Q4 2021 Rambus Inc Earnings Call
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Once again this is your op here well your conference will begin momentarily. Please continue to standby.
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Welcome to Rambus fourth 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 question and answer session. If you would like to ask a question you May press star one on your Touchtone Pat at any time, if anyone should require assistance during the conference.
Please press Star zero on your Capstone pad at any time as a reminder, this conference call is being recorded I would now like to turn the conference over to Das Lynn Vice President of Finance and Investor Relations you May begin your conference.
Thank you operator, and welcome to the Rambus fourth quarter and full year 2021 .
It's called I am Desmond Lynch VP of finance and Investor Relations, Don Nicole with me today is Luc citizen of CEO and Keith joins our interim CFO .
The press release for the results that we will be discussing today has been filed with the ACC on form 8-K.
A replay of this call will be available for the next week at <unk>.
8558592056, you.
You can hear the replay by dialing the toll free number and then entering I'd number five to 64419 when you hear the Trump.
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.
Replay 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 expectations regarding business opportunities industry growth rates.
And investment strategies timing of expected product launches demand for existing and newly acquired technologies that could also opportunities of the various markets we still have.
The expected benefits of our mantra acquisition and divestiture activity, including the success of our integration efforts the company's ability to deliver long term profitable growth.
The long term sustainability of the company's increased product revenue and cash generated from operating activities.
The company's outlook and financial guidance for the first quarter of 2022 and really two drivers the.
The company's ability to effectively manage supply chain shortages.
Risks and the potential adverse impacts related to all arising from COVID-19, and its fenians and the effects of ASC six who stakes on reported revenue amongst other things.
These statements are subject to risks and uncertainties that discussed during this call and may be more fully described in the documents, we file with the ACC, including our eight Ks 10, Qs and 10 keys.
These forward looking statements may differ materially from our actual results and we are under no obligation to update these statements.
In an effort to provide greater clarity in the 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 financials to the most directly comparable GAAP measures has been included in our press release and a slight presentation and on our website at Rambus don't call on the Investor Relations page under financial releases.
We adopted ASC, six who stakes and 2018 using the modified retrospective method, which did not restate prior periods, but rather run the cumulative effect of the adoption through retained earnings at the beginning balance sheet adjustment.
Any comparison between our results under ASC six Blue States 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 our investors better insight into the operational performance the.
The order of our call today will be as follows Luc will start with an overview of the business Keith Who'll discuss our financial results and then we'll end with Q&A.
I'll now turn the call over to Luke to provide an overview of the quarter Luke.
Thank you Dan and good afternoon, everyone two.
2021 was a great year for Rambus, driven by strong execution by our global team and continued product growth we.
We delivered an excellent fourth quarter with 91 $8 million in revenue exceeding revenue and profitability targets for the quarter.
It was also an outstanding quarter for cash generation.
We set a 10 year high with $72 million in cash from operations in Q4, and a new annual record at $209 million for the full year.
Our ability to generate strong cash from operations allows us to both continue to invest in new products and to return value to stockholders.
As we continue to scale the business, we benefit from a balanced and diverse portfolio of offerings and revenue contribution because chips and silicon IP and patent licensing.
Memory interface chips contributed to record product revenue for the second consecutive quarter at $45 million, which is up 23% over last quarter's records.
This brought the full year revenue to an annual record of roughly $144 million growing the kid's business by 26% over 2020.
We achieved key milestones throughout the year that drove that part of business performance.
Continue to focus on execution with our first generation <unk> E D.
This product is in volume production and has a growing qualifications could tweak next generation system.
We mentioned last quarter. We were also the first to sample a second generation DDR five off CD.
We are sampling our second generation products to customers and have begun receiving preproduction orders for the second half of the year.
Being first to market on DDR five.
Given us an edge to gain share joined the DDR high transition cycle.
We had a strong year. However, it is important to acknowledge the continued industry wide challenges in semiconductor supply chain.
We are working closely and proactively with our supply chain partners and minimize the impact of any disruptions and focus on our ability to meet the growing demand for our products.
