Satish Rishi - SVP and CFO Ron Black - President and CEO

Gary Mobley - Benchmark Suji De Silva - Topeka Mark Lipacis - Jeffries Atif Malik - Citigroup Paul Coster - JPMorgan

Good day ladies and gentlemen and welcome to the Quarter Four 2015 Rambus Inc. Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this conference is being recorded. I would now like to introduce your host for today’s conference Mr. Satish Rishi, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thank you, Chelsea and welcome to the Rambus fourth quarter and full year 2015 results conference call. I am Satish Rishi, CFO and on the call with me today is Dr. Ron Black, our President and CEO. The press release for the results that will be discussed to you today have been furnished to the SEC on Form 8-K. A replay of this call will be available for the next week at 855-859-2056. You can either relay by dialing the toll-free number and then entering ID number 23967982 when you hear the prompt. In addition, we are simultaneously webcasting this call along with the audio webcasting slides. So even if you are joining us via conference call you may want to access the website for the slide presentation. A replay of this call can be accessed on our website beginning today at 5 PM Pacific Time. In an effort to provide greater clarity on a financials, we are using both GAAP and non-GAAP pro forma format in our press release and also on this call. I need to advice you that the discussion today will contain forward-looking statements regarding our financial guidance prospects, product strategies, timing of expected product launches, demand for existing and newly acquired technologies, the potential benefits of the acquisition and the growth opportunities of the various markets we serve among other things. These statements are subject to risks and uncertainties that are discussed during the call and may be more further 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. Further, as mentioned, we will discuss non-GAAP financial results today and have posted on our website reconciliations of these non-GAAP financials to the most directly comparable GAAP measures. You can find a copy of our earning release and the reconciliation on our website at rambus.com on the Investor Relations page under Financial Releases. Now, I’ll turn the call over to Ron to provide an overview of the quarter and for the year. Ron?

