Welcome to Duranda's 3rd Quarter And Fiscal Year 2018 Earnings Conference Call. At this time As a reminder, this conference call is being recorded. I would now like to turn the conference over to Rahul Matore, Chief Financial Officer. He may begin your conference.
Thank you, operator, and welcome to the Randa's third quarter 2018 results conference call. I'm Rahul Mather, CFO, on the call with me today is Luke Sarafin, our CEO. The press release for the results that we will be discussing today have been furnished to the SEC on Form Eight K. A replay of this call will be available for next week at 8558592056. You can hear the replay by dialing the toll free In addition, we are simultaneously webcasting this call and along with the audio, we are webcasting slides that we will reference during portions of today's call.
So even if you're joining us via conference call, you may want to access the webcast with the slide presentation. A replay of this call can be accessed on our time beginning today at 5 pm Pacific Time. Our discussion today will contain forward looking statements regarding our financial guidance for future periods including Q4 2018 and beyond prospects, product strategies, timing of expected product launches, demand for existing and newly acquired technologies, the growth opportunities of the various markets we serve and changes that we will experience in our financial reporting due to our adoption of the new revenue recognition standard that started in Q1 twenty eighteen, 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 K. These forward looking statements may differ materially from our actual results and were under no obligation to update these statements.
In an effort to provide greater clarity to our financials, we are using both GAAP and non GAAP financial presentations in both our press release and also on this call. We have posted on our website a reconciliation of these non GAAP financials to the most directly comparable GAAP measures in our press release and our slide presentation. You can see this on our website at rambus.com on the Investor Relations page under Financial Releases. The order of our call today will be as follows: Luke will start with an overview of the business. I will discuss our financial results, including the guidance we issued in today's press release, 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?
Thank you, Raul, and good afternoon, everyone. I'm very pleased to be taking on the role of CEO and excited about our prospects as a company as we drive towards greater value creation for our customers and shareholders. For Q3, we delivered solid results with continued progress in our businesses as we execute on strategy and improve profitability. From a financial perspective, our performance was in line with our expectations. Delivering GAAP revenues of $59,800,000 under ASC 606 and generating $32,000,000 in cash from operations.
For reference, our 3rd quarter revenue under the prior ASC 605 accounting standard would have been $99,800,000. If we compare under the same If we compare under the same accounting standard and exclude the impact of our lighting division, this equates to a 5% increase year over year. Overall, we executed well with strong execution in our product groups and continued technology leadership on strategic programs. Our licensing program remains strong with new deals and renewals closed in Q3, including social Python, Infineon, Infineon and NVIDIA. For the memory and interface division, Q3 was another positive quarter, with both OEM and cloud customer qualifications ongoing in chips and steady revenue for IP cores.
Our DDR4 Memory buffer chip business continues to grow with steady gains in market share and revenue growth supported by a series of OEM design wins. As a result, we continue to hit our financial targets with $6,000,000 in Q1, $8,000,000 in Q2, $11,000,000 in Q3 and remain on track to hit our target of $35,000,000 to $40,000,000 for the year. As we look forward to next year, we expect that growth to continue. With an anticipated revenue range of $50,000,000 to $70,000,000 for the buffer chip program. For next generation DDR5 Memory buffer sheets.
We maintain our leadership position as the 1st and only supplier with working silicon that supports the top end speeds for both the RCD and DB chips. We are leveraging our head start in product development with Sunpros being validated by our partners and continue to have strong collaboration with the memory vendors as well as the broader ecosystem. Following the record revenue from our high speed IT course in the first half, we continue our leadership with further development of high end and high bandwidth 30s and memory IP cores in advanced process nodes. We increased traction from a growing number we see increased traction from a growing number of customers across multiple high performance applications, including AI, automotive data center and networking. Turning now to security, The division remains focused on enabling trust in devices and their connection to the cloud as well as protecting digital assets through tokenization and encryption.
