Earnings Call Transcript - RMBS Q1 2025

Operator, Operator

Welcome to the Rambus First Quarter Fiscal Year 2025 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. As a reminder, this conference call is being recorded. I'd now like to turn the conference over to Desmond Lynch, Chief Financial Officer. You may begin your conference.

Desmond Lynch, Chief Financial Officer

Thank you, operator, and welcome to the Rambus first quarter 2025 results conference call. I'm 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 has been filed with the SEC on Form 8-K. We are webcasting this call along with the 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 PM Pacific Time. Our discussion today will contain forward-looking statements including our expectations regarding projected financial results, financial prospects, market growth, demand for our solutions, and other market factors, including reflections of the geopolitical and macroeconomic environment, 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. In addition, we will continue to provide operational metrics such as licensing billings to give our investors better insight into our operational performance. The order of our call today will be as follows. Luc will start with an overview of the business. I will discuss our financial results, 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, Chief Executive Officer

Thank you, Des, and good afternoon, everyone. Rambus had an excellent start to the year. In Q1, we achieved great financial results and maintained our market leadership position in core DDR5 chips, delivering another quarter of record product revenue. As a cornerstone of our growth strategy, we continue to aggressively drive our product development roadmap of signal and power integrity solutions for next-generation memory architectures that address the ever-increasing needs of advanced workloads in the data center. As we navigate the dynamic environment in the near term, the Rambus business model is naturally resilient to turbulence. This resilience comes from the diversity of our business with revenue streams from chips, IP, and patents. Our patent licensing business is highly predictable due to the long-term nature of our agreements, which provides financial stability. Our robust balance sheet and consistent track record of generating strong cash from operations strengthens our ability to navigate macroeconomic uncertainty and the potential impact of tariffs. As of today, there is no direct impact on our operations from tariffs. This is a rapidly evolving situation that we are actively monitoring and we are in continuous discussions with our customers and suppliers to understand the potential indirect impacts of tariffs. Given the current dynamics, we have limited visibility of the potential impacts beyond the current quarter. We remain very conscientious and focused on strategic execution. Our robust business model and stable foundation allow us to sustain our strong investments in technology leadership and new product development, positioning us well for long-term growth while consistently delivering value to our stockholders. Turning now to our Q1 results. We delivered revenue and earnings above our expectations and generated outstanding cash from operations of $77 million. Memory interface chips drove the top-line growth, delivering another quarter of record revenue at $76 million, up 52% year-over-year, driven by our continued strong leadership position in core DDR5 RCD products. We are delighted to see another quarter of increased sales for memory interface chips and expect further growth in Q2, putting us on track for a very strong first half of the year. As I mentioned in my opening remarks, we are also making steady strides in advancing our product roadmap. The record number of products introduced last year are each moving through the varying stages of the product adoption cycle. Progress continues on the rollout of our expanding portfolio of new products, including our industry-leading server PMICs and MRDIMM 12800 chipset. We have broad-based momentum and qualifications ongoing at the module and system level. The industry standard MRDIMM 12800 chipset will enable a new wave of high-performance DDR5 systems as the need for capacity and bandwidth continues to grow. Designed to intercept future generation server platforms, we are providing qualification samples to customers and expect to see our chips ramp in line with compatible processes. As a critical component to managing power in high-performance memory subsystems, our family of PMICs is also being very well-received by customers. Our industry-leading extreme current PMIC will support high-capacity systems with RDIMMs running at 6400 and 7200 mega transfers per second and our second-generation server PMIC rounds out our offering for both industry-standard DDR5 RDIMM 8000 and MRDIMM 12800. We are very excited by the positive progress at customers for our broad set of new products with early shipments underway for both server and client applications. Turning to Silicon IP, AI continues to drive design win momentum. And while quarter-on-quarter revenue may vary due to customer program timing, we are pleased with our ongoing traction. As key building blocks for accelerating computing ICs, we continue to see strong demand for our industry-leading memory and interconnect IP, including HBM4 and PCIe 7 controllers, as well as our security IP. In March, we introduced our next-generation crypto manager security IP solutions that address an expanded set of customers and offer new levels of security, including Quantum Safe functionality. As we look ahead, AI and the ongoing evolution of the data center will continue to drive demand across our chips and IP with advanced applications requiring unprecedented levels of performance and security. To enable the robust high performance and high-capacity memory subsystems critical to meeting the needs of data-intensive workloads, a growing number of specialized silicon solutions are required. With 35 years of memory subsystem expertise, Rambus has strategically expanded our product portfolio to offer complete chipsets for all industry-standard DDR5 server memory modules. Over the past year, we continued our track record of industry leadership in core DDR5 products, introduced new server power management solutions, and were first to market with a complete chipset for industry-standard DDR5 MRDIMMs. We are also excited about the future prospect of our signal and power integrity technology coming into solutions for the client market. The strength of our business model enables us to continue this investment in new products for growth. And we look forward to sharing more as we make further progress on our roadmap and expand our addressable market. In closing, we had a very strong start to the year, exceeding guidance for revenue and earnings, and continued product leadership driving record product results. Our dedicated product execution, continued conviction in our roadmap investment, and resilient business model position us well for future growth and success. As always, I'd like to thank our customers, partners, and employees for their ongoing support. And with that, I'll turn the call over to Des to discuss the quarterly financial results. Des?