Thank you, Satish, and good afternoon, everyone. Before discussing the fourth quarter and last year overall, let me make a few comments about the announcements that we made today. The first announced this morning before the market opened was that AMD has extended their patent license for another five years. While the terms of the deal are confidential, what I can say is that AMD has been a loyal customer for over 10 years. So this is their second extension and that we look forward to working with them on other technology projects. The second announcement which we just made after today’s market close prior to this call is our acquisition of Smart Card Software Limited for £64.7 million in cash or approximately $93 million at the current exchange rate. Smart Card Software is a UK company with two divisions: Bell ID, a leader in mobile payment solutions; and Ecebs, a leader in smart ticketing solutions for transport. The deal was signed and closed today and will be part of our security division, cryptography research led by Dr. Martin Scott. We anticipate the acquisition to be accretive within 12 months. Both Bell ID and Ecebs are well-known entities in their respective fields having a broad base of customers. Each business has a decade or more to experience delivering advanced high-performance deployment hardened solutions, and equally important each business is also profitable. Bell ID provides banks, governments, and enterprises the ability to issue and manage credentials on smartphones, smart cards, and connected devices. They support all of the mobile payment platforms, are leaders in host card emulation or HCE and are deployed worldwide. Ecebs provides smart card solutions for national government, local government, transport operators, banks, and systems’ integrators and is best known as a leading provider of ITSO compliant smart ticketing solutions. ITSO is the open interoperable smart ticketing standard being adopted in the UK for transport. The ITSO organization is also working with the European Union and other international transport and standards bodies such as the Smart Ticketing Alliance to develop continental interoperable smart ticketing solutions. Together, Bell ID and Ecebs provides a significant stand-alone revenue opportunity. So we anticipate steady growth from the businesses. The Bell ID Served Available Market or SAM is much more substantial today. Although we anticipate the SAM for Ecebs to become more substantial later this decade as open, interoperable transfer standards gain more traction globally. But what excites us the most about this acquisition is the strategic rationale, which is to offer these vertical solutions even more differentiation through our CryptoManager platform. In fact collaborating with Bell ID and Ecebs to offer hardware based security was what led to our collective decision to combine the companies, which would be the natural way to offer the best solutions to our customers in the industry overall. We believe that CryptoManager can accelerate growth for Bell ID and Ecebs and that Bell ID and Ecebs can accelerate growth for CryptoManager. Of course, we will also offer CryptoManager as an enablement platform for other vertical application providers and hope that this transaction can spur even more strategic interests. At the core, what we are trying to do is provide ship to cloud, to client device solutions with the ultimate security and configuration ability. We have previously announced that CryptoManager is being used by Qualcomm and LGE to configure semi-conductor chips and ultimately OEM devices, and that we are working with many other semi-conductor providers as well as OEMs who can also benefit from device configuration. We believe that CryptoManager is the most advance solution for device configuration, offering customers the ability to dynamically change things during manufacturing in a reversible, secure, and easy way. At our Analyst Day last year we also explained, however, that CryptoManger can be used to configure devices and improve device security downstream, meaning applications at the consumer level, so the platform is not just about semiconductor and OEM manufacturing. More importantly, the downstream opportunity is enormous compared with the manufacturing opportunity, so it is extremely attractive financially. Smart ticketing and payment are just two examples of applications that can benefit. Content production is another one, as in the side, we recently announced our content protection vertical application solution, the CryptoMedia platform. The CryptoMedia Solution consists of a secure core, a software player, and trusted key provisioning services. The platform will protect highly sort after 4K Ultra HD and high dynamic range formats, while enabling consumers to easily store, copy, and share this premium content across several devices. And just last week, we announced our first CryptoMedia customer, Kaleidescape, who’ll be integrating the CryptoMedia Solution into their home cinema products. For those who you don't know, Kaleidescape is a designer and manufacturer of high-end movie players and servers for the home, and we’re pleased to have them as a customer. So with this structure, we will now be offering three high value vertical end-to-end solutions with the best security, content protection by CryptoMedia, mobile payment by Bell ID, and smart ticketing by Ecebs. You can think of our solutions as a stack with foundational security enabled by our DPA technology, architecture, and design as the base followed by secure provisioning and management by CryptoManager, and ultimately vertical market specific solutions provided by Rambus in the industry at large. So the acquisition of Smart Card Software not only bolsters our growth with more accretive category leading solutions in their own right, but strategically provides us a more complete platform for engaging the industry and triggering faster profitable growth. Needless to say, we