Welcome to the Ramus Fourth Quarter And FY19 Earnings Conference Call. At this time, at the conclusion of our prepared remarks, we will conduct time. As a reminder, this conference call, I'd like to turn the conference over to Raul Master, Chief Financial Officer. You may begin your conference.
4th Quarter 2019 Results Conference Call. I'm Raul Maskell, CFO, and on the call with me today is Luke Therafin, our CEO. The press release for the results that we will be discussing today have been furnished to the SEC on Form 8 K. A replay of this call will be available for the next week at 8558592056. You can hear the replay by dialing the toll free number and then entering ID number, 357-6589 when you hear the prompt.
In addition, we are simultaneously webcasting this call, and along with the audio or webcasting slides that we will reference during portions of today's call. So even if you're joining us via conference call, you may want to access the webcast with the slide presentation. A replay of this call can be accessed on our website beginning today at 5 pm Pacific Time. Our discussion today will contain forward looking statements, including our financial guidance for future periods, products and investment strategies, timing of expected product launches, demand for existing and newly acquired technologies, of our merger, acquisition and divestiture activity, including the success of our integration efforts and the effects of ASC 606 on reported revenue amongst other things. These statements are subject to risks and uncertainties that are discussed during this call and may be more fully described in the documents we file with the SEC including our 8 Ks, 10 Qs, and 10 Ks.
These forward looking statements may differ materially from our actual results and we're under no obligation to update these comments. In an effort to provide greater clarity in the financials, we're using both GAAP and non GAAP financial presentations in both our press release and also 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 atrampus.com on the Investor Relations page under Financial Releases. Any of our call today will be as follows. Luke will start with an overview of the business.
I will discuss our financial results, including our guidance for future periods, and then we will end with Q And A. I'll now turn the call over
to Luke to provide an overview of the quarter. Luke? Thanks, Raul, and good afternoon, everyone. 2019 was a year of tremendous progress propelled by strong execution across the company, guided by our strategic objectives we continue to focus on our core strength in semiconductor to optimize the company for operational efficiency and to leverage our strong cash generation to reinvest for growth. As a result, we had an excellent performance in Q4 and exceeded expectations with revenue of $59,900,000, delivering $224,000,000 for the full year.
We also continued to strengthen our balance sheet generating $35,400,000 in cash from operations in the 4th quarter. This brought our total cash from operations for the year to $128,500,000 which is up $41,400,000 or 48 percent over 2018. In 2019, we redefined our perimeter with significant M and A activity throughout the year, focusing the company on Silicon IP and chip solutions for the Semiconductor market. We ended the year strong completing both the sale of our payments and ticketing business to Visa as well as the purchase of the secure silicon IP and protocols businesses from varying metrics formerly inside Secure. Much like the purchase of digital controller company, Northwest Logic, earlier in the year, The Insight Secure teams and offerings augment our portfolio and expand our market position in data center, AI, networking and automotive.
As we have mentioned previously, neither acquisition materially impacted our 2019 results. But we expect both to have a positive impact on the business and be accretive to revenue and earnings in 2020. In addition to the successful closing and integration of our acquisitions, we demonstrate success across 2nd consecutive year of record revenue from products with combined results from our chip and silicon IP businesses delivering over 64 Memory interface chips was the fastest growing segment of the business, with revenue almost doubling year over year. Driven by increased OEM and data center qualifications. We saw steady gains in our DDR4 memory interface chip market share, and delivered the 3rd consecutive quarter of record revenue.
Clinical IT also delivered record revenue in Q4, and drove sustained growth throughout the year, up 29% from 2018. We had numerous design wins, at Tier 1 SLC customers across our target markets for both interface and security IP solutions. Most recently, we announced the win at inflamed for both our HBM II and controller as part of their next generation AI training chip. In addition, the team continued to build out our portfolio of solutions, addressing the fast growing and demanding applications in AI and 5G and data center with the launch of our comprehensive PCIe gen 5 interface solution in Q4. In closing, Q4 was a fantastic quarter.
We delivered record revenue from both chips and silicon IP, and robust cash from operations. For 2019, we executed on our strategic objective and successfully realigned the company around our core strength in Semiconductor, while strengthening the product portfolio. Now looking forward, we will continue to capitalize on high growth market trends favorable to Rambus. With market share gains for chips alongside the memory cycle upswing and growth in the strong semi IP market catalyzed by AI and 5G, will be very well positioned for continued success in 2020 and beyond. With that, I'll turn the call to Raul to discuss the quarterly financial results Rahul?