Desmond Lynch, Chief Financial Officer

Thank you, Luc. I'd like to begin with a summary of our financial results for the first quarter. We delivered strong financial results in the quarter as we continue to make progress on our long-term growth strategy. Our first quarter results exceeded our expectations for both revenue and earnings. In addition to these solid results, a resilient business model with diversified revenue streams and a stable foundation of our patent licensing business consistently generates strong cash from operations. This enables us to invest in our long-term growth as we navigate the current dynamic environment. Let me now provide you a summary of our non-GAAP income statement. Revenue for the first quarter was $166.7 million, which was above the high end of our expectations. Royalty revenue was $74 million, while licensing billings were $73.3 million. The difference between licensing billings and royalty revenue mainly relates to timing as we do not always recognize revenue in the same quarter as we bill our customers. Product revenue was $76.3 million, up 4% sequentially and up 52% year-over-year as we delivered another quarter of record product revenue, driven by continued strength in DDR5 products. Contract and other revenue was $16.4 million, consisting predominantly 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, were $90.4 million. Operating expenses of $59.4 million were in line with our expectations and relatively flat sequentially as we continue to be disciplined in our expense management. Non-GAAP interest and other income for the first quarter was $4.5 million. Using an assumed flat tax rate of 20% for non-GAAP pre-tax income, non-GAAP net income for the quarter was $64.6 million. Now, let me turn to the balance sheet details. We ended the quarter with cash, cash equivalents, and marketable securities totaling $514.4 million, up from Q4, primarily driven by strong cash from operations of $77.4 million. First quarter capital expenditures were $11.7 million while depreciation expense was $7.1 million. We delivered $65.7 million of free cash flow in the quarter. Let me now review our non-GAAP outlook for the second quarter. 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. While the geopolitical and economic environment is uncertain, we remain in constant communication with our customers and suppliers to navigate the evolving landscape. In addition to the non-GAAP financial outlook under ASC 606, we also provide information on licensing billings, which is an operational metric that reflects the amount invoiced to our licensing customers during the period adjusted for certain differences. We expect revenue in the second quarter to be between $167 million and $173 million. We expect royalty revenue to be between $67 million and $73 million, and licensing billings between $64 million and $70 million. We expect Q2 non-GAAP total operating costs, which includes COGS to be between $94 million and $90 million. We expect Q2 capital expenditures to be approximately $13 million. Non-GAAP operating results for the second quarter are expected to be between a profit of $73 million and $83 million. For non-GAAP interest and other income and expense, we expect $4 million of interest income. We expect a pro forma tax rate of 20% with non-GAAP tax expenses to be between $15.4 million and $17.4 million in Q2. We expect Q2 share count to be 109 million diluted shares outstanding. Overall, we anticipate the Q2 non-GAAP earnings per share range between $0.57 and $0.64. Let me finish with the summary. In closing, I am pleased with our strong financial results and continued execution. Our diversified portfolio and disciplined business model continue to drive profitable growth with strong cash generation. Our robust balance sheet enables us to invest in market expansion opportunities in the data center and AI while consistently delivering value to our stockholders. Before I open up the call 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?