are excited about the combination and look forward to reporting more developments in the coming months. As noted in one of the slides, please look for our integrated demos at the Mobile World Congress in Barcelona for 22nd through 25th of February. Now I’ll provide more color on the fourth quarter and 2015 overall. We finished the fourth quarter with revenue at $76.8 million, which was at the high end of our guidance. This brings our total revenue for the year to $296.3 million, which is also at the high end of the updated guidance we shared on our last call. Going forward, with the acquisition of Smart Card software, we are expecting revenue for 2016 to be between $310 million and $325 million. As usual, Satish will provide more color on the quarter and the full year financials as well as guidance in a few moments. Moving now to memory and interface business. We noted that 2015 was certainly a transformational year with 25 years since the inception of the company, last year marked the first time we offered a Rambus branded product with the introduction of our DDR4 server DIMM chip, the RCB26. This is a significant milestone as it serves as another proof point of our transition from a pure IP licensing model to one that delivers increasing value to the market through physical products. As we discussed on the last call, we experienced some technical issues with our first spend and miss one of our customer’s qualification windows. Well this was certainly disappointing we’re making great strides to bring the product to market and are on track for shipments this year. Although at this point, we’re not able to forecast significant revenue. 2017 should however offer more significant growth opportunities. And as said previously, strategically we believe buffer chips to be in excellent place for Rambus to offer superior solutions for the growing demand to cloud computing and big data analytics and also to partner with the industry. In our IP Core’s business we recently announced the availability of our 28 gig multi-node [indiscernible] PHY on Samsung’s leading edge 14 nanometer low power plus processor. This solution is optimized for power and area efficiency in long reach channels and we’re proud to be the only ones offering this solution on the market today. We had a good showing at Design Con last week where we demonstrated for the first time our R plus 16 gig [indiscernible] PHY along with our other enhanced standard memory and serial linked solutions. We also hosted a full day training session where our team explored the trend and challenges of shifting bottlenecks in future high performance system design as well as have a high speed serial links are shaping future networking and enterprise solutions. While we are focused on building and delivering compelling products, our patent licensing business remains active and is still providing the majority of our revenue today. During the course of the year, we signed several significant license deals, renewals and extensions including IBM for our memory controlling and serial link technologies, SK Hynex for memory technologies extending their current agreement until 2024 and Renesas license for memory, serial links and certain security technologies. We also ended the year with Toshiba renewing and as noted previously, just today announced that AMD had also extended its agreement making this the third time they have signed for a use of our inventions. I’d also like to touch on some of the exciting work that is coming from our Emerging Solutions Division ESD. Late in the year ESD announced that we are working with Microsoft Research to explore future memory requirements in the area of quantum computing. Microsoft Research chose to work with us based on our expertise in high bandwidth and power efficient memory architectures. We’re excited to engage with the researches at Microsoft to see where this project can take new technology platforms. On the memory side, ESD also announced some interesting developments with our Smart Data Acceleration or SDA platform. This is through a partnership with the Los Almos National Laboratory, LANL. Our SDA platform is currently deployed in a test environment at LANL where they are evaluating how our platform improves the performance and in memory databases, graph analytics and other applications necessary in the world of big data. This platform which we first revealed at our Analysts Day in September, leverages FPGA acceleration with large amounts of electrically close memory to test new message to optimize and accelerate analytics for large datasets. We look forward to being able to share more on this research in the coming months. Finally, at the recent Consumer Electronic Show, we highlighted our lensless smart sensors through demonstration showcasing how this technology can able next gen low power sensing through capturing information rich images using a low cost to fraction phase grading coupled with standard image sensors and sophisticated computational algorithms. To our partners in open development the POD program, we’ve identified key verticals to accelerate our SS deployment and amplify the discovery of applications such as iTracking for digital iWare and VRAR goggles, automotive passenger detection and smart home presence detection. We are now working with commercial partners to bring the technology to market and hope to have more exciting developments later in the year. To close, 2015 was another solid financial performance year and the next step in the evaluation of Rambus. The challenges we faced in our buffer chip program have only made us stronger and the team is more focused than ever on profitable growth and shareholder value creation. With our AMD extension and exciting acquisition with Smart Card Software today, we are starting 2016 with significant momentum. With that I’ll turn the call over to Satish to give you more detail on the acquisition and the rest of the financials for the year. Satish?

