Q1 2021 Rambus Inc Earnings Call
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Welcome to the Rambus first quarter and fiscal year of 2021 earnings conference call.
This time.
All participants and even listen only mode at the conclusion. After the prepared remarks, we will conduct a question and answer session. If you would like to ask the question you May Press Star one on your Touchtone part of any time, if anyone should the current assistance during the conference. Please press star zero on your.
Touched on part of any time as a reminder of this conference call is being recorded.
I would 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, 2020, One results conference call I'm, Rahul Mathur CFO and on the call with me today is Luc surf and 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 this call will be available for the next week.
At 8558, and $5 920 of five six you can hear the replay by dialing the toll free number and then entering I'd number 390 850 of six nine when you hear of 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're joining US via conference call. You may want to access the webcast with the slide presentation of <unk>.
He play of this call can be accessed on our website beginning today at five P. M 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 and 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 of adverse impacts related to her arising from COVID-19, and the effects of ASC 606, and 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 filed with the SEC, including our eight Ks 10, Qs and 10 Ks.
These forward looking statements may differ materially from our actual results and we're under no obligation to update these statements and.
And the effort to provide greater clarity to our financials, we're using both GAAP and non-GAAP financial presentations and both of 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 com on the Investor Relations page.
Under financial releases.
We adopted ASC 606, and 2018 using the modified retrospective method, which does not restate prior periods, but rather ran the cumulative effect of the adoption through retained earnings as the beginning balance sheet adjustment.
Any comparison between the our results under ASC 606, and prior results under ASC 605 is not an accurate way the track the company's progress we will continue to provide the operational metrics such as licensing billings to give our investors better insight into our operational performance.
The order of our call today will be as follows Luc will start with an overview of the business.
I will discuss our financial results, including our guidance for future periods, and then we will and with Q&A.
Now I'll turn the call over to Luke to provide an overview of the quarter Luke.
Yeah.
Thanks, Rahul and good afternoon, everyone.
One was the two quarter for the company delivering of the high end of expectations for revenue and profitability.
Continued to meet or beat expectations and I'm very proud of the team's continued the execution.
Cash generation remains strong with $39 5 million and cash from operations and continues to fuel our ongoing investments in our product roadmap.
As anticipated our memory interface chip business rebounded to over $30 million and we continue to expect annual profit growth to significantly outpace the market.
We also see of positive trajectory and silicon IP customer engagement with the opportunity to build the enterprise level of relationships.
Ongoing share gains and strong demand and non target markets and driving growth for the company with data center as the primary catalysts 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 companies vectors for growth out of high level and I wanted to provide more detail on some of the more tightened and try and shaping our roadmap and market opportunity.
We see three fundamental trends that are driving growth and the market system and chip level.
First is the.
The accelerated transition from enterprise to cloud.
Second the.
And the sustained increase and data generation and usage.
And third is the proliferation of the AI and data intensive applications across flow and markets.
Beyond the secular growth and data center. These trends are increasing demands for performance with rising AI and the workloads driving solid growth and the system now.
And of the chip level the need for more data to see the system is driving memory bandwidth and big growth.
As a result.
Data delivery, particularly in the memory subsystem is now on the critical path for meeting ongoing performance requirements.
Additionally, the emergence of new architectures and growing need for privacy create the necessity for security and data at rest and the motion where we have dealt with the <unk> portfolio of IP offerings.
The combination of the factors have created the nonqualified market opportunity and the growing Tam for Rambus.
Our companies kind of expansion is driven by a number of factors.
And the near term Intel's latest DDR for Black Swan supports a higher and maximum memory module attach rate.
This platform is currently ramping and will enable and optional inquiries and corresponding modules of the box and high end systems.
As the industry transitions to DDR high beginning later this year the growing complexity of higher speeds, we do require additional companion chips like temperature sensors power management integrated circuits also known as Phoenix and serial presents detection of also known as SPD hubs.
Each of these provides in the adjacent cheap opportunities for Rambus, and we expect to see and increase in our portion of the chief 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 the differentiated memory interface architecture. In addition to traditional deems to expense eastern and bandwidth and capacity we.
We are actively engaged with the ecosystem on the design and development of the new memory interface products.
And finally, as we look a bit farther out in the future the opportunity.
Opportunities to leverage the same high speed links as part 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 the security has become the critical concern that must be addressed and the hardware level to deliver both performance and protection and future architectures.
We see a growing number of industry standard and customer requirements of the security as part of the chip and system specifications.
As an industry pioneer with all of the 30 years of experience and high speed interfaces and and extensive portfolio of security offerings Rambus is ideally suited to address these challenges.
