Rambus Inc. (NASDAQ:RMBS) Q1 2023 Earnings Call Transcript

Rambus Inc. (NASDAQ:RMBS) Q1 2023 Earnings Call Transcript May 1, 2023

Operator: Welcome to the Rambus First Quarter Fiscal Year 2023 Earnings Conference Call. At this time all participants are in a listen-only mode. After conclusion of our prepared remarks, we will conduct the question-and-answer session. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Desmond Lynch, Chief Financial Officer. You may begin your conference.

Desmond Lynch: Thank you, operator, and welcome to the Rambus first quarter 2023 results conference call. I am Desmond Lynch, Chief Financial Officer at Rambus; and on the call with me today is Luc Seraphin, our CEO. The press release for the results that we will be discussing today have been filed with the SEC on Form 8-K. A replay of this call will be available for the next week at 866-813-9403. 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. A replay of this call can be accessed on our website beginning today at 5:00 p.m. Pacific Time. Our discussions today will contain forward-looking statements, including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions, the company’s ability to effectively manage any supply chain shortages and the effects of ASC 606 on reported revenue, amongst other items.

These statements are subject to risks and uncertainties that may be discussed during this call and are more fully described in the documents we file with the SEC, 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 greater clarity in the financials, we are 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, in our slide presentation and on our website at rambus.com on the Investor Relations page under Financial Releases. We adopted ASC 606 in 2018 using the modified retrospective method, which did not restate prior periods but rather run the cumulative effect of the adoption through retained earnings as a 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 licensing billings to give our investors better insights 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, and then we will end with Q&A. I’ll now turn the call over to Luc to provide an overview of the quarter. Luc?

Luc Seraphin: Thank you, Dave, and good afternoon, everyone. This was the strong start to the year for the company, with Q1 revenue and earnings at the high-end of guidance. We delivered $39 million in cash from operations and retired the last of our remaining debt further strengthening our balance sheet. These results were driven by continued execution and achieved in the context of a challenging macroeconomic environment. In addition to our strong financial performance, we were very pleased to extend our strategic relationship with SK Hynix through the middle of 2034, with the early renewal of our comprehensive patent licensing agreement. Similar to our expansion with Samsung announced in Q4, this agreement strengthens our foundation for ongoing investments in product and technology leadership across our portfolio and is a great demonstration of the ongoing value of our innovations to the market.

Turning to our business results. Memory interface chips performed well, delivering Q1 product revenue of $64 million, up 33% year-over-year despite the challenging market conditions. In the near term, we remain vigilant as we navigate through the dynamics of the industry transition to a new generation of memory. While DDR4 inventories remain high at some end customers, as reflected in our second quarter guidance, we are seeing initial orders come through for DDR5 with shipments starting towards the end of the quarter. We remain focused on execution and are actively working with our customers. We expect a stronger second half as inventories return to more normal levels and demand for DDR5 continues to ramp. As we have said previously, the server memory crossover to DDR5 is projected for the first half of 2024, and we expect our memory interface chip product mix to be lumpy during the transition period.

Given our strong leadership position in DDR5 and improving market conditions in the second half, we believe we are well positioned for continued annual growth in 2023. As we look further out, advancing the performance of data center memory will be critical to address the growing bandwidth and capacity requirements of generative AI and other advanced workloads. We are making good progress on the follow-on generations of DDR5 with our Gen 2 RCD in qualification across the ecosystem and our Gen3 RCD sampling to all of our customers and partners. In addition to DDR5, close collaboration and developments with the ecosystem continues on CXL and we are well aligned with the market needs and timing to support the road map of future server generations for years to come.

Finally, in silicon IP, our recently announced GDDR6 interface, achieving a best-in-class data rate of 24 gigabit per second is a great illustration of our continued technology leadership. It is the latest addition to our market-leading portfolio, which also includes the industry’s fastest HBM3 memory IP subsystem. With these memory solutions, Rambus addresses the needs of both AI training and inference with state-of-the-art offerings. We continue to lead in our areas of focus for both interface and security IP and in spite of current challenging macro conditions, we remain confident in the long-term growth opportunities. In closing, this was a strong quarter for the company with results at the high-end of guidance and the team executing well.