Thanks, Ron. I’d like to remind everyone that for this call and for internal assessment, we use non-GAAP pro forma numbers to discuss our operating results as well as forward-looking projections, which we believe are indicative of complete performance as they excludes certain discrete events such as stock-based compensation, amortization, impairment and restructuring charges, which we believe are not indicative of long-term performance. As noted earlier, we will provide reconciliations to the most comparable GAAP measures on our website. In the case of any forward looking projection or estimates containing non-GAAP information discussed on this call, a reconciliation may not be available due to unreasonable effort to make such a determination or provide such information as more fully described in our website. Let me first review some of the financial highlights. As Ron mentioned, revenue for the fourth quarter was $76.8 million at the high end of our guidance were up $71 million to $77 million a 4% increase over the third quarter and an increase of 7% year-over-year. For the full year, revenue was $296.3 million, again at the higher end of our last guidance of $291 million to $297 million and relatively flat year-over-year. Operating income for the quarter was $33.4 million, an increase of 21% quarter-over-quarter and an increase of 22% from a year ago. For the full year, operating income was $115.2 million or an operating margin of 39% as compared to operating income and margins of $109.2 million, 40% respectively for fiscal 2014. Cash and cash equivalents were $288 million as compared to $363 million last quarter and $300 million at the end of 2014. Going into some more detail for the fourth quarter. Our memory and interface revenue was $57.3 million, Cryptography Research was $13.6 million and our Lighting and Display Technology revenue was $5.9 million. Quarter-over-quarter these numbers represent an increase of $2 million and $1 million for MID and CRD respectively and no change for LDT segment. As Ron mentioned during the quarter we signed new customers for new technology licensing both in MID and CRD and during the quarter we had four design wins and for the full year we had eight design wins. For the full year Memory and Interface’s revenue was $222 million, Cryptography Research was 50.5 million and Lighting and Division Technology revenue was $23.8 million. Year-over-year these numbers represent a decrease of $4 million for MID and an increase of $1 million and $3 million for CRD and LDT respectively. Cost of revenue plus operating expenses or what I would refer to as total operating expenses for the quarter came in at $43.4 million at the midpoint of our guidance of $42 million to $45 million, 6% below the previous quarter and a decrease of $1.2 million from the same quarter a year ago. The quarterly decrease is primarily due to reduction in contractor spending and lower head count post restructuring. For the full year total operating expenses were $181 million, an increase of 2% from the previous year. We ended the quarter with a headcount of 494 as compared to 527 in the previous quarter and 505 in the quarter a year ago. Now with the acquisition of Bell ID and Ecebs we now have a total global headcount of approximately 620 employees. Operating income for the quarter was $33.4 million close to the high end of the guidance of $26 million to $35 million. On a sequential basis this is an increase of 21% and an increase of 22% year-over-year. The increase quarter-over-quarter was driven by a combination of higher revenue and lower expenses as we reset our guidance and manage our expenses to meet our internal and external targets. The increase year-over-year was driven primarily of higher revenue in Q4 of 2015. EBITDA margin which we believe is a good measure of a business model was 47% for the quarter as compared to 41% in Q3 2015 and 43% in Q4 of 2014. For the full year EBITDA margin was 43% as compared to 45% for fiscal 2014. Interest and other expenses for the fourth quarter were $1.4 million as compared to $1 million in Q3 of 2015 and $1.4 billion in Q4 of 2014. For the full year interest and other expenses were $5 million as compared to $9.7 million for the prior year. Using a flat rate of 36% for pro forma pre-tax income, net income for the quarter was $20.7 million or $0.18 a share as compared to $17 million in last quarter and $16.7 million in the quarter ago. For the full year net income was $70.6 million or $0.60 as compared to $70.1 million and $0.60 for the prior fiscal year. Overall cash defined as cash, cash equivalents and marketable securities was $288 million, a decrease of $75 million from the previous quarter. Just a reminder that we entered into a $100 million accelerated share repurchase program in Q4 and that was a primary driver for the reduction in cash. During the quarter we generate approximately $23 million in cash from operations. Before I turn to guidance just a couple of points on the acquisition that we announced. For the businesses collectively SCS are profitable and growing. So we expect this acquisition to be accretive to our earnings. Historically SCS have used UK GAAP and they had nuances between UK GAAP and U.S. GAAP especially as it relates to software revenue recognition. We made a best estimate for 2016 U.S. GAAP revenue and we will include that in our guidance. In an acquisition, existing software licenses end up being booked as intangibles in the balance sheet and while we may continue to collect cash on these contracts under U.S. GAAP we cannot report this as revenue. So for the first year revenue might be understated. The net result is that for 2016 the cash we collect will be higher than revenue. So our revenue from SCS may not reflect the true health of the business. As a point of reference, on an LTM UK GAAP basis based on the latest financial for 2015, we paid a 2.6x revenue multiple and a 6.1x EBITDA multiple both of which reflect a fair price for the businesses. Going forward, SCS will be an integral part of CRD reporting segment and we will be not be breaking other financials or SCS going forward. Now I will provide pro forma guidance for the first quarter of 2016 as well as for the full year. The guidance reflects our reasonable estimates and our actual results could differ materially from what I’m about to review. For the first quarter, we expect revenue to be between $71 million and $75 million and the total operating expenses including COGs to be between $51 million and $55 million. Q1 expenses are typically higher due to payroll taxes and the accrual for variable compensation and this current guidance of $51 million to $55 million includes the expenses of related to incorporating SCS into Rambus. Operating income is expected to be between $16 million and $24 million. For the full year we expect revenue to between $310 million and $325 million, for 2016 we are focused on execution to our key programs and the integration of a newly acquired businesses and plan to manage our expenses to be between $202 million and $210 million. We expect our pro forma operating margin to be within a range of approximately 35% and pro forma EBITDA margins to be approximately 39%. As I mentioned because of the treatment of the acquired contract that I mentioned above, the margins are artificially lower but from a cash perspective we expect to generate cash from operations of approximately $100 million for the year. That provides a recap of 2015 and what we expect for 2016. We are now ready to open the lines for Q&A. operator?