Despite these supply chain challenges, we delivered record results and expect the business to continue to grow in 2022.
In addition to the record financial performance. The team continues to broaden the range of <unk> products and the available market with the ongoing development of new DDR five companion chips and the external interconnect solutions.
They found out the silicon IP.
Through a combination of disciplined execution and strategic investments to scale. The business, we have grown to a run rate of over $100 million a year in bookings and it continues to grow.
Leading in our chosen focus areas, including H B M. C. S. L. P C I express and security IP and see a growing number of design wins across our target markets.
Our silicon IP business contributes to the company's balanced revenue streams diversity in the customer base and broad relevance in the ecosystem.
It also gives us the ability to leverage the solutions develop the data center on the edge.
The address additional markets like automotive Iot and governments.
In closing this was an exceptional year for the company, we increased our investment in ESG.
During that we working with environmentally conscious companies that share our values and commitment to the health and welfare of employees and the community.
We successfully closed key patent licensing agreements solidifying our foundation of sustained cash generation and continued investments.
We returned $100 million to our stockholders through an accelerated share repurchase program.
We acquired and integrated two silicon IC companies augmenting our world class design team and product portfolio.
We expanded our roadmap for next generation data Center solutions with the launch of the <unk> initiatives and the development of DDR five companion chips.
And to double our Tam in the years to come.
And finally, we extended our technology leadership with key product releases and performance milestones, including the production ramp of our DDR high velocity expanding our market share.
I'm very proud of what the Rambus team has achieved we said we would deliver profitable growth and we did.
With the expansion of our product Roadmaps and two new chips, the industry's transition to new memory and interface technologies and the growing demand for state of the art security technologies across a wide range of markets and applications.
We are very excited about the prospects for 2022 and beyond.
With that I'll turn the call over to Keith to discuss the quarterly financial results.
Thanks, Luke let me begin with a summary of our financial results for the fourth quarter and for the full year 2021 slide five.
Once again, we delivered great results to square with product revenues growing 23% and generated $72 $2 million in cash from operations.
The cash flow contributions is an all time record for us in our evolution as a products company and is a clear testament to our success in profitably growing the company.
Our ability to consistently generate cash has helped us to both invest in our strategic growth drivers to consistently return capital to shareholders.
Let me walk you through our non-GAAP income statement on slide six.
Revenue for the fourth quarter was $91 8 million exceeding our expectations.
Royalty revenue was $32 9 million, while licensing billings was $66 $6 million.
Difference between licensing billings and royalty revenue primarily relates to timing as we don't always recognize revenue in the same quarter, we bill our customers.
Product revenue was $45 $3 million, consisting primarily of our memory interface chip business.
As Luke mentioned memory interface chip revenue was a record for the company. Despite the supply chain challenges seen in our industry and we are delighted to see such strong demand from our customers.
Contract and other revenue was $13 6 million.
Consisting primarily of our silicon IP business.
Total operating costs, including cost of goods sold for the quarter came in at $65 $4 million.
Operating expenses of $51 $4 million were in line with our expectations.
We expect to continue to grow investments in expanding our product roadmap in the coming quarters as we further expand our product portfolio to help drive our long term growth.
We ended the quarter with total headcount of 690 employees, which was relatively flat from the prior quarter.
Under ASC 606, we recorded $1 $9 million of interest income related to the <unk>.
Financing component.
Six feet licensing arrangements for which we can recognize revenue, but not yet received payment.
We incurred $800000.
Vince primarily associated with our convertible notes.
This was offset by incremental interest income associated with our cash and investment portfolio.
After adjusting for noncash interest expense on our convertible notes.
This resulted in non-GAAP interest and other expense for the fourth quarter of $800000.
Excluding finance interest income related to ASC 606, this would have been $1 $1 million of interest and other expense.
Using an assumed flat tax rate of 24% for non-GAAP pretax income non-GAAP net income for the quarter was $26 million.
Disciplined execution and focus in a difficult industry wide supply chain environment, We again delivered earnings that were above expectations.
Now, let me turn to the balance sheet details on slide seven.