While we navigate the dynamic market conditions in the near term, we continue to see strong secular trends and solid growth opportunities. This is a very exciting time for the industry with a broadening availability of generative AI applications like ChatGPT that have captured the public imagination. These are perfect examples of the advanced workloads that will drive accelerated growth in computing in the data center with the ever-increasing demand for data. And with memory bandwidth as a first order enabler, Rambus is well positioned to enable the state-of-the-art memory performance required by these advanced applications. With our strategic focus in data center, continued execution and diverse portfolio of offerings, we have confidence in the strength of our strategy and ability to drive long-term profitable growth for the company.

We are making the right focused investments to deliver differentiated, high-quality products and innovations that address the critical performance bottlenecks between processing and memory. As always, I’d like to thank our customers, partners and employees for their ongoing support. And with that, I turn the call over to Des to discuss the quarterly financial results. Des?

Desmond Lynch : Thank you, Luc. I’d like to begin with a summary of our financial results for the first quarter on Slide 5. Once again, we delivered a strong quarter, and we are very pleased with the company’s ongoing execution in a challenging macroeconomic environment. We delivered financial results at the high end of our revenue and earnings expectations, while continuing to strengthen our balance sheet. In April, we were delighted to announce we extended our licensing agreement with SK Hynix for an additional 10 years at similar financial terms. This extension becomes effective in Q3 2024, and we expect to recognize revenue quarterly under ASC 606. In the last six months, we’ve extended our two largest patent licenses, both for 10-year terms, which demonstrates the continued strength and relevance of our patent portfolio and innovation engine.

Additionally, in Q1, we continue to strengthen our balance sheet. We repaid the final balance of our convertible notes and settled the associated underlying hedge agreements. We’ve utilized that existing cash on hand to retire the debt, while continuing to generate strong cash flows and drive shareholder value. Let me walk you through our non-GAAP income statement on Slide 6. With our continued focus on execution, revenue for the first quarter was $113.8 million, at the high end of our expectations. Royalty revenue was $28.2 million, while licensing billings was $63.4 million. The difference between licensing billings and royalty revenue primarily relates to timing as we do not always recognize revenue in the same quarter as we bill our customers.

Product revenue was $63.8 million, consisting primarily of memory interface chips. Contract and other revenue was $21.8 million, consisting primarily of silicon IP. As a reminder, only a portion of our silicon IP revenue is reflected in contract and other revenue and the remaining portion is reported in royalty revenue as well as in licensing billings. Total operating costs, including cost of goods sold for the quarter was $86.3 million. Operating expenses of $58.3 million were in line with our expectations as we continued to be vigilant in our expense management, and we ended the quarter with total headcount of 762 employees. Non-GAAP interest and other income for the first quarter was $1.8 million. This included $900,000 of ASC 606 interest income related to the financing component of fixed fee licensing agreements for which we have recognized revenue, but not yet received payment.

Excluding the financing interest income related to ASC 606, this would have been $900,000 of net interest income. Using an assumed flat tax rate of 24% for non-GAAP pre-tax income, non-GAAP net income for the quarter was $22.3 million. Now, let me turn to the balance sheet details on slide 7. We ended the quarter with cash, cash equivalents and marketable securities totaling $292.1 million, a decrease from the prior quarter, mainly driven by the convertible note repayment and the settlement of the underlying hedge agreements. Cash from operations for the quarter was $38.9 million. At the end of Q1, we had contract assets worth $113 million, which reflects the net present value of unbilled accounts receivable related to licensing agreements 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 that, this metric does not represent the entire value of our existing licensing agreements as each renewal opportunity we restructured our patent agreements in a manner which still allows us to recognize revenue each quarter during the life of each agreement. First quarter CapEx was $11 million, while depreciation expense was $7.4 million. We delivered $28 million of free cash flow in the quarter. Now, let me turn to our guidance for the second quarter on slide 8. As a reminder, the forward-looking guidance reflects our current best estimates at this time. We continue to actively monitor the macro environment and our actual results could differ materially from what I’m about to review.