Thank you. [Operator Instructions] And our first question comes from Gary Mobley with Benchmark. Your line is open.

Hi, guys. Thanks for taking my question and congrats on a nice finish to the year. I wanted to delve a little bit more deeply into the rev recognition for Smart Card Software, if I do the math correctly, the company generated about $37 million in 2015 due to accounting rules and what not, what would you expect that number to be in 2016 and what sort of growth off of the base in 2015 would you expect in sort of the interim?

Sorry, Gary I think I didn’t understand that question, you said $37 million?

So, if you just mentioned that you paid 2.6 times revenue, I just fully divided the U.S. dollar purchase price by 2.6 to drive.

Okay yeah sure. Yeah so the UK GAAP, well two things, one is there is a difference in rev rate between UK GAAP and US GAAP, UK GAAP is principle based whereas U.S. is a little more rules based. And under UK GAAP, there is fair amount of flexibility in how you recognize revenue. So just for example under UK GAAP if you have a -- if you sign a software agreement, you get cash upfront even though you may have post-contract services, you’re allowed to recognize the revenue over a short period of time, whereas for U.S. GAAP you first have to set VSOE, and then you also have to prorate the revenue over the -- you have to figure out whether the PCS was included in the contract or separate, was this mandatory or non-mandatory. So, the term over which you recognize the revenue becomes longer. That’s number one. Number two, when you acquire software licenses for which new additional work is to be performed from a purchase accounting, it lands up on our balance sheet. So let’s say even they may have a $5 million or $10 million software licenses that we acquire, we would not be able to recognize revenue on those, but we put them as intangibles, take the fair value of those because intangible on a balance sheet when we get the cash we reduce the intangibles, but we can’t recognize revenue under US GAAP. We had a similar issue when we did CRD back about four years ago, and at that time we created a new pro forma revenue, we call it CLI, which I am not going to do this time. We are going to keep things simple. So those are the nuances that occur between both UK GAAP, U.S. GAAP, as well as purchase accounting for software licenses for which no further services is going to be performed.

Okay. Ultimately what I was trying to get to is try to breakdown the revenue delta you are expecting for 2016 versus 2015. So it’s about roughly $20 million based on the midpoint of your guidance. And so I’m trying to determine how much of that $20 million delta comes from contribution from the acquisition, and then whether or not your organic revenue forecast compared to October 20th differs as we see here today, and if so what are the factors?

Yeah, I can tell you that the forecast we gave in October might be slightly different, but hasn’t changed substantially.

Okay, pretty much answers it. And Ron, could you give us a little more detail on the license potential for CryptoMedia and the potential customers in addition to Kaleidescape that was announced recently?

Sure. I don’t have a specific market assessment in front of me as we view those kind of once a year as we roll everything up and give you the SAM for it. In terms of looking at that specific area, I think it really depends on how quickly there is adoption of these next generation 4K and beyond standards. I am thinking about it as a relatively modest growth to be perfectly honest, I think it’s a cool segment, it is a segment where we add a lot of value. But deployment of these things has just taken a long time, and as the industry gets aggressive on it obviously that could be different there, maybe hockey stick, but I don’t think it will be super significant revenue and from a unit volume basis for several years.

Okay and just to hub back on the topic of Smart Card Software, it looks as though you are adding about 126 employees and assuming you’re only recognizing a fraction of the revenue in 2016, maybe $150,000 revenue per employee roughly. It’s not necessarily indicative of an accretive acquisition or even a profitable company. So are you saying that the acquisition out of the gate is going to be accretive or we are going to have to wait until 2017 before you see the full benefit?

