Q2 2021 Rambus Inc Earnings Call

Yeah.

Welcome and thank you for standing by today's conference is scheduled to begin momentarily until that time your lines will again be placed on hold. Thank you for your patience. Once again today's conference is scheduled to begin momentarily until that time your lines will again be placed on hold thank you and please continue to stand by.

[music].

Welcome to the Rambus second quarter and fiscal year 2021 earnings conference call. At this time all participants are in a listen only mode. At the conclusion of our prepared remarks, we will conduct a question and answer session. If he would like.

To ask a question you May press star 1 on your Touchtone Paddock Amy time, if anyone should require assistance during the conference. Please press 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.

Jasmine Lynch, Vice President of Finance and Investor Relations you May begin your conference.

Thank you operator, and welcome to the Rambus second quarter 2021 results conference call.

Desmond Blench VP of finance and Investor Relations and Don Nicole with me today is Luc Sanderson per CEO and Rahul Mathur CFO.

A press release from <unk>.

<unk> that we will be discussing today has been filed with the FCC on form 8-K I.

A replay of this call will be available for the next week at each site 58592056.

You can hear the replay by dialing the toll free number and then entering I'd number 7 for 78989, when you hear the prompt.

In addition, we are simultaneously webcasting this call and along with the audio we are webcasting slides that we will reference during portions of today's call.

Even if you are joining us via conference call you may want to access the webcast with the flight presentation.

A replay of this call can be accessed on our website beginning today at 5 P. M Pacific time.

Our discussions today will contain forward looking statements, including our expectations regarding business opportunities.

Net investment strategies.

Timing of expected product launches.

Mind for existing and newly acquired technologies.

The growth opportunities of the fitness market suite sales.

The expected benefits of our merger acquisition and divestiture activity, including the success of our integration efforts.

Company's ability to deliver ongoing profitable growth.

The company's outlook and financial guidance for the third quarter of 2021 and really 2 drivers.

Risks and potential adverse impacts related to all arising from COVID-19, and the effects of E. S. C..6 O 6 on reported revenue amongst other things.

These statements are subject to risks and uncertainties that are discussed during this call and may be more fully described in the documents, we file with the ACC, including our 8 Ks 10, Qs and 10 Ks.

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

In an effort to provide they took quantity in our financials, we're using both GAAP and non-GAAP financial presentations in both our press release and on this call.

A reconciliation of these non-GAAP to non chose to the most day day like compatible GAAP measures has been included in our press release slide presentation and on our website and Rambus don't call on the Investor Relations page under financial releases.

We adopted ASC 626 in 2018, using the modified retrospective method, which did not restate prior periods, but rather from the cumulative effect of the adoption through retained earnings as the beginning balance sheet adjustment.

Any comparison between our results under ASC 606, and prior results under ASC 605 is not an accurate way to track the company's progress.

We will continue to provide operational metrics such as license billings to give 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, who will discuss our financial results, including our guidance for future periods and then we will end with Q&A.

I'll now turn the call over to Luke to provide an overview of the quarter Luke.

Thanks, Dennis and good afternoon, everyone.

Q2 was an exciting quarter for the company, we complemented our excellent financial performance with a number of strategic advancements to capture the next wave of semiconductor growth focused on next generation data center architectures.

This quarter, we delivered $84.9 million in quarterly revenue and $51.6 million in cash from operations, beating expectations for the top and the bottom line.

In addition, the company launched our CX standard memory interconnect initiatives announced the acquisitions of <unk> and analog acts and initiated a $100 million accelerated share repurchase program.

Each of these activities gross the size and scale of our cheap and Nike businesses and puts the company in a great position to capitalize on the next wave of semiconductor growth in data centers.

As we have discussed before rambus sees a tremendous opportunity to lead the market and accelerate the adoption of CX study Interconnects in next generation data centers.

The XL is going to be a critical enabler for memory expansion and pooling in disaggregated and compatible architectures.

Through our CX had a memory interconnect initiative Rambus is leveraging our unique combination of technology experience and expertise to develop breakthrough solutions. So these new high performance use cases.

The acquisitions of PLD, a analog axis strengthened this initiative by providing critical building blocks for high bandwidth chip and subsystem interconnect solutions.

The complementary EXL and Panful based interface solutions augment our interface IP offerings.