In addition to the financial outlook under ASC 606, we also provide 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 second quarter between $111 million and $117 million. We expect royalty revenue between $37 million and $43 million, and licensing billings between $61 million and $67 million. We expect Q2 non-GAAP total operating costs, which includes COGS to be between $82 million and $78 million. We expect Q2 CapEx to be approximately $10 million.

Under ASC 606, non-GAAP operating results for the second quarter is expected to be between a profit of $29 million and $39 million. For non-GAAP interest and other income and expense, which excludes interest income related to ASC 606, we expect zero interest expense. We expect the pro forma tax rate to remain approximately 24%. The 24% is higher than the statutory tax rate of 21% and primarily due to higher tax rates in our foreign jurisdictions. As a reminder, we pay approximately $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 $7 million and $9 million in Q2. We expect Q2 share count to be 112 million basic and diluted shares outstanding.

Overall, we anticipate our non-GAAP earnings per share range between $0.20 and $0.26 for the quarter. Let me finish with a summary on Slide 9. I’m pleased with our strong results and the team’s execution in this challenging macroeconomic environment. We have a diversified portfolio with a stable and predictable backbone from our patent licensing business. We remain disciplined in our investments to support our long-term growth strategy. We continue to deliver value to our shareholders with our strong innovation, a robust balance sheet and strong cash generation. Before I open the call up to Q&A, I would like to thank our employees for their continued teamwork and execution. With that, I’ll turn the call back to our operator to begin Q&A. Could we have our first question?

Q&A Session

Operator: Thank You. Our first question is from the line of Gary Mobley with Wells Fargo. You may proceed.

Gary Mobley: Hey, guys. Good afternoon. Congratulations on a good start to the year. I understand the second quarter is a transitional quarter for the product revenue. But I appreciate the comments giving us color as to when you can see some resurgence in DDR5-related revenue. And related to that, I was hoping that maybe you can give us a preview into product revenue for the second half of the year, considering the selling price uplift for the Register Clock Driver and your market share position in DDR5 and the expectation of industry crossover for DR5, all those different things. Is it possible to see a new revenue high in product revenue by the time we exit calendar year 2023?

Luc Seraphin: Hi, Gary, thank you for your question. Yeah, we had a good first quarter in terms of product revenue, with good execution at $64 million. $64 million was actually 33% higher than the same quarter last quarter, so we continued to grow in that business despite the challenging environment. This is also the second highest quarter in terms of product revenue for the company. As we previously said, the product transition between DDR4 and DDR5 will be lumpy, and that’s reflected in our Q2 guidance for products. Given the softness in the data center outlook, there will be a period of inventory digestion for DDR4 in advance for the DDR5 product transition. But we are very encouraged by the fact that we have received orders for DDR5, which will start to ship in late Q2.

And our view is that the second half of the year would be a year — half of growth compared to the first half of this year. So we expect the second quarter — the second half of this year to be stronger compared to the first half driven precisely by the ramp of DDR5. This being said, as we said, it’s lumpy. That transition is lumpy, and we’re watching the overall timing and dynamics every week.

Gary Mobley : Okay. I appreciate that Luc.

Luc Seraphin : I think the second part of your question was the transition. Yes, the transition between DDR4 and DDR5 with the crossover, we still see this happening in the first half of 2024.

Gary Mobley : Got it. Thanks, Luc. I want to ask about your SK Hynix license renewal. In your 8-K, you described the average royalty rate at $11 million a quarter, with the first five years being higher than the second five years. So to put that to the form of a question, when you start to recognize revenue from the new license deal in the second half of next year, will you see a step-up in your patent licenses specific to SK Hynix?

Desmond Lynch : Hi, Gary, thanks for your question. We were very happy to renew the licensing agreement with SK Hynix for 10 years. You are correct that this is a variable structure that we have with SK Hynix, which will allow us to recognize revenue under ASC 606. If you look at the way that the contract is written, in the first couple of years of the contract, we will see a step up, a slight step-up the royalty rate, which will then even off on the sort of back end. This will not change our overall estimates on the patent revenue for the year. We’ve consistently talked about being $200 million to $220 million, was $210 million at the midpoint, but there is a sort of sort of step up on sort of the first part of the contract from there. But overall, we’re very happy that we’re able to renew the contract with SK Hynix, which really speaks volumes to our patent portfolio and innovation.