Thanks, Luke. I'd like to begin with our financial results for the fourth quarter. Let me start with some highlights on Slide 6. As Luke mentioned, we continue to execute on our product businesses and delivered solid financial results above our revenue and earnings expectations. We've adopted ASC 606 using the modified retrospective method, which does not restate prior periods, but rather runs the cumulative effect of the adoption through retained earnings as a beginning balance sheet adjustment.
And prior results under ASC 605 is not an accurate way to track our company's progress. We will continue to provide operational metrics such as licensing billings, to give our investors better insight into our operational performance. We delivered revenue of $59,900,000 and licensing billings of $63,800,000. Revenue was higher than our expectations due to strong buffer chip sales. We have a very strong balance sheet and ended the year with cash, cash equivalents and marketable securities of $408,000,000, up from the previous quarter.
For the year, cash from operations was $128,500,000, up nicely from last year, with $14,900,000 of capital expenses free cash flow for 2019 was $13,700,000. Our continued execution on our strategy and our operational discipline has yielded excellent financial results and a strong balance sheet that afforded us the flexibility on our strategic initiatives. We continue to leverage our high margin historic businesses to fuel growth in adjacent areas where we have strong technical and market expertise with a focus on chip and Silicon IP. Now let me talk you through some revenue details on Slide 7. Revenue for the fourth quarter was $59,900,000, above our expected range due to market share gains in our buffer chip business.
Royalty revenue for the fourth quarter was 19,400,000, while licensing billings was $63,800,000. The difference between licensing billings and royalty revenue primarily relates to timing as we don't always recognize revenue the same quarter we bill our customers. Going into additional detail, our product revenue was $26,600,000, consisting primarily of our buffer chip business. Our contract and other revenue was $13,900,000, consisting primarily of our silicon IP As we expected due to the timing of the close, our acquisition of the Silkin IP secure protocols and provisioning business from Vermaatrix did not have a material impact on fourth quarter. $7,000,000, up 29% year over year.
Our growth of these areas underlies the benefit of our focus and strategy. We recorded $900,000 of revenue $2,300,000 in operating costs and expenses associated with our payments and ticketing business in Q4 prior to the sale of EBITDA. Let me walk you through our non GAAP income statement on Slide 8. Along with our solid revenue performance in Q4, we met our profitability targets on a non GAAP basis. Cost of revenue plus operating expenses or what we refer to as total operating expenses for the quarter came in at $62,300,000.
This was towards the high end of our expectations due to higher COGS related to record buffer chip revenue and disciplined execution on spending our profit was nicely above our expectations. We ended the quarter with headcount of 6.85, down from 8.40 in the previous quarter, primarily due to the divestiture of our payments and ticketing business. We added approximately 65 employees throughout acquisition of the Silicon IP secure protocols and provisioning business from Verimatrix. Under ASC 606, we recorded $4,500,000 of interest income related to the financing component of our fixed fee licensing agreements for which we've recognized revenue, but not yet received payment. We incurred $600,000 of interest expense related to convertible notes issued in Q4 2017.
This was offset by incremental interest income related to the return on interest and other income for the first quarter of $5,500,000. Excluding the interest income related to the significant financing component related to ASC 606, this would have been $1,000,000. Using an assumed flat rate of 24% for non GAAP pretax income, non GAAP net income for the quarter was $2,400,000. Now let me turn to the balance sheet details on Slide 9. We are very pleased with the strength of the balance sheet.
Cash, cash equivalents and marketable securities totaled $407,700,000, up significantly from the previous quarter as cash from operations of $35,400,000 and proceeds from sale of our payments and ticketing business to Visa was offset by cash used for the acquisition of the Silicon IP secure protocols and provisioning business from from TheraMatrix. Year over year, we've grown cash by $130,000,000. Our strong balance sheet allows us flexibility to invest strategically in our patent portfolio and our growing product program, as well as provides firepower for additional inorganic access. At the end of Q4, we had contract assets worth $528,000,000, which reflects the net present value of unbilled payoff related to licensing agreements to which the company has no future performance obligations. I expect this number to continue to trend down as we bill and collect for these contracts.