As the importance of semiconductor device level security grows, our cryptographic group is seeing increased traction and opportunities in market segments like IoT, automotive and networking. We see rapidly increasing interest and new requirements for establishing and managing the identity of devices throughout their life cycle, starting on the factory floor. With nearly 5,000,000,000 devices provisioned to date by our crypto manager infrastructure product, Ranbus remains the most mature provider of upscale device level provisioning solutions and expect to see steady growth in demand and customer traction. As part of our ongoing efforts to make it simple and fast for our customers to implement security by design, we are systematically increasing our product portfolio. We now offer the general availability of our risk size based gram eval crystal manager hardware root of trust, a full suite of DPA resistant crystal cores for commercial and government applications, and an enhanced DPA workstation with expanded site channel attack testing capabilities through our partnership with riskier.
The quarter also marked a commercial milestone for one of our existing customers, Cygotress Japan. The subsidiary of SoftBank announced the availability of their software development kit, allowing customers to evaluate the IoT security platform, which integrates our crypto manager IoT security service. We are pleased with the progress on this group and look forward to meeting the market growing demand. As we look now to our ticketing and payment groups, market traction and product development for tokenization continue to progress. This year, we have expanded our organization solutions for mobile payments and retail to account base payments, e commerce, and now the blockchain.
Q3 saw announcements from both groups introducing new customers, partners and products. The ticketing group announced the selection and deployment of our transport tokenization solution for mobile ticketing on Scotland's national rate network. And our payment group made announcements with the retail group closing of Treya as well as Visa and American Express for our retail and e commerce tokenization products, supporting a major industry shift from carbon file to token on file. Finally, Last week, we launched fortified Trade, the first solution to offer bank grade tokenization and encryption technologies. To secure the transaction and of leveraging innovation and IP to develop differentiated products for high growth markets remains.
While we're pleased with the progress in our software based payments and ticketing programs and see increasing market traction for tokenization solutions. We acknowledge that these businesses are far from our core in the semiconductor space. With that we are exploring strategic options to maximize the market opportunity and success of these businesses. In closing, Q3 was a strong quarter that continue to reinforce our confidence in our strategy and execution to plan. We are creating the foundation for future profitable growth as we continue to With that, I'll turn the call to Raul to discuss the quarterly financial results.
Raul? Thanks Luke, I'd
like to begin with our financial results for the quarter. Let me start with some highlights on Slide 5. As Luke mentioned, we delivered solid financial results in line with our revenue and EPS expectations. As you know, we've chosen to adopt the new revenue accounting standard 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. As a result, in comparison between third quarter 2018 results under ASC 606 and prior results under ASC 605 is not the best way to track the company's progress.
We are required to present a footnote that presents our 2018 results as if we continue to recognize revenue under the old standard. To make this transition easier to the readers of our financial statements, we will continue to present our results under both ASC 606 and ASC 605 through this transition period of 2018. This way, we can have a meaningful discussion regarding the performance of our business instead of focusing on accounting changes. Under new accounting standard ASC 606, we delivered revenue of 59,800,000. Under ASC 605, we would have delivered revenue of $99,800,000.
Under ASC 606, we delivered non GAAP diluted loss per share of negative 1%. Under ASC 605, we would have delivered non GAAP earnings per share of $0.22. We delivered solid results while continuing to leverage our high margin historic businesses to fuel growth in adjacent areas where we have strong technical and market expertise. A focus on memory and security. Now let me talk you through some revenue details on slide 6.
Revenue for the third quarter was 59,800,000 under the new revenue accounting standard, higher than our expectations due to licensing agreements signed in the quarter. Revenue would have been $99,800,000 under ASC 605 in line with our expectations. Year over year, excluding the lighting business we shut down in Q1, our business was up 5%. As we've mentioned previously, the new revenue recognition standard has an material difference in the timing of revenue recognition for our fixed fee licensing arrangements. Our licensing business continues to perform well as the foundation of our success is core to our initiatives in both memory and security and will continue to generate cash in years to come.