And when combined with our existing interface and security IP, we have all of the necessary ingredients to be an industry leader in CX that anti C. A T as well as offer differentiated CX cell based interconnect products.

Turning back to this quarter's performance, we continued to consistently meet or beat financial targets, our balanced portfolio of chips and silicon IP continues to scale and will continue to drive growth in the coming quarters.

Product revenue from memory interface chip remained solid with another quarter over $30 million in revenue and we expect record product revenue in Q3.

Silicon IP revenue was up 10% quarter over quarter bolstered by a number of design wins as the industry continues to build solutions for data center and AI.

Demand for our memory interface chips continues to be robust, we have sustained momentum in DDR, 4 and a strong market positioning DDR 5.

We have received orders and have started to deliver production DDR 5 memory interface chips to the market.

On the supply side, we're now seeing some of the shortages in cytokine challenges experienced by our peers in the semiconductor industry.

We are actively managing our supply chain and working closely with our partners to ensure our ability to satisfy the growing customer demand for our products and she pulled the aggressive memory interface chip revenue targets, we set at the beginning of the year.

This quarter's performance also saw excellent performance in our silicon IP business with record revenue from security and digital controller IP.

The demand for Silicon IP remains strong.

Generally in high performance data center, and AI applications, where the growing need for bandwidth and security and compressed product development timelines are accelerating the need for trusted and reliable off the shelf IP.

The acquisitions of northwest logic, and very metrics have delivered extremely well and provide a blueprint for successful integration as we bring analog X M. P. M D a into our silicon IP business.

In addition to the strong performance from our businesses. This quarter, we continued to make great strides in liquidity occasion of our environmental and social programs.

We are committed to responsible and sustainable practices and as established semiconductor provider. We know that 1 of the biggest impact we can have on the environment is through the selection of our partners with.

With that we have joined the responsible business Alliance an organization dedicated to corporate social responsibility in global supply chains.

Our formalized governance structure and oversight committee ensure that our policies and actions aligned with our passion for creating a safer and more sustainable future.

The health and safety of our global work force customers and partners remain our top priority. We are actively monitoring the human impact of the global pandemic and appropriately responding in each of our geographic locations.

In closing the company had an excellent second quarter, we took some very important strategic steps to accelerate our roadmap and grow our market position.

Rambus is uniquely positioned to address the critical challenges facing the industry and remains on the forefront of next generation data intensive architectures.

We continue to grow faster than the market and are taking the right steps to support the company and our customers as we increase in size and scale.

There will be new challenges as we continue our transition to a leading for a company and I'm very excited about the many opportunities in front of us this year and beyond.

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 financial results for the second quarter on slide 8.

Once again, we delivered a solid quarter with financial results at the high end of expectations and generated $51.6 million in cash from operations now let me talk you through some financial highlights on slide 9 we have consistently realized profitable growth over the past. Many years. This has enabled us to them.

<unk> strategic initiatives, returning capital to investors and improved cash from operations and free cash flow, we've built a strong foundation for future growth.

Let me walk you through our non-GAAP income statement on slide 10.

Revenue for the second quarter was $84.9 million above expectations royalty revenue was $41.9 million, while licensing billings was $65.2 million the difference between licensing billings and royalty revenue primarily relates to timing as we don't always recognize revenue in the same quarter as we bill our customers.

Product revenue was $31.2 million, consisting primarily of the buffer chip business.

For chip revenue slightly below the midpoint of expectations and would have demonstrated growth if not for a shipment delay at the very end of the quarter.

Contract and other revenue was $11.8 million, consisting primarily of the silicon IP business.

As Luke noted we were delighted to report quarterly records for the digital controller business, we acquired from northwest logic and security IP.

Our execution bodes well for the integration of the 2 acquisitions, we announced in June overall, the silicon IP business grew over 10% quarter over quarter.

Total operating expenses, including Cogs for the quarter came in at $56.1 million operating expenses of $43.7 million were lower than expectations due to the timing of certain discrete R&D expenses.

We expect to grow investments in our product roadmap, including through acquisitions in the coming quarters to drive for long term growth.

We ended the quarter with headcount of 592, roughly flat from the previous quarter I expect head count in Q3 to increase as we integrate the strong engineering talent from analog X npls.