We ended the quarter with cash cash equivalents and marketable securities totaling $485 $6 million up from the previous quarter as we generated cash from operations of $72 $2 million.
As we deliver on the top line and execute on operational efficiency.
Expect to continue to deliver strong cash from operations in the future.
At the end of Q4, we had contract assets worth $258 $6 million, which reflects the net present value of Unbilled accounts receivables.
Licensing arrangements for which the company has no future performance obligations.
We expect this number to continue to trend down as we bill and collect for these contracts.
It is important to note. This metric does not represent the entire value of our existing licensing agreements.
At each renewal opportunity, we restructure a patent agreements in a manner that allows us to recognize revenue each quarter.
Fourth quarter, Capex was $8 $9 million.
Depreciation expense was $5 $7 million, we delivered $63 3 million of free cash flow in the quarter.
Looking forward, we expect capex for the first quarter to be roughly $7 million.
As a reminder, before 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 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.
We have reported historically licensing billings closely correlates with what we had historically reported as royalty revenue under ASC 605.
Now, let me turn to our guidance for first quarter on slide eight.
Under ASC 606, we expect revenue in the first quarter between 91 and $97 million, we expect royalty revenue between 30 and $36 million in licensing billings between 64 and $70 million.
We expect Q1, non-GAAP total operating cost which includes cost of goods sold.
<unk> 69 and $73 million.
We increased our investments in strategic initiatives and expand our product portfolio.
Under ASC 606, non-GAAP operating results for the first quarter is expected between two profit.
$17 million to $27 million.
For non-GAAP interest and other income and expense, which excludes interest income related to ASC 606 weeks.
We expect approximately $1 million of expense, which includes $600000 of interest expense related to the convertible notes due in 2023.
We expect the pro forma tax rate remained consistent at roughly 24%, 24% is higher than the statutory tax 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 license new.
Agreement with our partners in Korea.
We expect non-GAAP taxes to be between an expense of $4 6 million.
In Q1.
We expect Q1 share count to be roughly $115 million basic and diluted shares outstanding.
Overall, we anticipate non-GAAP earnings per share range between 11, and 18 cents for the quarter.
Let me finish with a summary on slide nine.
Our financial results for 2021 show great growth sustained profitability and continued investment in our long term growth strategies.
We saw a memory interface chip business track record annual product revenue of $143 9 million.
Reflecting 26% year over year growth as we outpaced the market to continue to gain market share.
But that being said I am pleased with our execution. This growth has been achieved through a challenging industry wide supply chain environment.
Our silicon IP business continues to show great momentum and scale as the business also had a record performance and exited the year with an annual run rate in excess of $100 million.
As a reminder, in 2021, there was approximately $50 million of our silicon IP business for <unk>.
Selected in our licensing billings.
Our patent license business remains the backbone of our financial base to continue to provide consistent and predictable financial results.
Our ability to grow revenue profitably.
It Didnt record cash flows from operations of $209 2 million for the full year.
Our proven track record of Josh narration helps us fund our strategic initiatives to invest in our product portfolio inorganic acquisitions and return value to our shareholders through stock repurchase programs.
Leveraging our strengths with focused execution, we made great strides in 2021.
This will serve as the foundation for future success as we are well positioned in the data center and cloud markets and we anticipate long term growth.
Before I open the call up to Q&A I'd like to thank our employees for their continued teamwork execution and resilience during these uncertain times.
We truly appreciate your dedication and commitment as we all look forward to continued success in 2022.
With that I'll turn the call back to the operator to begin Q&A. So we have a first question.
Thank you ladies and gentlemen, if you have a question. Please press star one on near Touchstone telephone.
Your first question comes from the line of Gary Mobley with Wells Fargo Securities. Your line is now open.
Good afternoon, everybody let.
Let me congratulate you on a strong finish to the year and what seems to be good start to the current fiscal year I wanted to start off by asking about some of the supply demand dynamics on the chip side of the business the bumper chip specifically.
I'm curious.