Gary Mobley : Thanks, Des.

Desmond Lynch : Thanks, Gary.

Operator: Thank you, Mr. Mobley. Our next question is from the line of Mehdi Hosseini with Susquehanna. You may proceed.

Mehdi Hosseini : Yes. Thanks for taking my question. I want to go back to two items. Can you give us an update on how we should think about the gross margin traction outside of licensing and royalty? I think in the last earnings call, you talked about hitting that 60% to 65% for product margin in the second half of the year. Are you feeling comfortable, especially given Luc’s commentary that second half revenue should be higher than the first half? And the same margin question about Silicon IP, would that continue to improve above 92%? And I have a follow-up.

Desmond Lynch: Hi, Mehdi, thanks for your question. On the product gross margin, I think both our revenue growth and gross margin performance has been strong. And if you look back at 2022 for the full year, our product gross margins were around 61%, which was in line with our long-term gross margin target of 60% to 65%. What we’ve consistently said is that, this transition could be lumpy. And depending upon what products are shipping in any given quarter, you could see some fluctuations in the product gross margin. In Q1, our product gross margins were around 59% for the quarter, which was up about 1% compared to Q4. And looking into sort of Q2, we do expect to see a slight improvement in product gross margins, mainly driven by favorable product mix.

As Luc mentioned that we do expect to grow in the second half of the year. And with that, we do expect to see a more favorable product mix from a margin perspective. And we do expect that, our gross margins will improve based upon that. As a company, we’ve been very disciplined in our ASP management, and will continue to drive our product cost reductions, Mehdi. And for the full year of 2023, we do expect our product gross margins to be in line with our long-term target of 63% to 65% from there. I think the second part of your question related to our Silicon IP gross margins. They were just over 90% in Q1, and we do expect a similar sort of mix around that sort of 90% gross margin on a sort of go-forward basis. So you can see that we have a fairly rich and healthy gross margin profile on Silicon IP.

Mehdi Hosseini: Got it. Thank you. And then one question for Luc. Talking about referencing a parity between DDR4 and DDR5 in the first half of 2024, so that’s a 50-50. Should I assume that like Q2 this year, the reference point is like 20 so that over the next three quarters, the mix increases by like around 10 points of incremental increase with 10 points of increase on a quarterly basis?

Luc Seraphin: Thank you, Mehdi. Yes, we expect the crossover point to happen in the first half of 2024. As I indicated earlier, we are starting to see orders for DDR5 that will start shipping at the end of this quarter. So this is really encouraging. As we said also earlier, the transition between DDR4 and DDR5 is going to be lumpy in nature. So it’s difficult to say, whether it’s going to be linear or not, over the period that stretches from now to the first half of 2024. But what we can say is that, the trend is going to be in favor of DDR5 over DDR4 as customers digest the inventories of DDR4 and start to ramp DDR5, but it’s going to be lumpy in nature.

Mehdi Hosseini: Got it. Thank you.

Operator: Thank you, Mr. Hosseini. The next question is from Kevin Cassidy with Rosenblatt Securities. You may proceed.

Kevin Cassidy: Yeah. Thanks for taking my question and congratulations on the good results. Maybe just to follow on with that with DDR4, inventories getting worked down this quarter, can you see DDR4 revenue growth in the second half of the year, or will that just continue to decline?

Luc Seraphin: So as we said, there’s still some high level of inventories of DDR4, but these inventories are being digested or burned. I think it’s going to take a couple of quarters for these inventories to burn. This being said, there’s still demand for DDR4. And we expect that we should receive more orders for DDR4 towards the second half of the year. DDR4 still has a life. As we said, we expect the crossover point to happen in the second — in the first half of 2024. We have good backlog, but obviously, that backlog doesn’t cover us until that period. So at some point in time, our customers are going to replenish their backlog to cover the demand for DDR4 as we move through the transition. So we expect more orders from DDR4 in the second half of the year.