Under ASC 606, we recorded $2.4 million of interest income related to the financing component of fixed fee licensing arrangements for which we recognize revenue, but not yet received payment.

We incurred <unk> $8 million of interest expense, primarily associated with our convertible note. This was offset by incremental interest income related to the return on cash and investment portfolio.

After adjusting for non cash interest expense on the convertible note. This resulted in non-GAAP interest and other expense for the quarter of $1.6 million <unk>.

Excluding the financing thing interest income related to ASC 606. This would have been <unk> 8 million of interest and other expense.

Assuming a flat rate of 24% for non-GAAP pretax income non-GAAP net income for the quarter was $23.1 million.

With continued focus on cost and disciplined execution, we delivered profit that was nicely above expectations.

Now, let me turn to the balance sheet details on slide 11.

Our ability to generate cash has helped us to both invest in growth drivers and consistently return capital to shareholders.

End of quarter cash cash equivalents and marketable securities totaled $477.1 million down from the previous quarter as cash from operations of $51.6 million was offset by the $100 million accelerated share repurchase program, we initiated in the quarter as we deliver on the top line and execute on operational efficiency.

We expect to continue to deliver strong cash from operations in the future.

At the end of Q2, we had contract assets worth $324 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's important to note that this metric doesn't represent the entire value of our existing licensing agreements as several customers have royalty based agreements that allow us to recognize revenue each quarter.

Second quarter Capex was $5.8 million, while depreciation was $5.1 million, we delivered $4$5.8 million of free cash flow in the quarter looked.

Looking forward I expect capex for the third quarter to be roughly $5 million I continue to expect depreciation of roughly $20 million for the full year of 2021.

Now, let me turn to our guidance for the third quarter on slide 12.

As a reminder, the forward looking guidance reflects our current best estimates at this time 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 an operational metric that reflects amounts invoiced to our licensing customers during the period.

Adjusted for certain differences.

As we have reported historically licensing billings closely correlates with what we had historically reported as royalty revenue under ASC 605.

Under ASC 606, we expect revenue in the third quarter between 76% and $82 million, we expect royalty revenue between 25 and $31 million in licensing billings between 59 and $65 million.

As Luke mentioned this outlook represents a record revenue from the buffer chip business like many others. We are now starting to see some of the strain in the semiconductor supply chain, but as of now our maintaining our lead times and delivery commitments to our customers.

We expect Q3, non-GAAP total operating costs and expenses, which includes cogs to be between $65 to $61 million as we increased investment in programs. Our guidance includes the incremental expense from analog X, which we closed in July that we don't expect any incremental revenues due to acquisition accounting.

Forward looking projections do not contemplate <unk>, which we expect to close later this quarter.

Under ASC 606, non-GAAP operating results for the third quarter is expected to be between 11% and $21 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 <unk> 6 million of interest expense related to the notes due in 2023.

We expect the pro forma tax rate to remain consistent roughly 24%.

<unk> 4 percentage higher than the statutory rate of 21%, primarily due to higher tax rates in our foreign jurisdictions.

As a reminder, we pay roughly $20 million of cash taxes, each year, driven primarily by licensing agreements with our partners in Korea.

We expect non-GAAP taxes to be between an expense of $2.5 million in Q3.

We expect Q3 share count to be roughly $113 million basic and diluted shares outstanding.

Overall, we anticipate our non-GAAP profit per share range between 7% and 13 cents for the quarter.

Let me finish with a summary on slide 13 over the past several years, we've made substantial progress strategically operationally and financially we've realigned our portfolio to address opportunities in the data center and support long term growth.

Our product businesses are well positioned in the market and we anticipate long term growth in each segment Q2 was an excellent demonstration of our successful capital allocation strategy. We continue to invest organically in products like DDR 5 in our CX all initiatives, making organic investments like analog accent, <unk> and return value to our shareholders through share repurchases.

Before I open up the call to Q&A I would once again like to thank our employees for their continued teamwork and execution resilience during these uncertain times.

Everyone. Please stay safe and take care of yourself and your families.

With that I'll turn the call back to our operator to begin Q&A could we please have our first question.

Thank you Rahul ladies and gentlemen, if you have a question. Please press star 1 on your Touchtone telephone.

Your first question comes from Gary Mobley with Wells Fargo Securities. Your line is open.

Good afternoon, guys. Thanks for taking my question.