Going into additional detail under ASC 605, our memory and interface revenue would have been 79,800,000 and our security business revenue would have been $20,100,000. As we mentioned last quarter, we've been restructuring the pipeline for our tokenization and embedded security businesses. While we are pleased with our progress on the security initiatives, in particular our recent announcements, the revenue profile has continued to change. As a result, we now expect security revenue in 2018 to be down year over year that we remain confident in this business the growing number 87. Along with our solid revenue performance in Q3, we once again 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 67,600,000 We ended the quarter with headcount of 814, up from 7.91 in the previous quarter. Over the course of 2018, we expect to invest in headcount for our growth initiatives in our memory and security businesses. Revenue and operating expenses under ASC 605 led to operating income of $32,200,000, we recorded $6,500,000 of interest income under ASC 606 related to the significant financing component. Of licensing agreements for which we had not yet received payment but recognized revenue under the new accounting standard. We incurred $700,000 of interest primarily interest expense, primarily related to the convertible notes we issued in Q4 2017.
This was offset by incremental interest income related to the return on our cash interest expense on our convertible notes, this resulted in non GAAP interest and other expense for the third quarter of $300,000 down from Q2. On a GAAP basis, we recorded a valuation allowance of roughly $90,000,000 in Q3. As you may recall from our adoption of ASC 606, we accelerated a significant portion of our revenues, mostly from patent licensing, resulting in a roughly $820,000,000 adjustment to retained earnings at the beginning of 2018. The acceleration of revenue resulted in roughly $157,000,000 of foreign tax credits being utilized to offset the tax obligation. Given that we expect much of our growth to succumb outside of the U.
S. In subsequent years, at a domestic level, we may still generate losses in future periods. Furthermore, the decrease in our effective tax rate after last year's tax reform reduces our ability to utilize any domestic deferred tax asset to future periods hence the valuation allowance. Using an assumed flat rate of 24% for non GAAP pretax income, Non GAAP net income for the quarter would have been $24,200,000 under ASC 605 or $0.22 a share at the midpoint of our guidance. Now, let me turn to the balance sheet details on slide 8.
We're very pleased with the strength of our balance sheet. Cash, cash equivalents and marketable securities totaled $248,200,000, down $50,000,000 from the previous quarter as cash from operations of $32,000,000 helped to offset the remaining $81,300,000 pay down on the 2018 convertible notes that came due in Q3. As part of settling the 2018 notes, we also issued 424,000 shares. We expect to maintain our ability to generate cash from operations in Q4 This will be an important metric to monitor as we adopt ASC 606. As a result of adopting ASC 606, at the end of Q3, We had contract assets worth $700,000,000, which reflects a net present value of unbilled AR related to the license arrangement for which the company has no performance no future performance obligations.
I expect this number to continue to trend down as we bill and collect for these contracts and the reduction approximates the difference between our reported royalty revenue under ASC 606 and our licensing billings. Third quarter CapEx was $2,600,000 and depreciation was $2,600,000. Looking forward, I expect roughly $2,700,000 of for the fourth quarter and roughly $10,500,000 for the full year of 2018. I also expect depreciation of roughly $3,000,000 per quarter in 2019, and CapEx of $11,000,000 for next year. 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 at this point in time and our actual results could differ materially from what I'm about to review. To provide our investors and analysts additional transparency during this accounting transition, We are also providing financial outlook as if we were still under ASC 605 as well as ASC 606. During this transition period, which ends in 2018. Please note that the presentation under ASC 605 is not a substitute for the new ASC 606 revenue recognition standard under GAAP. Future revenue under ASC 606 will be volatile from period to period due to the timing and structure of our licensing arrangements.
We will continue to focus on leveraging our vast patent portfolio to maximize the value for our business as well as to provide the best economic structure for our customers. To offer additional transparency, we've also been providing information on licensing billings, which is an operational metric that reflects amount invoice to our licensing customers during the period adjusted for certain differences. The differences between licensing billings and royalty revenue under ASC 605 are primarily related to timing, as we don't always recognize revenue in the same quarter, we bill our customers. As you've seen, the supplemental information we provided on Slide 16 of our earnings deck. On an annual basis, licensing billings closely correlates with what we reported as royalty revenue under ASC 605 given this timing lag.