Let me take that Gary. We expect that this will be accretive within the next 12 months. So it might happen earlier than that, but I can tell you that in Q1, it probably will not be accretive because we are only recognizing part of the revenue, and as we go and dig through some of the contracts, we have to figure out how to book many of those, so we’ve taken our best estimate right now. But as we go and get closer on this and do the purchase accounting, we’ll have a better visibility on this, but I feel quite confident that this would be accretive definitely within next 12 months.

Okay. Alright, thanks guys. That’s it for me.

Thanks, Gary.

Thank you. Our next question comes from the line of Suji De Silva with Topeka. Your line is now open.

Hi, Ron. Hi, Satish. Congratulations on the acquisition here. Couple of questions on the core business, the CRI business had a strong fourth quarter. I’m just curious about the first quarter, the seasonality there. What were some of the drivers, the sequential decline there perhaps it’s from the CRI, but just wanted to understand that dynamic?

Part of -- there is not much seasonality. I think some of the contracts as I mentioned before they are not what I would -- we have fixed contracts and we have unit based contracts. But then we also have contracts that are actually fixed, but the payments change year-over-year or quarter-over-quarter because of the payment schedule that we have agreed upon. So I think this is a function of that. So for the full year, we’ve given the guidance for the full year, but I think Q1 is slightly lower than where we were in Q1 of last year or even Q4 of last year. So it’s not driven by markets per se. Although there is some – some portion of it is on the unit based royalty, there is some seasonality and we have some weakness in the semiconductor but that also is a small impact on the unit royalty based revenue contracts that we have.

Okay, that helps Satish. And then on the contract revenue line, I know it’s a small percent of revenues, but can you just tell me remind me what’s driving that line and then whether that has the opportunity to grow with some of these many of these projects you’re working on perhaps come to provision?

Yeah just give me a second. So the contract revenue line is growing, as I mentioned we had eight design wins for the full year and four in the last quarter. So as we mentioned with the design win we had Samsung and then many others both on the CRD side as well as on the MID side, that portion is growing. You’ll see it in our 10-K when we publish it, but the contract revenue let me just pull up my sheet over here. The overall contract revenue is about $34 million for fiscal ‘15 and it was about $25 million for fiscal ‘14. So those are -- we are as we change our strategy and getting into products and services that part of the business is growing.

Okay great. And then my last question is on the acquisition and really the implications for CryptoManager and then whole platform there. It sounds intriguing to me you have all these different ways you can go to market with this product. As I look back at the Qualcomm and LG deals one was kind of the whole thing and LG was maybe a part of the technology. Do you expect in the future as more customers come online for CryptoManager that they’re going à la carte sort of selection here or do you still expect to sell the whole platform even with these new kind of front ends to them if you would?

What we’re trying to do Suji is really flexible to the customers’ needs. As we’ve discussed I think in several of the previous calls, CryptoManager itself is an exciting platform people see, but it also has some level of complexity in the sales price, because it really involves every aspect of the semiconductor company. So it’s security, it’s R&D, it’s IT it’s finance so on and so forth. So it takes time to implement it. What we’re excited about and it’s something that we’ve anticipated as Qualcomm ramps and starts to ship more devices more and more people are starting to see the value of it. As we’re engaging the industry companies that are partners like Bell ID and Ecebs we’re going to be, we’re also seeing the value of the technology and providing some additional level of differentiation. So what we’re going to do is offer really total solutions, partial solutions. Things where we offer a product and then the ability to customize to meet with the customer needs. So it is a deal-by-deal basis and what we’re hoping is that we started to see a little bit of acceleration for CryptoManager and as I reflected in the prepared remarks that the combination here is going to drive faster revenue for these vertical applications and faster revenue for CryptoManager.

Great, that’s very helpful, Thanks guys.

Thank you.

Our next question comes from the line of Mark Lipacis with Jeffries. Your line is now open.

Hi, thanks for taking my question. First question is on the DDR business, I understand that you’ve missed the design win there, can you just review for us one more time what’s the -- when are the windows when do they happen and then assume you hit the next one and you get design wins, how long does it take to recognize or realize revenues from that? Thanks.