I want to start off by asking about <unk>.

<unk> in your approach there.

The question is when would you expect to product ties CSL or.

How should we think about the different phases of the product position of <unk>.

<unk>, whether it relates to IP licensed IP and then eventually.

<unk> related revenue and then specific to the 2 acquisitions, which helped form a portion of the basis for the <unk> initiative.

How should we think about the.

Revenue contribution from each of those maybe not so much in the near term, but when you don't have the purchase accounting headwind and then as well the related expenses to those 2 thank you.

Hey, Hi, Gary This is great great great questions. So forth EXL with CSL, we kind of killed 3 birds with 1 stone first.

It improves our IP offering for memory expansion and desegregation for anyone who wants to build chips for that market. So that revenue from IP is going to start almost immediately post acquisition people will buy it integrate.

Integrate that IP into their products and address the <unk> market with those products. So that's the first.

Bert if you wish.

Second thing is.

We are going to be able to use that IP in building our own semiconductor products.

That's critical because these products are complex, especially in terms of latency and having the IP Inc.

The house is critical for the successful development of those products those products.

A few years to develop and will hit the market in about 3 years from now and ramp from there so theres going to be a second wave of revenue coming from the.

<unk> CX products themselves.

Based on that IP and the third aspect of which is not related to revenue growth is that in these times of war for talent. The acquisitions of these 2 company allows us to bring very talented engineering teams.

Into rambus, so it's clear.

Objectives for us, bringing talent on board, increasing our IP revenue in the short run and increasing our product revenue in the longer run and we expect these 2 acquisitions combined to bring about $20 million of accretive revenue in the first year.

Yes.

Okay I appreciate all the color.

<unk>.

As my follow up question I'm interested to hear I'm sure others as well.

What sort of a logjam.

There was on the.

Net chipset business, the bumper chip business late in the quarter and.

What steps you took to fix it and to what degree do your Q3 <unk>.

Chip revenue.

To what degree does that contemplate any additional supply chain constraints. Thank you.

So first of all I would say that we've been able to manage our supply chain quite well over the last few years by building redundancy in our supply chain.

We grew the revenue as you know from.

$36 million at $2000.18 million to $114 million last year. So we've seen the supply chain constraints later than some of our competitors and now what we see we see some pockets of supply constraints across different products and we're working very actively and we have great support from our suppliers.

To make sure that we address each 1 of these potential challenges immediately and that we don't disrupt.

You know our ability to serve the markets and the demand which continues to be to be.

B B.

Be very high, but we do see across the supply chain.

People are increasing their lead times or some pockets of shortages and as I said it affects different products in different ways, but at this point in time.

We're working very actively with our suppliers to make sure. It does not disrupt the demand that we see ahead of us.

Thank you.

Yes.

Your next question comes from John Pitzer with Credit Suisse. Your line is open.

Yes, just a follow up on Gary's question on the supply side I guess, how much better could your product revenues have been in the September quarter, and I guess importantly, as you look into December do you see some incremental supply coming on.

Pretty clear that you will show sequential growth on the product side in the December quarter as well.

I'll start with Great question, I think for the third quarter.

We are able to manage the situation. This is this is short term and we have great visibility of but what we can do so we feel comfortable with the third quarter with respect to the fourth quarter.

Just have a lack of visibility I think we continue to improve the situation with our suppliers, but between the pockets of challenges with suppliers and the transition between DDR foreign DDR side, it's difficult to predict with Q4 is going to be but what I would say is that our design win momentum continues back.

Loans for DDR 5 continues to grow.

Very fast.

<unk> for the products continues to work and the support from our suppliers is there. It's just difficult to predict what Q4 is exactly going to be at this point in time, but we feel quite confident with our Q3 number.

And then look on the DDR 5 I think micron on their earnings call talked about DDR 5 perhaps ramping.

Little bit later than they thought next year I'd be curious to kind of get your thoughts on the DDR 5 ramp and I guess importantly, what kind of revenue at or should that be to you either on ASP <unk> market share and do you have a sense of how much the market could shifted DDR 5 as an exit trajectory it.

The end of calendar year 'twenty 2.

So yes, we've heard about the potential delay of DDR 5 but what's happening in the ecosystem is that people are building systems ahead of the launch. So we do see very solid orders from all memory customers that products that we ship to the <unk>.