We're in a situation where your revenue is constrained by supply and if so to what extent and I know, it's a week by week situation and trying to get enough product from your fab partners may be perhaps if you can give us an update in terms of your visibility on that particular front as well.
Hi, Gary Thanks for your question.
Yes, we are supply constrained for the buffer chip.
Yet.
We grew our revenue 26%, although the previous year.
This last quarter in Q4.
Grew 23% for the previous quarter. So we continue to grow.
Gained share in a market that is already in single digits. So we able to do that.
We could have generated a few million dollars of revenue last year had we had the supply that we required and as you said in your question. We are working on this.
Literally on a weekly basis, both with our suppliers and with our partners to minimize any disruption from a supply and to maximize our revenue.
And our customers.
We don't have much visibility.
Beyond 90 days and I think we're going to stay in that low visibility environment.
The second half of this year. Unfortunately, what we're facing today, but he said we are very happy with the demand I think it's driven by that the last generation of ice Lake we have the better.
Footprints in terms of design wins, so that generated more revenue and we started to ship Edr cards and volume in anticipation for the Yahoo platforms to be launched in the market mix next year. So that design win footprint from generation to generation is increasing the demand for our products.
It's good for US we are growing our business faster than market, we constrained by supply and working this on a weekly basis with our suppliers.
And Gary can I add to that too.
Luke's point.
We are very excited with the demand that we're seeing but however, there is a noticeable difference between our demand forecast and our supply forecasts. So from a demand perspective does it look now that were seeing great momentum from DDR five from DDR for <unk>.
And we're just really pleased with the traction we're making in the marketplace.
We're from a supply perspective for our product business, we are constrained and that's fundamentally how we have to manage the business.
And just to add a little bit more color. If we take a look at what the consensus for of analysts bottles that were put out as part of the Q3 earnings process.
Those consensus product numbers are really in line of what we see for the full year 2022 from a product revenue perspective, we see some differences within the quarters, but for the full year and that is clearly due to the supply constraints. So that's why we're still a bit cautious and.
We have good visibility for 90 days as Luca talked about but for the further we look out it's a little bit more challenging.
Got it appreciate the color, Keith and Don and Luke on the topic of the buffer chip business I realize that DDR five is probably <unk>.
Large mix of the total buffer chip revenue today, but.
Maybe if you can give us a sense of what it might represent.
Exit run rate at the end of the fiscal year end.
And then as well.
How would you characterize your market share in DDR five.
Relative to DDR var for us is it moving higher.
A great question, Gary I think Q4 might not reflect.
Yeah.
The market in the sense that this is the first quarter, where you would you be outright buffer chips are being shipped to the market. So we have a combination of as we said earlier higher AUC.
It happens when you move from one generation to the other the other aspects of the question is that.
The deep manufacturers had to build in preparation for the launch all of the platforms next year. So we have a combination.
And unusually high demand for <unk> five in the fourth quarter, which is normal pre launched the platform with unusually high AFP I think over time this is duane.
Normalized.
As Keith said, we're confident with.
The revenue.
<unk>.
We talked about in Q3 for the year on year, 2022, and overtime pricing because of the upfront Johan screens phenomenon, but I would say that Q4 was an outlier quarter from that standpoint.
And your next question comes from the line of Sidney Ho with Deutsche Bank. Your line is open.
Great I'll add my congratulations very solid quarter and guide.
My first question is just to follow up with the previous question on the product side.
Specifically related product gross margin. It was very strong in Q4. It seems like you already answered this part it.
Sounds like you said better Asps, what's the reason, but beyond that.
Beyond the first quarter.
When you look at the mix of this year's kind of accruals things like you are suggesting 30%, 40% kind of Havent focus doable, what kind of product gross margin do you expect and maybe maybe you could talk about the puts and takes on what's driving the gross margin the product gross margin specifically.
Hi, Sidney.
So on the gross margin side you saw it in Q4, we had a relatively high gross margin at 71% and that was.
Really due to having a little bit more DDR five mix during the quarter.
But however, as Luke mentioned DDR five is in its early stages of ramping and we had some very favorable asp's in 2021.