Kevin Cassidy: Okay. Great. Thanks. And maybe on a different subject, the market has been — I see a lot of activity around the CXL developments. I think you’ve said in the past you’re expecting second half of 2024. But can you give us any data points or any feel around your licensing activity for CXL, maybe if you could compare it to any other type of licensing ramps that you’ve seen in the past. Is it an aggressive ramp, or do you have plenty of customers? Maybe just some type of feel of how the CXL licensing activity is.

Luc Seraphin: Thank you, Kevin. Yes, CXL has been a strong driver to our Silicon IP growth last year on the controller side as well as on the size side. A lot of our end applications had to do with PCIe or CXL. That explains the record revenues that we reached last on the Silicon IP revenue at $130 million for the year. We do see now some headwind in the market that are not coming from CXL per se is just the macroeconomic environment is less favorable. But CXL continues to drive some sales for our Silicon IP business. These Silicon IP sales are going into systems, Silicon systems that our customers are deploying in the first generation of CXL and that’s how we play in that first generation of CXL. Our products are going to reach the market later down the road when CXL 2.0 comes into play in a couple of years from now.

Kevin Cassidy: Okay. Great. Thank You.

Luc Seraphin: Thank you, Kevin.

Operator: Thank you, Mr. Cassidy. Next question is from Nam Kim with Arete Research. You may proceed.

Nam Kim: Hi. Thank you for taking my question. I have a couple of questions. Just curious DDR5 RCD chip price premium. I know you don’t comment on chip pricing. However, do you expect the DDR5 to carry RCD chip price premium over DDR4? I know chip prices are usually very high initially and come down over time and product mature. But I’m just curious if you see DDR5 chip price will continue to carry premium over DDR4 based over lifetime. And then second question about PMIC, I think you are developing PMIC on DDR5 module. Are you developing your own chip or you have any partnership with the existing PMIC supplier — and when should we expect the ramp of this product? Thank you.

Luc Seraphin: Hi, Nam and welcome. The first question for DDR5, yes, you’re right. We do see an ASP premium associated with the DDR4 to DDR5 transition. And the DDR4 products have been in the market for six to seven years now. And as expected, we have seen some erosion over time and by seeing the pricing is stabilizing as we speak, on DDR4. In DDR5, today, the ASP are higher. It is expected a new product launch. They are higher now, but we expect to see some erosion over time. But if we take the DDR4 example, it took six to seven years to get the price we are now. Price really erodes as volumes grow. And that’s something we’re going to monitor quarter-over-quarter. To your question regarding PMIC, or PMIC devices, we are developing our own PMIC devices, and we’re developing this on our own, not in a partnership, and we expect to hit the market with the PMIC devices next year.

Nam Kim: Okay. One more question — thank you, if I can. Silicon IP revenue last time you guided low to mid single-digit percent this year. You said it’s a macro headwind. But in the meantime, there are a lot of activities going on with AI in cloud and some AR solution in edge. Do you still keep your earlier guidance like low to mid single-digit growth this year, or any change there?

Desmond Lynch: Yes, there are a lot of end applications for our controllers, our FIs as well as our security IP. It’s just that the macro environment is a bit challenging these days with a lot of headwinds. We do see the number of designs are just slowing down. We see some start-ups taking a little more time to make decisions. So yes, we maintain our guidance of low single-digit growth year-over-year, remembering that last year was an exceptionally high growth year. But in the long run, we expect that business to grow between 10% and 15%. I think we just have to deal with the current headwinds this year.

Nam Kim: Okay. Thank you

Desmond Lynch: Thank you.

Operator: Thank you, Mr. Kim. Our next question is from Sidney Ho with Deutsche Bank. You may proceed.

Sidney Ho: Thank you. I have two questions. The first question is, in the past, you talked about the memory chipset TAM, if somewhere last year was $800 million to $900 million. Can you remind us what between DDR4 and DDR5 was? And as you think about the order trends you’re seeing year-to-date, DDR4 coming down, the DDR5 start picking up, how do you expect that TAM to change this year? And what do you think your revenue mix would look like?