Non customers because the ecosystem. Despite the potential delay is is building the systems to be able to to run the products. So it has had very little impact on our.

The order book on a backlog and that's a good thing we expect to see.

Our price increase when we move to DDR side, we see these as part of our.

Our backlog.

And as we said in earlier calls.

Footprint from DDR 5 is quite small because we started early so.

When it ramps in the market, we should actually see.

Our share continue to growth so with constant consistently grown our share in DDS war over the past few years, but we're going to see a steady increase in our share when <unk> come to comes to production. So at this point in time, we have a strong backlog we receive fields from the 3 of them their customers are building systems in anticipation.

The ramp of DDR 5.

So from that standpoint, all the all looks good.

We'll see when the actual launch is going to happen.

Great. Thank you.

Our next question comes from Sidney Ho with Deutsche Bank. Your line is open.

Great. Thanks, Thanks for taking my question. So a couple of questions on the memory buffer chip side I know you don't want to talk about Q4 guidance, yet, but what what kind of revenue expectations do you expect from DDR 5 chipsets.

And second question I know you talked a lot talk about 3 waves of memory Tam extension potentially doubling the Tam by 2025 can you maybe talk about what what are the sizes and timing of these various waves that thats going to happen over the next few years.

Yeah.

Uh huh.

Sure. So on the first question about DDR for Hiseq and the first question on DDR 4 vs. DDR 5 it's a.

As I said, we have little visibility over Q4.

But what I can say is despite the.

Talks about potentially delay of DDR 5 we see a mixed between DDR for NTT outside in a favorable way.

In favor of DDR 5 so we're watching the mix as well.

But as it looks today the mix looks favorable to DDR 5, but I think it's due to the fact that the ecosystem. Despite the potential for a few months of delay is building products for that for that for that market and as I said from Q4, we did watch the mix and we'll work with our suppliers to make sure that we don't disrupt any.

Shipments to our to our customers with respect to the product growth.

We see the time doubling by 2025.

This is if you add buffer chip with the other interface products based on the CSL. So thats the combination of these 2.

And as I said, the CX that ramp is going to stop in 'twenty 3 'twenty 4 tightened.

Type type of Tyco's timing.

So that's where the market today is around $600.620 million in size. So that market is going to double from that number by 'twenty 2 'twenty 3.2024.

There's a reason for that.

As we explained in earlier calls this is the need from the cloud service providers to have access to more capacity in terms of memory.

With lower latency, so that creates the need for either memory expansion use cases, which is going to be the target of our first product in that product line. All 4 memory desegregation in the memory cooling, which is going to be the second wave in that so we do have a roadmap of products.

These <unk> initiatives, we're starting with the first product, which is going to see extended memory expander, which will address the need for more memory per processor.

Okay, Great maybe a follow up question is on the licensing billings.

If I'm not mistaken I think typically a third quarter is our strongest usually up about 5%.

Curious why licensing billings in your guidance will be lower this year, given the strong utilization to administrate I understand you don't recognize any revenue from analog X because of purchase accounting and you probably don't have anything in <unk> is in the guidance, but just curious is it typical for Q3 for you guys to have to see a decline in billings and going.

Thank you Alex.

Sydney.

Good question, what I'll tell you is that any given quarter. We're perpetually in the process of renewing partners and so what ends up happening is that just based on how we structure. Those contracts you can see licensing billings fluctuate from quarter to quarter perspective, and that's often done kind of at the end of the deal negotiation.

Just in terms of as our partners are working with us in terms of how they want to structure the financial the other piece of it is that from our licensing billings perspective, we've seen more of our silicon IP.

Revenue show up in licensing billings this year than we had anticipated I think coming into the year I thought it would be closer to $20 million I think now its probably going to be closer to 40, and so as we print that number you could see some fluctuation just depending on how our silicon IP contracts are structured as well.

The base of our business I think is just as strong as we always thought we still have that patent licensing business that continues to be very strong very predictable. We've had some great renewals from the first half of the year, but continue to support our belief that that will stay somewhere between $200 million to $220 million business for the next several years.

Our silicon IP business also is growing very nicely.

As we mentioned earlier, it grew 10% quarter over quarter and that shows up in a combination of contract and other as well as some times in royalty revenue or licensing billings.