So they’re really rolling design wins. We had a particular strategic relationship with the customer and we missed some of those. But there are others coming up from that customer and subsequent customers. Then there is also some particular geographies that tend to be a little bit behind. So for instance China is an area that tends to still be with the higher percentage with the DDR3 and moving to DDR4. So we’re really working and across all of these. Things are going really well in the whole design process. We’ve gotten good support from our customer partners, from their partners from Intel. But everything typically from beginning to end takes a really minimum of six months. So we’re hoping that we’re going to have good news to report for the second half of this year and those things will be even better than we had anticipated. But given where we are and the nation state of this business for us we just wanted to be reasonably conservative.

Well that’s fair enough. And then is there a -- should think about is there a particular competitive advantage that you believe that you will have over your competition in this area.

Yeah I think that we can and there is a multitude of them. While it’s taking us some time to sort it out, one of the things that we were incredibly encouraged by is the fact that when we delivered the first silicon our customers and partners could not believe the quality of it. We ended up having a few stupid mistakes as things would -- as luck with have it as you get into a new business and people really don’t have as much experience as you would like. But the quality was outstanding. We’re already producing it at higher speeds it will operate at higher speeds than is required or capable on the existing Intel platforms. And we believe that longer term there is going to have to be architectural changes and speed enhancements. So this is directly in this sweet spot of where Rambus does particularly good innovation we can innovate on both bandwidth and frequency and latency all at the same time. So we think that we have a package that in collaborating with the industry that we can bring a lot of this technology to market. And so we will be the first with the fastest and the most. It won’t be right this year, but we’ll be able to it overtime.

Well that’s helpful. And then last question on, you’re projecting $100 million in cash flow for operations. What does what’s the targeted use of that cash is that just build up and you wait for M&A or do you do something else with that?

Yeah so Mark the target is approximately $100 million and just like we used up our cash $93 million for targeted acquisitions. There are other areas we’re looking at and we have there might be some other in the horizon. We did announce $100 million share buyback last quarter through an ASR. So I think I would say the uses of cash would be unchanged and we’ll be continue to look for areas that are complementary to our business and that can provide us organic growth baring which we will return capital back to shareholders through some form of a share buyback.

That’s helpful. Thank you very much.

Thanks Mark.

Our next question comes from the line of Atif Malik with Citigroup. Your line is open.

Hi, thanks for taking my question. If I look at your MID segment revenue they declined last year STMicro and where that you said were down and offset by SK Hynex. So I think within that MID you have SoC revenues and DRAM revenues and I’m assuming that DRAM revenues were flat year-over-year and SoC were down. So my question is are we at a trough point for the SoC revenues in that MID bucket or and when you look at your pipeline for renewals this year, do you think we are at trough point for SoC part of the MID?

Alit this is Ron. I would like to believe that that’s where we’re at. There are several moving parts. One of the brutal realities as we’ve engaged market is that several of our customers and customers that have just renewed, extended or signed for the first time were quite candidly in a lot of difficult times from their own business. And as they suffered some of the revenue expectations that we had, had to go down. As you know what we’ve tried to do is broadly establish a marketable rate for this technology, engaging the industry and fair inequitable licensing terms which has enabled us to be able to do that. And so what that means is some companies and you could basically just go through the list that I said today almost all of them have had very, very trying businesses over the last several years. So that just is where it is. Now in a few years if things are better for these companies we would expect the revenues go higher just on the patent licensing piece. With respect to the cores we are working and we’ve announced several of them. We still believe that we have some unique differentiation and we are going as fast as we can to split them out. We had a great design time as we said we’ve showed more, we are getting some real attractive design wins especially on the 30 side. So we are also hoping that over time that that could build. Unfortunately when I came here I can’t remember the specifics, but it was somewhere around $35 million that we had in these annualized core licensings a lot of it from the strategic relationship that we had with Sony. But the company many years ago decided to step out of this business and as a consequence we’ve basically had that go down. So while just a few years ago we had the solid base of cores licensing we’re in the process of rebuilding that and it takes time because unfortunately these cores like ARM would face or Imagination or companies like that are ingredients of ingredient. So we have a design win it takes us some time to build it, the customers offer it that goes into an ASIC or some type of ASSP product that takes its own time to develop and get qualified that ramps in the time. Now afterwards we get royalties or use fees. So it can build up to a very nice revenue. But it’s off of basically a hole that we dug ourselves four or five years ago. So I’m hoping that this is a part where we see something and as kind of the low point we continue to grow more significantly in the following years.