We see many opportunities while credit roadmap and focused R&D investment to drive some expansion and expect the long term profitable growth of the company to outpace that of the market.
Now, let's get back to our credit business the <unk>.
Industry has returned to healthy memory consumption levels. Following the short term inventory digestion and 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.
First quarter net product revenue returns to over $40 million and we'll continue to build as demand for server memory is expected to remain robust throughout 2021 and into 2020 two.
We expect our annual product growth to significantly outpace the market driven by share gains and <unk> and ramping volumes and DDR high.
We continue to improve our market position and media for through superior execution and expect the incrementals gain given our larger qualification footprint on the intense most recent DDI for platform.
With respect to DDR five we are in the leading position for qualification with our memory customers on both Intel and AMD DDR five platforms.
All of the major DRAM suppliers of shipping DDR five modules without chips for and customer qualification and we expect volume to ramp in the second half of the year.
We continue to invest and the development of the companion chip for the Yahoo platforms and look forward to share anymore 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 am excited about the menu of opportunities this year and beyond.
The health and safety of our global work force customers and partners remain our top priority.
We approached people culture and diversity with the same level of passion and dedication and resolve.
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'll 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 eight 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 and cash from operations, bringing our total cash position to $529 1 million.
Our execution and operational discipline have yielded solid financial results and our strong balance sheet debt enables us to support our strategic initiatives.
Let me talk you through some financial highlights on slide nine we continue to be focused on profitable growth and have demonstrated this over the past many years as Luc mentioned earlier, the significant growth and our chip and Silicon IP revenues as a result of our focused R&D investments and 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 and the same quarter as we bill our customers are.
Our buffer chip business rebounded and the first quarter as we worked through the inventory digestion and the supply chain, we had anticipated and discussed previously.
Product revenue was $30 8 million, consisting primarily of our buffer chip business and our contract and the other revenue was $10 7 million, consisting primarily of our silicon IP business.
Operating expenses, including Cogs for the quarter came in at $58 2 million op.
Operating expenses of $45 3 million were lower than our expectations due to our continued focus on operational efficiency.
We ended the quarter with head count of 589, and lower than 623, and the previous quarter as we continued to align our product programs with growth markets.
Under ASC six of fixed we recorded $2 8 million of interest income related to the financing component of our fixed fee of licensing arrangements for which we recognize revenue, but not yet received payment.
We encourage the <unk> 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 the convertible notes. This resulted in non-GAAP interest and other income for the quarter of $2 2 million.
Assuming the.
Using an assumed flat rate of 24% for non-GAAP pretax income non-GAAP net income for the quarter was $10 9 million with.
And with continued focus on cost and disciplined execution, we delivered profit that was nicely above our expectations.
Now, let me turn to the balance sheet details on slide 11.
We have consistently generated cash and cash cash equivalents of 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 the operational efficiency, we expect to continue to deliver strong cash from operations and the future.
At the end of Q1, we had contract assets worth $3 $44 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 bill and collect for these contracts.
It is 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.
First quarter Capex was $6 6 million, while depreciation was $4 7 million.
We delivered $32 8 million of free cash flow and the quarter.
Looking forward I expect capex for the second quarter to be less and $5 million.
So I 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 and 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 billings, which is and operational metric that reflects 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.
And billings closely correlates with what we had historically reported as royalty revenue under ASC 605.
Under ASC 606, we expect revenue and the second quarter of between 76% and $82 million. We expect royalty revenue of between 32 and $38 million. We also expect licensing billings between 60% and $66 million.
As Luc mentioned, we continue to closely monitor our supply chain, we're upholding our lead time commitments to our customers. Additionally, we maintain the inventory to respond to unforeseen events and customer upsides, we remain confident and our ability to fulfill customer demand.
Our expected Q2, non-GAAP total operating costs and expenses, which includes Cogs.
And we expect to be between 61% and $57 million as we continued to invest and programs and.
And our ASC 606, non-GAAP operating results for the second quarter is expected to be between the 15 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 the zero point $6 million of interest expense related to the notes due in 2023.
We expect our pro forma tax rate remained consistent at roughly 24% the 24% is higher than the statutory rate of 21%, primarily due to higher tax rates and 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 and Korea, we expect non-GAAP.
Taxes to be between and the expense of three and $6 million and Q2.
We expect our Q2 share count to be roughly 116 million basic and diluted shares outstanding. This leads you to between the GAAP profit per share of 916 cents for the quarter.
Our product businesses are well positioned relative market and we anticipate steady execution across our strategic priorities for that.