No I think that's the way I look at it I wouldn't read too much into the quarter over quarter change.

Okay very helpful. Thanks.

Yes.

Again, ladies and gentlemen, if you have a question. Please press star 1 on your Touchstone telephone.

If you have a question. Please press star 1 on your Touchtone telephone. Your next question comes from Manny.

Hussaini with <unk> Your line is open.

Yes, thanks for taking my question.

Wanted to go back to.

The growth opportunities are big.

Picture It seems to me that.

You would need to have DDR 5 implementation for other opportunities like CX sales to materialize.

Once there is a change in architecture than there will be several different growth driver.

Thinking about Detroit or or.

For CSL could stand on its own in other words is there anything with silicon IP and a growth driver that could be viewed as independent of <unk>.

Great question Mehdi.

The.

At a high level, a CX said memory expander.

Has the <unk> interface in the processor side and DDR.

Interface on the memory side, so it will come as a complement to our buffer chip business, our buffer chip business.

We'll sit on the standard memory interface of the processor.

And once this is fully populated and.

Cst's need more memory than you will attach more memory to the CSL bus. So this EXL bus with attach itself to the CSL product.

And on the other side of that product Youre going to have a standard DDR interface and that's why it was strategically important for us to bring those IP on board because we do have a complete set of critical IP that allows us to both develop the next generations of standard buffet shapes, but also to.

Develop those memory Expanders that we've helped processes address more memory than they can do on the standard cost.

Yes.

I guess, what I'm trying to understand is let's say if if the.

If the CPU company is late with their CPU upgrade.

Can other.

CPU GPU based vendor or arm based CPU.

Chips that are coming to the market enable adoption of a new <unk>.

Memory architecture, like either DDR, 5 or 6 or both.

There is some confusion around SAP.

Sapphire rapid and I'm, just trying to understand how your growth opportunities are tied to introduction of Sapphire Rapids.

Right so.

Louisiana with Sapphire rapid.

Sapphire Rapids is going to feature.

DDR 5 standard memory interfaces, so that book.

Boswell with our <unk> buffer chip.

<unk> and this is what's driving the growth that we're talking about for the quarters to come.

It will look also shows from Pcie Gen 5 and EXL to zero interfaces. So.

Those interfaces are going to be a V.

<unk> in the ecosystem, if you wish both from Intel and AMD. So the main stream.

You get a processors are going to push the market to use potentially.

Those those interfaces and then I'll follow with the first part of your question.

People developing gpus or specialized Cpus based on course, and what they're trying to do is they're trying to address a portion of the market.

That was very.

Data demanding use cases and what these people could do is they could align to the same pcie Gen 5 and EXL to the zero types of interfaces, which would be good for them because if they do that they know they can interface to all the players developing the ecosystem, but what they could also do is Z.

Could accelerate that roadmap and move faster to CX suite at zero or Pcie Gen..6 and this is another reason why we.

We did these acquisitions of analog <unk> and <unk> because they are advanced in the development of these next generation of CSL CSL fleet of zero and they are advanced in the development of next generation <unk>.

Like the PCA agency side, so by acquiring these companies, we will be able to address the needs of people who develop specialized processors for data intensive use cases in addition to the mainstream business.

Right and just.

Final comment I guess.

Given what you just laid out perhaps a year from now your.

Revenue volume would be different than what we're dealing today like a year from now there will be a relatively.

Relatively more brother diversification because of what you just said with or would that be a fair statement.

Maybe that's exactly how I look at it and as I was talking about earlier, we have a very stable predictable patent licensing business that gives us fantastic cash flow that as I mentioned earlier allows us to invest organically inorganically and continue to do capital return you see wonderful growth opportunities for our silicon IP businesses as we mentioned.

In Q2, we had records for the controller business, we bought from northwest project as well as for our security IP business and then you also see the growth and the product opportunity not just in the buffer chip, but as Luc mentioned in the future it's going to be an excel. So certainly in 3 years from now you will see more on the product side I think next year.

You'll probably see also growth in IP in particular, so I think we're set up nicely to continue to grow in.

Cross our portfolio in the coming years.

Got it thank you.

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

Thank you everyone, who has joined US today for your continued interest and time, we hope each of you stay safe and healthy and we look forward to speaking with you again soon have a great day. Thank you.

Thank you. This now concludes today's conference.

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