.
And then.
[music].
And then.
[music] and Canada.
And then.
Yes.
And then.
And.
And.
Yes.
Yes.
Yeah.
And.
And then.
And.
Yes.
And therefore.
[music] zone.
Yes.
And then.
Yes.
And.
Moving forward.
[music] zone.
And.
[music].
And.
And.
And.
And.
[music] loans.
Yes.
And then.
And.
And we will.
And then.
Yes.
And then.
And then.
And.
And then.
Our growth.
[music].
And then.
[music].
And.
Yes.
And.
And on that.
Yes.
Yes.
And then.
[music].
And then.
[music] accounts in Canada.