Operator, Operator

The first question is from the line of Gary Mobley with Loop Capital. Your line is now open.

Gary Mobley, Analyst

Good afternoon, everybody. Thanks for taking my question. As we sit here today and think about the served available market for your product revenue, your memory interface chip revenue, I guess the baseline to consider the market for general servers. But as far as socket configurations go, core count, and the number of memory channels supported by these different server processors, what are you guys seeing in terms of trends out there that's driving memory density in each specific server above and beyond just sort of that baseline general server market growth rate?

Luc Seraphin, Chief Executive Officer

Thank you, Gary, for your question. There are actually a lot of factors coming into play regarding the total available market for our products. There's certainly, as you say, the number of sockets, the number of channels per processor, but also the mix between AI servers and standard servers. If you take all of this into account, we believe that the market is going to grow mid to high single-digit for our product this year, taking into account all of these factors, including the memory density on each one of the DIMMs. So it's a complex equation, but with everything taken into account, we expect the market to continue to grow mid to high single-digit this year for our products.

Gary Mobley, Analyst

Okay. Thank you. Just a quick follow-up. In the past, you've always had your ASC 606 compliant GAAP revenue lower than your adjusted revenue. And now I would presume that most of your major licenses with your memory RDIMMs are on, you have some of the better performance obligation. So I would expect them to convert, but now your ASC 606 revenue is above your adjusted revenue. Maybe if you can just give us a sense of what's driving that seemingly $5 million a quarter of revenue path that's in the numbers now?

Desmond Lynch, Chief Financial Officer

Hi, Gary, it's Des. In the quarter, we did see a small patent agreement that was renewed, which resulted in upfront revenue recognition from a 606 perspective. The billings from this contract will follow in later quarters and will show up under licensing billings. And as you mentioned, I am really pleased to see that all major patent license contracts have been renewed to long-term agreements under a variable structure, which results in a strong alignment between both GAAP and non-GAAP results. We will continue to work on transitioning some of these smaller legacy contracts to our revenue recognition-friendly structure under ASC 606. But overall, we're really pleased to see the convergence of our financials.

Gary Mobley, Analyst

Thanks, Des. Thanks, Luc.

Operator, Operator

The next question is from the line of Aaron Rakers with Wells Fargo. Your line is now open.

Aaron Rakers, Analyst

Yeah, thanks for taking the question, guys. A couple if I can as well. So first of all, I just wanted to go back and I can appreciate the commentary that you offered on the tariff situation, and the uncertainty involved in what is obviously very fluid dynamics. But, Luc, I'm curious, as you're engaging with your customers, what are the scenarios that they're thinking about as it relates to tariffs? Have you seen any indications or signs of kind of inventory builds or buying ahead based on this fluidity of tariffs? Any kind of context around what your dialogue with them would be very helpful.

Luc Seraphin, Chief Executive Officer

Thank you for your question, Aaron. Our business model is quite resilient, as I mentioned in the opening remarks. Our patent licensing will not be affected by the tariffs due to the nature of these agreements. While we are uncertain about the indirect impact of the tariffs on our customers' design starts, we still anticipate growth in our Silicon IP revenue. Regarding our product business, we manufacture in Asia, with front-end operations in Taiwan and back-end in Taiwan and Korea, shipping products to customers in Asia. Therefore, there is no direct impact from tariffs. We are considering the indirect effects on the product space, as some customers may shift production to areas without tariffs, which could create supply chain tensions. Looking at our inventory levels and backlog, we do not see any pull-ins at this moment, but we are closely monitoring the situation. Currently, we do not observe any pull-ins from our customers.

Aaron Rakers, Analyst

Yeah. No, that's very helpful. And then kind of more on the product chipset growth, 50%, 52% growth is pretty notable. I'm curious as we think about the diversity within that business, where we stand today with regard to RCDs and kind of really what I'm trying to get at is the diversity towards these PMICs and companion chips really starting to ramp in the second half of the year. How do we think about the mix of that business and the progression of that mix? And then I'll slot in the final part of that is that MRDIMMs, just remind us real quickly of the timing of when that might be something that we should really start to consider in that product line? Thank you.