It's important to note that this metric doesn't represent the entire value of our existing licensing agreements as several customers have royalty based agreements that allow us to recognize revenue each quarter under ASC 606. As the sale of our payments and ticketing business did not close until October 21st, At the end of Q3, we classified the assets and liabilities for this business as held for sale. The net carrying amount of this business as of the third quarter was $86,500,000 considering assets liabilities and cumulative translation adjustments. After considering the $75,000,000 purchase price and transaction costs, we recorded a recovery of $1,900,000 in Q3, that offset the impairment charge in our Q2 GAAP results. In Q4, we recorded another recovery of $7,700,000 upon the sale of this business, which resulted in a cumulative year to date loss of $7,400,000 after considering the net carrying amount of this business of $86,100,000 and net proceeds of $78,600,000.
4th quarter CapEx was $6,400,000 and depreciation was $4,900,000. Full year 2019 CapEx was $14,900,000 and depreciation was $15,200,000. As I mentioned earlier, we delivered $113,700,000 of free cash flow in 2019. Looking forward, I expect roughly $16,000,000 of CapEx for the first quarter and roughly $26,000,000 for the full year of 2020. Half of that total amount is related to the relocation of our headquarters facility.
I also expect depreciation of roughly 5,000,000 Overall, we have a strong balance sheet with limited debt and expect to continue to generate strong cash from operations in the future. Now, let me turn to our guidance for the first quarter on Slide 10. As a reminder, our forward looking guidance reflects our current best estimates and our actual results could differ materially from what I'm about to review. In addition to financial outlook under ASC 606, we've also been providing information on licensing billings, which is an operational metric that reflects amounts to invoice to our licensing customers during this period, adjusted for certain As you see in the supplemental information we provided on Slide 15 of our earnings deck, licensing billings closely correlates with what we've have historically reported as royalty revenue under ASC 605. That said, under ASC 606, we expect revenue in the first quarter between $44,450,000,000.
We expect royalty revenue between $7,000,000 13,000,000 We also expect licensing billing between $60,000,000 $66,000,000. We expect Q1 non GAAP total operating expenses, which includes COGS, to be between $64,000,000 $68,000,000. Under ASC 606, non GAAP operating results for the first quarter is expected to For non GAAP interest and other income and expense, which excludes interest income related to ASC 606, we would have expected $1,000,000 in income includes $600,000 of interest expense related to the notes due in 2023. Based on the new tax legislation passed at the end of 2017, We expect our pro form a tax rate in 2020 to remain consistent with our 2019 pro form a tax rate of roughly 24%. The 24% is higher than the statutory rate of 21%, primarily due to higher tax rates in our foreign jurisdictions.
As a reminder, we pay roughly 20,000,000 of cash taxes each year, driven primarily by our licensing agreements with our partners in Korea. We expect non GAAP to be roughly 115,000,000 basic and diluted shares outstanding. This leads you to between a non GAAP loss per share of $0.159 for the quarter. Looking ahead to 2020, I expect Q2 down 2% because of our typical seasonality and then modest growth in Q3. I expect Q4 to be roughly flat with Q3 due to the structure of our licensing agreements.
As we've communicated previously, structural step downs and several of our long term licensing agreements impacted our 2019 revenue. Last year, our excellent product growth and operational efficiencies offset these structural step downs. In 2020, we had the last of the structural step downs under our current license agreements after which patent licensing billings will level off. As we look to the future, I expect subsequent revenue growth in our product businesses to provide growth on both the top line and bottom line. We expect to deliver gross margins in the 55% to 50% range, From an expense perspective, we expect COGS move in line with product shipments through the year.
We anticipate operating expenses will come down gradually through the year due to the operational efficiencies we've already implemented. All told, these changes reflect $5,000,000 of higher revenue and $0.02 of higher EPS than current analyst consensus estimates and expectations for 2020. Let me finish with a summary on Slide 11. We're proud of the solid performance by our team and the progress we continue to make against our strategic initiatives to drive long term on organic and inorganic growth. While we understand that ASC 606 added a level of complexity to our financial reporting, it important to reiterate that the underlying financial strength of our business remains strong reflected in our demonstrated ability to generate cash.
We have refocused our product portfolio around Rambus' core strength in the semiconductor industry, improved our operational efficiency and profitability, generated solid cash from operations and leveraged our strong balance sheet to support our strategic initiatives. We continue to focus on our core markets and are well positioned for
first question.
Your first question comes from the line of Sidney Ho from Deutsche Bank.
My first question is your licensing billing is better for both Q4 results and Q1 guide. Can you talk about what's driving the side, other than maybe timing of some of the contracts. And related to that, I I appreciate you going through, Rahoo going through the quarter by quarter for next few quarters. But if you kinda look past the beyond, look past 2020, I think you talked about the being, licensing billing being roughly flat after seeing structural step down in 2020. Are there any other steps down that we should be aware of going forward, and what type of licensing structures are you seeing this, in a recent deal?