Starting in 2022, we're going to see a lot more normalized pricing, we're going to see them immediately throughout the year.
And just kind of given where DDR five ads and DDR for us relative to bear their product life cycles over the blended gross margin rate is going to be at that 60% to 65% that we've consistently historically been talking about.
Okay. That's helpful. Maybe switching gears to capital returns you guys generated very consistent cash flow from operations in the call. It around $200 million range. The cash balance is close to $500 million, you probably don't need that much they run the operations.
In the past you opportunistic buyback because it makes sense it would be a little more systematic going forward in terms of maybe not evident but more buybacks and will be paid well paying down the convertible note that is I think deal within a year.
That a use of cash and maybe just how do you think about capital structure of the company longer term. Thanks.
Yes, Sidney great questions. There so from a capital allocation standpoint, what.
What we take a look at in terms of buybacks and that our history is that we have consistently returned if I look back into 2015, we returned about 45% of our free cash flow.
To our shareholders and that's something that we've consistently done if you take a look at 2021, we return.
55% on the $100 million ASR.
Now if you take a look at the periods of times that we've done over the years its very its not one particular quarter that we pick but we have the consistent it's part of our overall capital allocation strategy.
So that's something that we monitor but it's also balanced as you mentioned on the convertible note.
In overall kind of capital allocation structure, and how we want to look long term. So on the convertible notes side, where we're deeply reviewing all the alternatives that might avail themselves to us. So we'll go through and continue to manage that but it also just kind of really lines up to <unk>.
What we wanted to do long term for capital allocation, which also includes looking at M&A opportunities. So it is a balance. So we are committed to returning capital to shareholders. We will continue to look for M&A and we're actively managing the convertible notes.
And your next question comes from the line of Mehdi Hosseini, but S. James Your line is open.
Yeah. Thanks for taking my question just the acute let me go back to your guidance for product revenue 22 did you mean to imply that.
You're guiding to 20% year over year growth of 172 million of product revenue for this year was it.
Was that what you were implying.
Many of you are aware, we're basically there's the reports that are out today and from what we see right now from a supply perspective, you know we're in alignment.
Our forecast look very consistent with what's out there I think the numbers a little bit higher of that March rather than the 172, I think it's not the one <unk> or so but that's out there, but that's just really based on our current outlook for when we see from supply got.
Got you.
Because you're starting the year with a very.
Strong momentum given your guide for March I, just wanted to make sure.
I can.
Misunderstood I didn't misunderstand you so.
So youre conservatively, one eight ish with the 60% to 65% gross margin right.
That's that's accurate and clearly those numbers for the top line is it is very much a supply outlook, it's not a demand outlook.
We are extremely pleased with what we're seeing for DDR for DDR five we're very pleased with that.
Okay, and one follow up for Luca how should I think about the adoption of DDR five bye.
Notebooks commercial notebook versus server do you think this is going to be driven by servers first in a notebook or is it different dynamics you see.
Just as a follow up to what you see.
Where do you see the mix of server DRAM.
In terms of a DDR four versus DDR five exiting this year.
So to the first question I think maybe to the first question.
The vast majority.
Or the demand for <unk> market share.
It's coming from servers.
The introduction of buffer chip doubtful for us too.
Client type of customers as far as we see it come later not much this year. So most of the 100% of the demand for the buffer chip.
It's going to come from service and again I'm talking about buffer chips not the memory test.
There's no change in the plan.
The.
Second question has to do with the mix of <unk>.
The reports of Nike and we tend to agree with that he crossover in volume.
Towards the middle of 2023 in the second half of 2020 fleet. As this is still our view, we think that the crossover in revenue.
But before that just because of the dynamic when they move from one generation to the next.
And your next question comes from the line of John at Kit, Sir with Credit Suisse. Your line is open.
Hey, guys. Thanks for let me ask the questions. Congratulations on the solid results I just want to go back to the supply issues.
And make sure that I fully understand to what extent are these sort of direct issues.
You're having that's preventing you just ship to full demand versus kind of issues you see out there in the ecosystem, perhaps for our server substrates or whatever that is kind of holding back full potential this year.