Luc Seraphin, Chief Executive Officer

Thank you. At this point, most of our business revolves around the RCD chip, with the majority specifically on DDR5 RCD chips. This aligns with our strategy to ensure we have a solid presence in each generation of DDR5, contributing to the growth we're experiencing today. Last year, we launched eight new products: four on April 1, one in July, and the rest in October. We're noticing that some of the qualifications are starting to make their way through the entire system, with modules now being qualified with our PMICs, primarily in the high-end modules, which is deliberate given our product positioning aimed at gaining market share. Although the pace is gradual, progress is being made. As for the contribution of these companion chips in the early part of this year, it's likely in the low-single digits per quarter, but we anticipate continued growth toward the end of the year. We are seeing momentum, though the later products require more time concerning MRDIMM. We have recently sampled customers, and the MRD market is set to ramp up alongside the next generation of computing platforms, with revenue expected to start in the second half of 2026.

Operator, Operator

Thank you. The next question is from the line of Blayne Curtis with Jefferies. Your line is now open.

Blayne Curtis, Analyst

Hey, good afternoon. Thanks for my question. I just want to follow up on the tariff question. Maybe you can just walk us through kind of how the linearity of the quarter in the first few weeks here of April. I mean, I guess, your product business is growing. I'm just kind of curious how kind of that order momentum has been and it sounds like it hasn't changed much, but just if you could just kind of add a little color there would be great.

Desmond Lynch, Chief Financial Officer

Hi, Blayne, thanks for your question. We're really pleased with what numbers we were able to print for Q1 and also the guidance for Q2. If we look at our order sort of backlog, we have high coverage going into the quarter. We're probably at least over 90% covered on the midpoint of the backlog from there. And what we will see is the normal sort of shipping patterns through month one, month two, and month three within the quarter. So very pleased with how everything is sort of playing out. As Luc mentioned earlier, we've not really seen a pull-forward of demand from our customers, but that's something we continue to watch here going forward.

Blayne Curtis, Analyst

I'm curious if you could share your thoughts on your outlook for the full year or the second half. Specifically, I would like to know your perspective on visibility regarding the new server platform products and their potential for ongoing growth in product revenue.

Desmond Lynch, Chief Financial Officer

Yes, certainly. As we mentioned earlier, we have eight different products that we're rolling out at various stages with our customers. We expect to see the first complete modules utilizing some of these products being launched in the second half of this year. Our outlook is that we will continue to see revenue growth from our companion chips on a quarter-over-quarter basis, though we will need to monitor how the tariff situation develops. Additionally, the performance of all our products relies on the rollout of the platforms that utilize them. This is the typical state of our business. If the rollout of these platforms proceeds as we anticipate, we expect to see ongoing growth in our companion chips both quarter-over-quarter and into 2026.

Blayne Curtis, Analyst

Thanks a lot.

Operator, Operator

Thank you. The next question is from the line of Mehdi Hosseini with Susquehanna. Your line is now open.

Mehdi Hosseini, Analyst

Yes, excuse me. Thanks for taking my question. I want to start off with the product revenue. Was there a mix issue that led to a sequential decline in the gross margin? And if I just use the Q1 as a baseline, how should I think about the progression of product revenue growth throughout the year? And I have a follow-up.

Desmond Lynch, Chief Financial Officer

Hi, Mehdi, it's Des here. So on the product gross margins, they continue to operate in line with our long-term gross margin target. In Q1, our gross margins on the chip side were around 60%. This was down slightly compared to Q4, which was driven by the price negotiations with our customers, which are effective at the start of the year. These price reductions were in line with our expectation, and we saw mid-single-digit erosion on production parts from there. If we look at the back half of the year, what I would expect to see is stronger gross margin performance compared to the first half. This would be driven by a combination of product mix improvements as well as manufacturing cost savings that will continue to ramp throughout the year. We did see this dynamic and similar profile in 2024. I think overall, when we look at an annual basis, we have a strong track record of delivering product gross margins in line with our long-term target through a disciplined approach to pricing and the continued drive on the manufacturing cost savings side.