Okay. And then Satish on the share repurchase you did 8 million in accelerated share repurchase. Do you still have about 12 million shares of the 20 million share repurchase that you announced last year to be used by June of this year?

It is more than June of this year. I think the approval we got from the Board in January of 2015 was not bounded by time. So they authorized up to 20 million shares and there was no time limit on it. With the ASR we spend $100 million and we receive 7.8 million shares which is about 80% approximately of the total estimated number of shares you would buy and the 20% comes over time in an ASR. And since this was done in the -- towards the end of October beginning of November you are only seeing the impact of on a weighted average only two thirds of the quarters. So you’ll see a little more impact in Q1 of this year to the weighted average shares which of course might be offset by any RSUs we invested or option we excised. But just purely from an ASR perspective the impact of that is not felt all in one quarter unless it’s done at the beginning of the quarter.

Okay, thanks.

[Operator Instructions] Our next question comes from the line of Paul Coster of JPMorgan. Your line is now open.

Thanks for taking my question. Satish I understand that the accounting treatment might be different for the SCS business. But is the business model essentially the same or similar to that of the acquirer?

The business model is it’s a software licensing company. So they have software engineer they’re developing software and the software they’re providing to the banks who are using it for running their back end for many of the mobile payment schemes. So it’s not a pure patent licensing business. It’s not what we call a technology licensing business. So it’s slightly different than what we’ve done before, but we do have software and we do recognize -- we have some software recognition in our revenue, but this would be additive to that. So to answer your question it’s not patent licensing, it’s not technology licensing, but it is software revenue recognition.

Is it pretty diversified source of revenue and what kind of tenure the licensing deals have?

The licensing typically are three to five years. It’s fairly diversified, customers all the way from Australia to Far East to Europe and Canada and U.S. So geographically fairly diversified, lot of different banks, lot of clearing houses. Those are the primary customers for SCS at this time.

The guidance for the year, revenue guidance for the year it sort of refers to the obviously puts and takes from new contracts or contract renewal risk. What is the contract renewal risk both in terms of number of contracts and sort of maybe issued in dollars that might be a risk there?

Yeah we don’t I think the only guidance we have given in the past is when we have contract that are public in terms of when they’re coming up for renewal. We haven’t been publicizing many of them in the past and we don’t have too many that we are concerned about in terms of renewals coming up in 2016.

Okay. My last question is the $3.10 to $3.25 is to make sure that guidance includes the pro forma revenues associated with the acquired business is not yeah is the pro forma not the GAAP?

No it is the GAAP got to meet certain estimates looking at as part of the diligence we look in the contracts they have, look at their robust bookings pipeline we made some estimates as to when we think they’ll close and what some of the assumption would be. So we have tried to reflect U.S. GAAP number versus give you a revenue pro forma number.

Right got it, I’m sorry will you be presenting on a go forward basis both numbers?

No we will only have U.S. GAAP numbers.

U.S. GAAP which is understating the actual revenues that’s for which there were cash payments.

Yes, but you might be able to see the cash in our cash flow statement you might see intangibles go down and so you’ll be able to see as intangibles go down how much cash is coming in, but that’s something which will not be opaque in the financial statements.

Got it, thank you very much.

You’re welcome, Paul.

I’m not showing any further questions at this time. I would now like to turn the call back to Dr. Ron Black. Chief Executive Officer for closing remarks.

Thank you all for your continued interest and support. We look forward to continuing the dialog with you in the future. And as I mentioned if you get to Mobile World Congress we would be very pleased to show you some exciting demos. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.