That said, while we don't provide guidance beyond Q2 consensus estimates for our topline and bottom line growth and the remaining quarters of 2021 reflect our belief that our product growth will continue to outpace the broader semiconductor industry.
Let me finish for the summary on slide 13, we are proud of the excellent execution by our team over the past couple of years, we've made substantial progress strategically operationally and financially we've realigned our portfolio to address data center and the cloud opportunities and to support our long term growth strategy.
We're consistently improving our profitability investing and the growth opportunities Luke 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 the Q&A could we please have our first question.
Ladies and gentlemen, as a reminder, if you would like to ask a question. Please press Star then the number one on your telephone keypad. The box for just the moment to compile the <unk> roster.
Yeah.
Your first question comes from the line of Sidney Ho with Deutsche Bank. Your line is open and you may ask your question.
And.
Thank you for taking my question.
My first question is really to supply constraints that we've been hearing all of where semiconductor supply chain has that been the headwind for you or do you expect that to be headwind either directly or indirectly for both your memory chipset business as well as the silicon IP business.
Yeah.
Yes, Hi, Sidney.
Great question at this point and time, we don't see these of the headwind.
Happening.
And the market at large.
But we have built for many years of supply chain and the inventory profile for growth.
And you that you know our strategy for both the shape was to gain share and so.
For the whole supply chain strategy has been built around that and.
And this means that today, we feel confident that we can supply to.
To our customers, we actually believe that we can supply.
Higher than what the demand will be and the next few quarters, yes, some lead times of increased a bit.
But we also had to increase our lead time for orders to our suppliers and they can supply to us. So at this point and time.
And we continued to be confident in our day to keep the supply as I said, the whole supply chain and outside was deals on the view that our share it would grow and our business would grow and the holds true now now you're absolutely right. There is always a.
The possible risks that a another device.
Mike.
Disrupt our supply chain.
But in our case the gain on the module you don't have many devices you have of circuit puts and Bob do you have memories and you'll have the buffer chip and a few other devices.
At this point in time.
Seen any of the situations popping up.
But that's something we are constantly Washington.
Great. That's helpful. Maybe my follow up question is you talk about the compute express link architecture and can you talk about what that means T of revenue opportunity for the traditional DDR five games from the product revenue standpoint, as far as royalty and licensing and when do you expect the brand power and sales will begin.
And thank the D var, five opportunity is already higher than detail for.
Alright, Thank you and Thats a great question. So we do see the.
DDR high opportunity and adding to the revenue growth potential starting next year.
CSL is.
Moving to significantly contribute to revenue starting in 2023 into 2020 for but the designs for CX set of chips are going to stop now and I'll starting now actually so.
It's a bit like what happens in the bus of shape the area designs and architectures and so I'm very early and three years down the road you start to see revenue ramp, but if you do add the <unk> potential.
And to which we kind of as you see on the <unk> plus the CX and potential we expect the Tam.
For our overall buffer chip business to more than double by 2024.
Great. Thank you.
Thanks Sidney.
Your next question comes from the line of Mehdi Hosseini with F. G and your line is open and you may ask your question.
Yes. Thanks for taking my question just wanted to follow up to Sydney and one of them.
And dig into silicon IP opportunities, especially with.
AI and machine learning and this is something that in my opinion, we're still.
And the early phase, but I wanted to see how much of those incremental opportunities.
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, Manny.
The.
AI and.
And then opportunities do add.
The potential revenue for our IP calls, especially HBM.
And where we do show a very high bandwidth capability.
AI is going to be consuming the large portion of the data center growth going forward. So anyone building a cheap for AI and that goes into data center. We would eventually need these high speed interfaces most of the HBM.
To some extent and GDR Stakes. So these growth of AI into the data center the data center market growth. It's the house are.
Driving growth for IP cores.
The IP core business.
And is growing and double digit growth.
The the AI <unk>.
<unk> of the main drivers for for that.
So but would it would it be possible that this.
And we're early in the adoption and perhaps.
If it materializes.
It may provide the upside to your expectation for this year and beyond or is it already dialed into whether you have communicated for opportunities.
Maybe it is dialed in what we have communicated for opportunities and the Rambus and <unk> always been to focus on data centers and high speed interfaces. So what we've done over the last few years, Inc.
We focused our portfolio on the IP that serve those market.
And <unk> going forward on sites ex Windows and <unk>.
Security IP focus onto benefiting from that market growth. So this is dialed in.
Expectations.
Got it. Thank you and just a quick follow up your pro forma opex over the past.
For quarter has remained below $50 million is this something that we should be thinking of over the next four to eight quarters.