Yes, Thanks John .
This is we see a direct tissues.
Coming directly from.
Our supply chain, our own supply chain, we work with them, we've not seen what's happened in other markets where we.
We would be constrained by all the components that would go into <unk> into the safety. This was not in that yet so all of our supply issues.
Learning from.
Our supply channel and supply chain and again working with them.
At 88.
Frictions and as we go away for a week.
And Luke just relative to the direct issues do you feel as though you are any better or worse position than competition. How do you think about your share as you navigate through some of these supply constraints.
Difficult to say I think.
In buffer chips on notice.
Supply chain challenges.
As well.
As our competitors. So I think we all suffering from that I would just say that last year. We grew our review 26% when the market.
8%, so we Atlantis.
You can work the society is quite quite well again I think one of the challenges we have as we said in our year.
Going into young 90 days from now.
And our next question comes from the line of Kevin Cassidy with Rosenblatt.
Securities Your line is open.
Yes, thanks and congratulations.
Also.
Excuse me.
Yes, I think you had mentioned that second half of 'twenty two.
Expected the supply will improve.
Is it from your last comment that you say youre expanding your number of suppliers is that why you're confident that.
Second half 'twenty, two will be better.
Maybe we are not going to expand on a number of suppliers we have.
The same suppliers.
We do we think things may improve.
Towards the end of 2022 in the second half of 2022.
Because they are all the market increasing demands on the same types of technologies that we think it might be it might be.
But again.
As we keep repeating unfortunately, we have very little visibility beyond the.
90 days.
But again, we are not going to add supply on us suppliers, we're going to use the same suppliers, which is believed that things might be up towards the end of the year.
Okay.
If I move to a different topic of CSL adoption or can.
Can you give us a feel for how many engagements you're talking to maybe further IP. How many licensees there are and what do you think the percentage of.
Server Cpus with we'll be using CFL.
So it's a great question.
There are different types of engagements, we have with EXL first type of engagement, we have eight two.
Sale of <unk>.
And with the acquisition of <unk>.
We really have great momentum there, but it is IP sale, so people buy floors and integrate the controllers into the chips that are going to be T itself capable.
On the road. So that's the first I would say wave of revenue that we have.
This acquisition allowed us to develop our own.
Chip.
We are in full swing in the development and.
We are targeting to kickstart the Xerox fabric.
She is doing to keep the market in 2023 and with those <unk>.
Engaged the same players.
And as we have buffer chip and.
And finally, we are also talking to cloud service providers.
Specific chips wood.
Keep the market.
So we have a.
Wave of different technologies and products that we are introducing to the market. The main one being a memory expander that we hit the market in 2023 based on <unk>.
And your next question comes from the line of Mark <unk> with Jefferies. Your line is open.
Hi, Thank you for taking my question.
A question I have is on your M&A strategy going forward to what extent would you expect your the M&A that you.
That you make going forward it would be like pure IP companies for the for the sake of you know.
Increase in your IP portfolio versus IP companies for the sake of delivering our product.
Selling a product also.
Is kind of up.
Semiconductor product.
Kind of companies.
If you could share your thoughts on that idea that'd be great. Thank you.
Yes, thanks Mark.
The first objective with M&A.
Obviously to generate profits.
Profitable growth.
And to scale the business so to the extent that we can find the right targets.
We would be looking for semiconductor companies or carve out some semiconductor company in the types of markets. We are serving today.
The other type of companies that we're looking at is the types of things that we did with <unk>.
Last year, when we both complement our IP portfolio in the same ecosystem and we secure IP that we're going to use it.
Products and again with the end user.
Increasing our product revenue growth going forward.
As you know it's difficult to predict M&A. It takes two to data. So we have to find the right partner.
But the idea here is to generate growth with semiconductor products.
Either by.
He directly semiconductor product companies will carve outs or buy.
IP companies that allow us to generate.
Our own development of silicon to parks.
Got you very helpful. Thank you.
Thank you Mike.
And we have a follow up question from Mehdi Hosseini with S. James Your line is open.