Sure. Thanks, Vivien. Let me see if I can answer your question. First, in terms of the trends of licensing billings and for it. It's really just related to the structural agreements that we signed over the last several years.
Our existing agreements, all have disparate terms and conditions in terms of how we bill and invoice our partners. In some cases, they are royalty based and that will show up in our reported revenue. In other cases, there are fixed payments that are consistent on a quarterly basis, and that may just show up in our licensing billings. In other cases, the, the payments are structured in a stair step faction, either going up and down or incoming going straight or even coming down in some cases. In any case, I wouldn't read too much into the quarterly changes between royalty revenue and licensing billings.
I'd refer you back to the guidance that we provided at our Analyst Day where I think we said at the midpoint, licensing billings for us in 2020, would be about $230,000,000. So that's what I kind of anticipate over the course of this year. If I recall your other questions, you specifically talk about what that may look like going forward. As I mentioned in prepared remarks, after 2020, we expect this to be very stable over the several years. We now see the last of the structural changes in 2020, and that was part of the quarterly guidance that I gave in my prepared remarks, where I expect Q4 to be roughly flat with Q3.
Otherwise, I would have expected Q4 to be up nicely from Q3 and due to increased product rescue. Looking forward, most of our, licensing billings are related to 3 big agreements with the VM industry. And I think we can talk certainly there in terms of our expectations for renewals out in the future, but we feel very confident about our patent portfolio and the investments we make there and our ability to maintain that very, profitable business for us in the future.
Great. That's super helpful. My follow-up question is on 5g Infrastructure. In the past, you talked about benefiting from the deployment of 5g Infrastructure. Especially based on the PCIe gen 5 interface.
Can you give us an update on that market, what we've seen there, especially after a very strong build in the second half of last year? And do you have any issues given, given the big portion of that field is coming from, one big Chinese customer there?
Hi, Sydney. This is Luke. So we continue to see traction from the 5g development and deployment. And as we explained in earlier calls, the reason is that we are further down in the value chain. We actually provide to people who build the chips for that 5G infrastructure.
So we kind of see the revenue before the others do. One of the things that have happened to us, over the last year is the acquisition of Northwest Logic allowed us to develop a complete solution for 5G. So we have combined our PHY with their controller to have a complete 5GPCI gen5. Solution and we continue to see traction with several customers, as we move forward.
Okay. Maybe one last question, sticking with the 5 g chipset side, but memory chipset side. I think you you mentioned, revenue in the $75,000,000 to $95,000,000 range, and that's up from roughly $70,000,000 in 20.19. Which doesn't seem like a lot of growth how how much DDR5 revenue are you expecting in your 2020 outlook? And can you talk about your market share expectations based on the design win design win activities for the next generation 14 nanometers 10 nanometer server products.
Any any color would be helpful. Thanks.
Yes, great questions. So I think the revenue from DDR5 is going to be very modest in 2020, we will see the very initial shipments towards the end of the year in low volume 2020 is still going to be a DDR4 market for buffer chip. The growth will depend on on a couple of factors. We see the upswing of the market after a soft year last year, in general terms. In addition to that, the speed of the growth will depend on how fast the market is going to transition from the current Intech platform to next generation platform.
So we certainly see growth potential for our business for which we give you we gave we just gave you guidance.
Great. Thank you so much.
Thank you, Kevin.
Your next question comes from the line of John Pitzer from Credit Suisse. Your line is open.
Yeah, good afternoon guys. Thanks for letting me ask the question. Well, I guess my first question, I think you said in your prepared comments, that the Verimatrix acquisition added very little to the calendar fourth quarter. I'm wondering how we should think about its contribution both to the calendar first and to the full year?
Sure. That's a great question, John. And yes, because of the timing of the close, there was minimal, impact to our Q4 financial statements, regarding the the Verimatrix acquisition. What we said at our Analyst Day is that we expected roughly $20,000,000 of revenue associated with that acquisition in 2020. And I think both that as well as the acquisition of Northwest Logic, we said would be marginally accretive for us in 2020.
Right now, I would just simply anticipate a roughly linear trend in terms of how much additional revenue we'd see in 2020 associated with with that acquisition of the Vermaatrix assets. So I'd get anywhere from $4,000,000 to $5,000,000 a quarter through 2020. Hopefully that helps answer your question.