And most of 50 million of Opex.
And maybe it's Rod Hall, thanks, very much for the question and we're delighted to have you on the call today.
In terms of and Opex perspective look I think we've done a fantastic job of improving our operational efficiency and in particularly and taking cost out of SG&A and what you've seen and so 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 and Theres always some ins and outs on a quarterly basis related to tax or hiring or other things as well what I would expect though is that if we had some increases in spend.
And it would be on the R&D side, we are investing in these very exciting product program and that Luke 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 $50 million of quarter.
And we should be under that.
Through the course of 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 and the future to few of these product plans that are growing very nicely. Maybe it's for the question you were asking earlier, we look at our Silicon IP business on total as Luc mentioned growing kind of and the double digit range on an annual basis.
And that's embedded I think and 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 I appreciate it.
Your next question comes from the line of Gary Mobley with Wells Fargo Securities. Your line is open and you may ask your question.
Hey, guys. Thanks for taking the question want to ask about your supply chain I noticed that in the 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 of function of.
Net pay for higher input costs, and particular finished wafers and.
And.
I went to ask the.
Converse.
And I guess go from a different angle from and a question asked earlier and I know your two main competitors and buffer chips.
We're also a fabulous.
Any chance that you could benefit from those two competitors, perhaps being capacity constrained.
Hey, Gary its Buffalo and great to hear from you I think in terms of your question. We've been very consistent that we think are our buffer chip gross margin should be and the 60 or 65 per cent range. As you mentioned, we had a couple of few quarters earlier without we're higher than that which was wonderful to see but I think a stopping and any period is really related more to product.
And mix more than anything else.
It's not associated with any expedite or other costs that we have associated with the supply chain and it really is mix and the margin that we printed last quarter. I think are very consistent with what we expect from of longer term basis and does that help answer your question.
Sure and just.
The question about your competition and and their supply chain.
Yes, so I think we've done a very nice job of gaining share from our competitors and if you.
You see our numbers for <unk>.
Q1 versus Q4 versus some of the other competitors, who have announced clearly we bounce back up and other folks haven't shown that 41% growth of quarter over quarter. I think it's really more associated with the design win activity and 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.
The confidence and our ability to continue to grow and it actually gives us confidence and talking about the back half of this year and growth and growth and things like the ADR five as well.
I think it's really design 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 designed our 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.
And the first half of last year as well, so hopefully that answers that part of that question as well.
Gary I think she got real demand grew demand grew.
Because of the design win activities and as we said earlier from day, one we build the supply chain and the inventory cost line 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 of a and testing.
We can maintain that growth trajectory.
And from visa for these markets and market share increase.
I appreciate that follow up question about <unk>.
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 the three the isolation and DDR five and I believe for DDR for to two day solution is it just too simple to think that that translates into a 50% boosted and your bill of material per day.
Dan.
And if not could you give us some sense of the ASP boost for you.
Sure. So the first question.
<unk> five is going to ramp and the market in earnest and 2022, but.
But we should expect customers to place orders before that to feel their channels.
So we should see some.
Preproduction orders and the second half of this year.
And the large collection of orders and in 2022, we are currently shipping <unk>.
And some volume to the memory module vendors as the go through the qualification process with the OEM customers. So that's the profile we see for <unk>. So you should expect.
<unk> revenue in the second half of the year, but these ramping and earnest in 2022.
With respect to ESP does the combination of the new generation of product coming to market that typically.
The.
The pop to the ISP and.
And the potential for additional chips. So we will certainly see overall.
The <unk> of the ESP on the <unk> platform, which.
Yes, I think you mentioned, 60%.
And that could be in that range and then over time, just thinking of regeneration and new leesville.
And the Teekay at least on the same chips, but we have the opportunity for additional chips Youre right.
I appreciate that thanks.
Thank you.
Your next question comes from the line of John Fitzer with Credit Suisse. Your line is open.
Yes. Good afternoon, guys. Thanks for let me ask the question Luca and I am curious in your opening comments you talked about price.
Ice Lake and the benefit of moving up the number of memory channel I would be curious, though if you could talk a little bit about your opportunity to grow and the memory buffer space outside of the Intel and either ex 86 or arm and I. Just wanted to ask the question because you are putting up good year over year of growth.
The time, where their server Intel server business isn't and so I'd be curious just to kind of helping to better understand your opportunities.
Outside of the of the largest provider of right now.
Yes, correct.
You mentioned.
The platform from Intel we do have the same types of engagements with AMD.
So we are at the same levels of qualifications of Intel platforms, the AMD platforms.
And when Theres a market share change between the two we continue to grow.