Mehdi Hosseini, Analyst

Okay. Thanks for detail. And then one follow-up on Silicon IP. Given the recent headlines of the past month or so, it seems like HBM4 samples will be available later this year and maybe high-volume manufacturing next year. And I'm not asking for specific guidance, but given my assumption that you have higher content with HBM4 compared to prior generation, should we expect a material step-up in incremental revenue or how else could we think about the contribution, especially as it relates to silicon IP?

Desmond Lynch, Chief Financial Officer

Hey, thank you, Mehdi. The nature of the silicon IP business is that we typically sell our IP 12 months to 18 months before our customers roll out their chips into the market. So our activity on HBM4 started last year. It continues throughout this year. That explains some of the good performance we had last year with total revenue of $120 million on the SIP side. But that business is lumpy in nature because we get the revenue when actually people license our IP. So we're dependent on the design starts, new tape-outs and these kinds of things. But the HBM4 wave started months ago for us in preparation for chips that are going to roll out into the market. And as we do with the rest of our SIP product, we continue to work on the follow-on generation, which will generate revenue. But again, we were pleased with the revenue last year of $120 million, but that was partially due to the HBM4 rollout last year.

Mehdi Hosseini, Analyst

I have a quick follow-up regarding Q4, where I noticed a significant increase in Silicon IP. With HBM and the licensing agreement, this isn't related to customer diversification. You have already licensed, and the next step is HBM4E. Is that related to licensing revenue? I understand it occurred earlier, but is it driven by product migration, customer diversification, or both?

Desmond Lynch, Chief Financial Officer

The dynamic between Q4 and Q1 on the Silicon IP business has mostly to do with customer timing of these different tape-outs and these different products, more than a generation of change because when you introduce a new technology like HBM4 and HBM4E, it can be adopted at different times by our customers. And every time one of our customers adopts it, we see a spike in our revenue, but that can be a bit lumpy. So that Q4 to Q1, we just happened from a timing standpoint to have customers rushing through their designs in Q4, being a little slower in Q1, that has more to do with timing than it has to do with the rollout of new technologies.

Operator, Operator

Thank you. The next question is from Natalia Winkler with Evercore. Your line is now open.

Natalia Winkler, Analyst

Hi, thank you for taking my question. Luc, could you share your insights on the differences between x86 and ARM CPU servers? Specifically, how do you see the shift in market share affecting your product lineup? Additionally, what are your expectations regarding the performance of ARM servers, and do you see any potential advantages from the companion chips, or could this pose a risk for your company?

Luc Seraphin, Chief Executive Officer

Thank you, Natalia. The way we look at it is that we are agnostic to the type of processor or core that is being used. Whether it's an x86 core-based product, AMD or Intel, or whether it's an ARM core-based product, the interface to the module remains the same. So we are agnostic to the changes of or the shift of share between Intel and AMD on the x86 side and between x86 and ARM processors at this point in time. But that doesn't change the content on the module as well. So what we have to do at Rambus is to make sure that we are engaged with all of these customers. But the interface is exactly the same. The product line doesn't change for us. So we're kind of immune from a revenue, revenue ramp, or design-win standpoint.

Natalia Winkler, Analyst

Thank you. That's very helpful. And from the standpoint of the client product, do you mind reminding us what's the sort of timeline for ramp of those client products? Is it any different shipments of the product?

Luc Seraphin, Chief Executive Officer

Sure. The concept on the client side is that certain technologies necessary for performance in the data center will also be needed on the high-end client side. Currently, the total addressable market is limited as it focuses on the very high end of the market. The first product we are introducing, or reintroducing, is the Client Clock Driver, which we launched in July of last year. It is being sampled to customers and will start hitting the market towards the end of this year and the beginning of next year, although in relatively low volumes. This is crucial for us because, looking at it strategically, power integrity and signal integrity, which the Client Clock Driver addresses, will be essential for the performance of future client systems. Transitioning data center technologies into client products is significant for us. The Client Clock Driver is the first product in this initiative and is currently being sampled to customers who have responded positively so far.

Operator, Operator

Thank you. The next question is from the line of Kevin Cassidy with Rosenblatt Securities. Your line is now open.