Desmond Lynch: So I would say that when we talk about the RCD chip, we don’t see the TAM changing much year-over-year, if we talk about the RCD chip alone. As we said earlier, regarding revenue, the TAM split between DDR4 and DDR5 is also lumpy. It depends on how fast our customers and our customers’ customers are going to digest their inventory on DDR4, number one and ramp their DD-based products, but again, I think we have to be very agile this year for total TAM that would remain about the same. And if we assume that the TAM for CD remains the same, it means that we are expecting to continue to grow our share in the combined time of RCD as we look at 2023. The companionships can add $200 million to $300 million of time to that when it’s — when DDR5 is ramping in earnest on an annual basis.

Sidney Ho: Great. Thank you. And then maybe a follow-up question. I know there’s a lot of excitement around generator AI, and that uses a lot of memory in the form of high bandwidth memory and high-density DRAM modules. Can you walk us through maybe qualitatively or quantity of how you are benefiting from this both from an IP and product revenue point of view? Thanks.

Desmond Lynch: Sure. Great question. On the IP side, generative AI and high workload type of applications were a catalyst to IP sales, especially on the memory side. As part of our offering, we do have HBM and GDDR6 memory subsystems that we’re going into Silicon products from our customers that are addressing those type of applications. And again, that explain the growth that we saw in the Silicon IP business last year. On the product side, generative AI does not necessarily increase the TAM, but it’s a proof point that the trends underlying our strategy in terms of need for more capacity and more bandwidth a very strong strength. And I think we’re very pleased with that. And we do see the development of GPU’s and specialized products around generative AI type of applications to be a catalyst for standard modules as well.

So, I think it affected in a positive way, our Silicon IP business and continues to. And it’s also a proof point that bandwidth and capacity are critical factors in our strategy.

Sidney Ho: Great. Thank you very much

Desmond Lynch: Thank you, Sidney.

Operator: Thank you, Mr. Ho. The next question is a follow-up question from Gary Mobley with Wells Fargo. You may proceed.

Desmond Lynch: Hi, Gary, are you there?

Gary Mobley: Hey, guys. Sorry about that. I just had a multipart follow-up question as it relates to the companionship opportunity. Looking specifically at the SPD hub and the two temperature sensors that maybe located on each DDR5 DIMM, when would you expect to ship your specific companion chip products. Is that Gen 2 or Gen 3 of DDR5? And then I have a follow-up related to that.

Desmond Lynch: So in the first generation of DDR5 will ship modest volumes of those chips, as we indicated in earlier calls of the temperature sensor and SPD Hub modest volumes towards the end of 2023 and in 2024. We’re also working on follow-on generations as all of the companionships to hit the follow-on generations of DDR5. DDR5 is going to be on the market for a long time like we have many generations of DDR4. And therefore, we’re acting on follow-on generations of those products for the follow-on generation of DDR5 RCD chips.

Gary Mobley: Okay. I guess related to that, a common question that I get is trying to understand who is shipping SPD Hubs and temperature sensors for your products today for DDR5? And what compels your customers to eventually start to take your SPD Hub, your temperature sensors? And what do you think the attach rate for those campaign chips can be for your RCD sales?

Desmond Lynch: So there are multiple vendors of companionships, be there, the temperature sensor, SPD Hubs or power management chips. And our customers are using different combinations of different suppliers and RCD suppliers in the first generation of products, the goal being to ramp up in the market. I think what’s going to be compelling for future generations is that the qualification and validation process become more and more challenging and difficult as you increase the speed of the RCD and you roll out new generations of DDR5 and that’s why we’re working on the follow-on generation of those products. And at some point in time, it will be compelling for customers to work with the people who will be able to go through the validation process, the fastest. So I think the first generation of DDR5 is going to see a lot of suppliers in that space. And over time, that number of suppliers may reduce as the complexity of the DDR5 systems increase over the years to come.

Gary Mobley: That’s helpful. Appreciate it. Thanks.

Desmond Lynch: Thank you

Operator: Thank you, Mr. Mobley. 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 the company.

Desmond Lynch: Thank you to everyone who has joined us today for your continued interest and time. We look forward to speaking with you again soon. Have a very good day.

Operator: Thank you. This now concludes today’s conference.