And that's also true for the next generation of of members we are engaged with the <unk>.
Two main vendors there.
Also engaged.
I would say Nathan vendors, who are starting to desert.
And processors for the data centers.
And that will create some additional opportunity down the road not this year or next.
And next year, but the year after.
And we try to engage with everyone developing chips for data centers, whether it's the traditional AMD or Intel or the people developing the own ships, especially the cloud guys.
And then as my follow up you've talked about kind of the the long design cycles as we go from GTR for the DDR five and your optimism around cash.
Of your ability to continue to grow share through that transition I am curious is it too early on the <unk> side to talk about what the design funnel looks like and kind of what's your position is and that design and tunnel.
It's a bit early to say, where we are and the design funnel.
What I would say is within the industry for us is converged.
Most of you to the EXL in per Se.
The architecture of the chiefs for six of interfaces of being defined as we speak and.
And we are central to those discussions with memory vendors toughest vendors and the cloud guys. So I think we are and the state of the timing chief of architectures and memory subsystem architecture, and we're thinking of good.
<unk> with central part of those discussions then we would go into the phase of development and markets ramp as I said.
The volume for CX.
<unk> buffer as you noticed we stomped, sometimes in 2023 and.
And quickly and 2000 for but the thing that has changed.
Since the last time, we talked is that the the industry has aligned around the CX and interfaces.
And the architectures that are being defined and we of parts of those discussions with the the industry and the other thing that is happening for Rambus.
And I think we're uniquely positioned for that is that a lot of the IEP contained the <unk> buffer.
We have developed as part of our business.
<unk> interface is actually the 32 gig phy.
And in the quarter, we have part as we have this as part of our offering.
IP core business the six cell buffers, we require security functions. We have this as part of our IP business. So for men IP content standpoint, so that goes into the chip I think we are uniquely positioned to be successfully and that space.
Perfect. Thank you.
Ladies and gentlemen, if you have a question. Please press star one on your Thats total telephone. Your next question comes from the line of Mark with half of it with Jefferies. Your line is open you may ask your question.
Hi, Thanks for taking my questions a couple of questions.
<unk> you.
And in the past.
Successfully used inventory strategically the to meet upside and and today you you had mentioned again net.
You you often have.
You have like some strategic inventory placed and the supply chain can you if I look at your balance sheet. It looks like you are.
Inventories are kind of flattish year on year, but you're expecting more of revenues this year. So.
Whereas the strategic inventory isn't it on is it on other is the other places and the supply chain not showing up on your balance sheet, where you have access to it if you if you could help.
Explain like how you're positioned right now with the the ability to meet upside should it should it manifests.
Hey, Mark it's Ronald Thanks, and that's a great question and what I'll tell you is that inventory report is.
At a point and 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 some times that will go a little lower.
Do have some inventory and thats placed with some distributors and that helps us solve the <unk>.
Tori or request for partners on a quick basis, and so that's not kind of show up and 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 the visibility you see and again on the on the on the DVR product side of the visibility you have into orders from the Hyperscale customers and it seems like these are products that youre, making and that would go into the hyperscale data centers and we hear from other.
Semiconductor companies that supply the Hyperscale are set and the planning is fairly robust and they typically get very good visibility and and most of the spoke with have.
And I believe that there's very good visibility into growth and the second half of the year. So I guess I'm wondering.
Can you can you characterize the visibility you see from.
That kind of classic customer or does it come directly do you get visibility of directly from the the consumer here of the Hyperscale company or do you get it through your the.
The memory module makers themselves.
Or is the or the PC Oems and thank you.
Yes. Thanks.
We see we see it from both.
From from.
Some of the cloud guys.
C is.
The aggregate growth.
And especially driven by the needs for.
AI applications.
So that confirms the growth that we see and in our forecast and from the memory vendors we.
We do see how the growth translate into different types of platforms, especially this year, where there's an introduction of this introduction of the lot of different flex and won't see the.
The last generate the trend of DDR for platform from both the AMD and Intel and is the first generation of <unk> platforms from the same vendors.
Vendors, so that transition is going to translate into demand mix.
We are watching carefully for the second half of the year, but in aggregate.
All of the Skus the growth driven by the data center, guys, which which which are the and end users.
Thank you that's very helpful. I appreciate the help.
Always spoke of market.
At this time there are no further questions. This concludes the question and answer session.
And what they would like to turn the conference back over to Luke.
Okay.
Thank you for.
For your interest in the Rambus and we wish you all.
And hope to talk to you soon thank you.
Thank you. This now concludes today's conference you may now disconnect.
Okay.
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