Yes. Thank you just a quick follow up for Keith can you give us an idea how we should think about.
The increase in Opex in 'twenty two versus 21.
Hi, Mary I think from an Opex perspective, I'll just take a look at some of the guidance that we had put forth for group recurrent.
Q1 quarter.
So we will have and continue to.
We have some additional costs at least in Q1 from the perspective that we have some seasonal payroll costs that will just kind of add to the to the natural run rate is tax payroll taxes that reset.
And then.
Also we're continuing to hire were looking to Luke talk about or expand our product portfolio. So there's hiring that we have and that will be slightly incremental throughout the course of the year.
Got it okay, and if I may just a follow up for Luke.
Just looking at your Silicon IP revenue mix, which has also benefited from the recent acquisition I wanted to better understand how we should think about the diversity of your customer mix.
How is the revenue mix between the actual car volume manufacturing at your customer side versus continued R&D budget. So kind of a two part question I'm just trying to better understand.
How are we how you're able to scale those acquisitions.
Thanks Mehdi.
I think about the silicon IP business is that.
Especially in the current environment, it's much less immune to supply chain and that's a good thing to have.
If we look at our silicon IP business across interfaces controllers and security.
The range of customers. We have is much broader than what we have for our semiconductor products. The vast majority of our design wins are in the data center and edge and then as we said in our prepared remarks, the silicon IP business allows us to go into other markets.
So we have a fairly large number of design wins in <unk> and Iot.
We have a lot in government driven in particular by our security IP technologies and in automotive. So we have a much broader range of customers and customer reach who don't see Tonight, just because there's so many more products that can use.
Piece of technology that can provide the silicon IP business.
Growing our process the hour.
Silicon market is not growing as fast.
The semiconductor product markets, but we are challenging our team to grow this business double digit.
Which is higher than the market growth. So it's a good contribution to both margins and revenue growth going forward.
Once again, ladies and gentlemen, if you have a question. Please press star one on your Touchtone telephone we have a follow up question from John Pitzer with Credit Suisse. Your line is open.
Thanks, Luke just real quick there were a bunch of questions around asps in the memory buffer business as you move to DDR five I'm a little bit more curious if you can talk a little bit about server DRAM content.
And kind of how you are levered to the growth in content and I guess to the extent that street models have product revenue up this year is about as much as last year I'm kind of curious of your view is the overall underlying market do you think it shows accelerating growth versus kind of that mid single digit number you saw in calendar year <unk>.
'twenty one.
Because of this accelerating content growth.
Yeah, John Thanks for the question, it's always a bit difficult for us to correlate.
DRAM market precisely because of that.
The dynamic on the capacity on the module, but also the volatility on pricing on the DRAM.
Wei.
The way we look at it is that.
People are recycling.
There are four designs.
Demand for data and demand for speed is growing up and this is what drives.
The demand for new generations of products and as we do that we accelerate.
We prove our footprint within within the market and that's how we can generate these.
<unk> X percent of growth.
Which is not directly correlated to the DRAM since more correlated to.
It should be better generation from generation to generation if that answers your question.
No. That's helpful. And then I know it's difficult beyond 90 days, but is there any way to figure out to what extent you know what revenue could have been or could be this year without some of the supply constraints that you're talking about.
4% to 5% deficiency of supply and demand are you talking about something that's more in the double digit line.
Yeah, John I think it's a meaningful number in that regard, it's a little bit.
A challenge to quantify Theres, a lot of dynamics of pricing changes and whatnot, but I think really the takeaway is that the demand is very strong and we.
We're getting some great design wins.
Dr for DDR, five and with that that's very exciting, but trying to put that big.
Number rounded.
We it's obviously larger number is kind of a.
Phrase it but.
It's something that.
It's a little bit more challenging just from all the pricing dynamics and other things.
That's helpful. Thank you.
Alright 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 lip therapy.
Thank you everyone who's joining us today and for your continued interest and time.
Look forward to speaking to you again soon have a great day. Thank you.
Thank you. This now concludes today's conference you may now disconnect.
Okay.
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