It does. And then maybe as a follow-up to Luke, just given the cash flow generation of the business model, should we think about 2020 as being another year of additional tuck in acquisitions or is this a year where you kind of try to rationalize and point the acquisitions you did last year? And if the former, how should we think about the acquisition strategy and potential targets?
Yes, thank you, John. So in terms of rationalizing the acquisitions we just made, we're moving really fast the integration of both companies is going quite well and fast. And I think both are up and running, I would say at this point in time, So we're quite pleased with that. It went really, really fast in terms of integration and focus on growing the business. Now we will continue to look very actively at possible acquisitions to strengthen our position either in the memory interface arena or in the embedded security arena.
This is very, very active activity that we have internally. And because we do have this ability to generate cash, we have the ability to move fast if any of these opportunities, comes to us with a high level of interest. So we will continue to do what we do and we've been very fast in integrating the 2 we did last year. So we'll change that.
Your next question comes from the line of Suji Desilva from Roth Capital. Your line is open.
Hi, Luke, hi, Rahul. Congratulations on the progress you're showing in the strategy of focusing on
the core. So congrats on that.
Raul, I just want to sharpen my pencil here on some of the maybe the 605 kind of equivalent numbers here. Fourth quarter 2019, I was getting $104,300,000 and EPS around $0.2829. Does that sound like it's in the ballpark?
So, Judy, we can't produce 605 numbers anymore, but I think what you're doing is you're substituting licensing billings for what we report as royalty revenue? And I think when you make that substitution and run it through, I get the same numbers that you would get.
Great. And most importantly for the guidance, I think you're coming in, it's implying something around $100,000,000 of slight sequential decline in $0.23 as you start out the year. I think that's kind of, I want to just make sure that that's also ballpark. Sounds reasonable as well.
Yeah. And again, that's not numbers that we provide, but if I were to do the same math that you did, I'd get in the same place. And that decline is really just just seasonal, between the Q4 and Q1. We were delighted with our Q1 results, both on the top line as well as from a cash perspective.
Okay. Fair enough. And then switching to some of the business segments. The silicon IP business up 29% year over year, how much of that is organic versus inorganic? Was that all organic?
And if so, what's a more normalized growth opportunity that's sustainable for that business? It sounds like it's on a chair really from a design ramp perspective. So curious how that can flow through the next year or 2?
Yes. No, that's a great question. So as I mentioned, we had minimal revenue from the assets we purchased from from their matrix. We did have a couple of $1,000,000 of revenue associated with the acquisition of Northwest Logic that closed in Q3. I think even without the acquisition though, it was very strong growth, year over year.
And we're very pleased with the performance our our memory IP business has grown very nicely over the last several years, and delighted with that growth rate. And I think we have a great opportunity to have growth in our security business as well. Looking forward, I would expect both of those to continue to grow. And with the acquisition of those businesses, we could be in a similar growth rate 2020 over 2019.
It's helpful color there. Well, and then on memory buffer, you started to talk about this, but where do you think your share is now? And where do you think it can go as you ramp up here in 20 20 obviously that the size of the market be a factor there. And then, is there any concentration in your current revenue run rate from a hyper scale customer or 2, or is it diversified kind of from the incomes customer perspective, not the memory customers?
Yes, great question, Suji. Look, we estimate our share in 2019 to be around 15%. And it keeps growing we'll surely go to 30% when we go to DDR5 because we were the first in DDR5, so we expect to have at least one third of the market. And between now and then, we will continue to increase share. In terms of, the structure of our customers, over time, our end customer profile has diversified.
So the risk to the business has diminished, as we grow the business, the end customer as diversified and as such, our risk has diminished in that area.
Okay, great. Congrats again guys. Thanks.
Thank you, Suji.
Your next question comes from the line of Gary Mobley from Wells Fargo Securities. Your line is open.
Hey guys, congrats on a strong quarter, strong finish to the year. Well, I wanted to go back to your summary comments about fiscal year 2020 guidance. I recall recall correctly at your Analyst Day in September. You gave sort of a preliminary 2020 outlook, which included billings of $230,000,000 contract now the revenue of $80,000,000 product revenue, $85,000,000 for a total of $395,000,000. Just to clarify, you're suggesting that perhaps now we're we're starting the year out and maybe that's looking $5,000,000 better.
And if so, you know, where does it come from in the 3 different categories?