Kevin Cassidy, Analyst

Yeah. Thanks for taking my question and congratulations on the great results. And going back to the Silicon IP, I see you did have lumpiness or on the upside in the first quarter, but it looks like your guidance for the second quarter is up also. Do you expect that to continue through the second half?

Desmond Lynch, Chief Financial Officer

Hi, Kevin, it's Des here. We were pleased with our overall sort of results in silicon IP in the first quarter, which was in line with our sort of expectations. What we did see is that we did sell more off-the-shelf IP, which explains the strength in licensing billings and royalty revenue in the quarter, which was offset by lower customizable sort of IP, which shows up under the contract and other sort of line from there. What I do expect going into the second quarter, the Silicon IP revenue to be relatively flat. The Q1 would be a good expectation from there. And as Luc mentioned, we did have a really strong fourth quarter of last year, which was really driven by the HBM4 results. But overall, I think the business is performing in line with our expectations and we would expect to see the second quarter revenue being flat to sort of Q1 from there.

Kevin Cassidy, Analyst

Okay, great. Regarding the MRDIMM, what adoption rate are you anticipating when speaking to your customers? If a CPU has 12 memory channels, will all of them utilize the MRDIMM, or will it only be a specific percentage? Additionally, will it apply to just a certain percentage of CPUs?

Luc Seraphin, Chief Executive Officer

It's early to say, Kevin, to be honest, but what's driving the adoption of MRDIMM is the need for more capacity and more bandwidth. What the market sees is that it's a nice bridge between the DDR5 generations of modules and the DDR6 generation of modules. It kind of bridges those two generations of products in terms of capacity and bandwidth. It's going to be used in very high-end systems where those needs are required. So in support of the AI deployment, for example, are going to be the first adopters of these types of MRDIMM.

Operator, Operator

Thank you. The next question is from the line of Tristan Gerra with Baird. Your line is now open.

Tristan Gerra, Analyst

Hi. Quick question. You talked earlier about the gross margin catalysts for the rest of this year directionally. How should we look at operating margin? Is it going to be similar, and really tied to what you described in gross margin? Or is there anything else that could act as a driver of operating margin, including on the licensing side?

Desmond Lynch, Chief Financial Officer

Hi, Tristan, it's Des here. As I talked about earlier, I do expect that the second half gross margin profile on the chip side will improve as a result of a stronger product mix in the second half as well as manufacturing cost savings kicking in from there. We've been really pleased with our overall model, which is operating at the sort of mid-40% op income level and continues to generate really strong cash from operations, $77 million last quarter. I think if you look at the progression of the business over the sort of last year, you can see that the business continues to improve both on the top and bottom line and that's what we expect to continue to see going forward. We have a really robust business model, as Luc mentioned in his prepared remarks, and we continue to generate strong cash from operations as well. So we can see that continuing here going forward.

Tristan Gerra, Analyst

Could you provide some insight into the price renegotiation you mentioned in Q1, specifically regarding the mid-single-digit price adjustment? Is this a common occurrence each year, or were there unique factors this year that we haven't seen in previous years? It would be helpful to understand the patterns we might anticipate. Is this just a standard pricing renegotiation? While I understand you're not significantly affected by supply and demand dynamics, I'm curious how this year's situation compares with past years.

Desmond Lynch, Chief Financial Officer

Hi, Tristan, it's Des again. What I would say is that the sort of mid-single-digit price erosion is really in line with normal cycles from there. This is a sort of normal cadence at the start of the year that we will see the price down on the products, and really that is in line with our expectations from there. So nothing untoward on the sort of price side. As you correctly point out, we're not really tied into the DRAM pricing cycles in terms of the price from there. So mid-single-digit erosion is the right way to sort of think about the ASP erosion of the business. Thank you.

Luc Seraphin, Chief Executive Officer

Thank you.

Operator, Operator

Thank you. At this time, there are no further questions. This concludes our question-and-answer session. I'd now like to turn the conference back over to Luc Seraphin to conclude.

Luc Seraphin, Chief Executive Officer

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 good day. Thank you.

Operator, Operator

Thank you. This now concludes today's conference.