Sure. And, and again, Gary, you know, we, we don't add those numbers up, because that wouldn't be something you do from a GAAP perspective. But what I said in our prepared remarks is we think we're going to be about $5,000,000 better than where term analyst estimates And I think that's going to come predominantly from buffer chip and silicon IP. As I mentioned previously, the structure of our patent licensing agreements, are fairly set. So those are largely predictable.
But I think it's going to come from buffer chip and potentially the Silicon IP Businesses.
Okay. I want to switch gears and talk about the profitability of everything other than your patent licensing business. And so in the just reported 4th quarter, using that, the billings number as a substitute for royalties, you would get to roughly non GAAP operating income of $42,000,000. In years past, in quarters past, even maybe as recently as the midpoint of this past year, I would imagine that 90% of your operating came from the patent licensing side. But seemingly now you're getting much larger contribution presumably from your buffer chip business.
So can you speak to the profitability of that business, where it sits today, where you see it materializing in 2020?
Yes. So I'll start. Thanks, Gary. We're
pleased with the performance of
our profit chip business as we grew the business and that business has become profitable, and this is a high leverage business. So we can marginally invest in that business to continue to generate growth. As we move forward and look forward, that business is going to continue to be profitable and more profitable. On the IP side, what we've done over the last year is We have refocused our portfolio of offerings onto products and solutions that show high demand in the market. We mentioned earlier the PCA AGN5 solution using our PHY and controller.
So by focusing the portfolio and making portfolio decisions, we're going to accelerate the profitability of that IP business. That's the way to look at it.
Okay. And related to that, I think in the second half of fiscal year twenty nineteen, you're product gross margin was around 65%. And that's about 10 percentage points higher than the first half. And so I'm curious to know how much above trend line is the buffer chip business running compared to what you had most recently been guiding for in can you give us sort of an update on how you view the gross margin profile of that business in the 2020?
Gary, that's a great question. I think what I mentioned in prepared remarks is I expect that gross margin for that, our product business to be in the 55% to 60% range in 2020. We had some quarters with particularly high margins, and that's just simply option of product mix, as well as how much we were shipping. I think as we become larger and larger, and I hope to beat the estimates that we provided today. But as we become larger and larger, then any small variation in mix will have a muted impact in terms of the gross margins look like.
But I feel pretty comfortable with the 55% to 60% gross margin. And as Luke mentioned earlier, in your question about leverage on the product portfolio because we have that, product portfolio. And as we ramp, there's minimal incremental investment And so there's a pretty nice fall through then to the bottom line. And I think that's what you saw also in Q4.
Okay. Had a sort of a final off the wall question about IP protection. So as part of the phase 1 US China trade agreement, we had some IP protection clauses. Cause is built into the, to the trade agreement. So I'm wondering if that changes in the enforceability of your patents as it relates to some of the developers of China Memory?
So, you know, Gary, it's an interesting question. I think it's in terms of really what's going to happen with China and the trade downs. The way I look at it is that we are unique in that our direct exposure to China is actually relatively small, though obviously anything that impacts our customers, the long term will impact us. I think for us, China is actually an opportunity from a patent life perspective. What we see is that tech industry in China continues to grow and diversify, and we're making great progress in our business areas.
But it becomes an opportunity. Now specific to licensing, China is investing tens of 1,000,000,000 of dollars in the semiconductor industry. And as the industry grows, so does our relevance and opportunity in the market. So there are strategic options we have for patent licensing and I think engaging the earlier will actually yield benefits to us as well as our partners. I think one of the things that we see is that for our partners taking an early license provides credibility and allows them to compete in the global marketplace.
So all told, we're actively engaged in China and continue to monitor the geopolitical environment, but we remain optimistic that our business will continue to grow. Think one of the things that I would see is that if we are able to announce a license agreement in China, typically our license terms are 5 to 7 years, And that's an early demonstration that the ongoing global relevance and validity of our portfolio will be there for many years to come. Well beyond the terms of our existing licensees. And I think that would be a nice external validation. But to what you said earlier, I think we also continue to monitor what happens from a global macroeconomic perspective, but continue to invest in our portfolio and feel we're going to be very well positioned to take advantage of China as well as continue to maintain our patent portfolio and renewals going forward.
Okay. Thank you guys. And again, congrats to a strong finish to the year.
At this time, there are no further questions. This concludes the question and answer session. I would now like to turn the conference back over to Luke for closing remarks.
Thank you for your continued interest and time and have a very good day. Thank you.
This now concludes today's conference.