We'll continue to provide licensing billings as another operational metric to help our investors understand the underlying performance of our company. With that said, under the new ASC 606 revenue standard, we expect revenue in the 4th quarter between $56,000,000 62,000,000 Under the ASC 605 revenue standard, we expect revenue in the 4th quarter would be between $99,000,000 105,000,000 Excluding the impact of the Lighting vision, this is up 4% year over year. As a reminder, our ability to meet our financial commitment on a quarterly basis is heavily dependent on our ability to continue to review, renew our licensing agreements on a timely basis. We typically have multiple partners coming up for renewal each quarter and not closing these on schedule could cause us to materially miss our financial commitments for the quarter. We expect Q4 non GAAP total operating expenses, which includes COGS to be between $65,000,000 $61,000,000, down from Q3 spend due to our cost controls.
Over the course of 2018, we kept operating expenses roughly flat as revenue grows, providing leverage to our financial model. I expect total operating expenses, which include COGS related to our buffer chip business to grow through 2019 as we ship more products. We continue to target $35,000,000 to $40,000,000 in buffer chip revenue in 2018 and could see this business grow to $50,000,000 to $70,000,000 in 20.19. Under the new 606 revenue standard, non GAAP operating results for the fourth quarter is expected to be between a loss of $9,000,000 and income of 1,000,000. Under the ASC 605 revenue standard, non GAAP operating income for the fourth quarter is expected to be between $34,000,000 $82,000,000 $44,000,000.
For non GAAP interest and other income and expense, we expect roughly $5,000,000 income for ASC 606 and $1,400,000 expense under ASC 605. This includes $800,000 of interest expense related to the notes due in 2023. Based on the new tax legislation passed at the end of December, we expect our pro form a tax rate to drop to roughly 24%, a 24% higher than the new statutory rate of 21 percent, primarily due to higher tax rates in our foreign jurisdictions. As a reminder, we paid roughly $20,000,000 of cash taxes each year, driven primarily by our licensing agreements with our partners in Korea. Under ASC 606 and based on the 24% tax rate, we expect GAAP taxes between a benefit of a 1,000,000 and a tax of 1.4 in Q4.
We expect our Q4 share count to be roughly 108,000,000 shares the 8,000,000 basic shares outstanding and 110,000,000 fully diluted shares. This leads you to between a non GAAP loss per share of $0.03 and the non GAAP earnings per share of $0.04 for the quarter. Under ASC 605 using the same assumptions for operating expenses, $8,000,000 to $10,000,000 for taxes and $110,000,000 fully diluted share count. We would expect between 25 and $32,000,000 of non GAAP net income and between $0.23 $0.29 of non GAAP earnings per share for the quarter. While we do not issue annual agreements, which impacts our 2019 revenue.
We expect the growth we see in our product programs to offset these structural step downs. However, given the structure of these agreements and what we're seeing from a macroeconomic perspective, we expect to see roughly flat revenue year over year. As our payments and ticketing business is roughly breakeven, I do not expect any changes to overall profit as we explore strategic options in the future. Though operating margins would improve significantly. Through our continued cost management, we also expect roughly flat earnings in 2019, as we maintain our commitment to earnings and cash flow and continue to invest in our product programs, which are growing nicely.
Let me finish with a summary on slide 10. We are proud of the solid performance by our team and the progress we continue to make against our strategic initiatives. While we understand that the adoption of ASC 606 adds a level of complexity to our financial reporting, it's important to reiterate that the underlying financial strength of our business remains strong. In closing, we are systematically improving our operational performance while rolling out compelling product offerings and gaining traction with our customers. We continue to generate solid cash from operations and remain very well positioned for continued success as we close the year and head to 2019.
With that, I'll turn
Thank you. Your first question comes from the line of Gary Mobley from Benchmark. Gary, your line is now open.
Hi guys. Thanks for taking my question. Congrats on the full appointment loop. I want to start with sort of dissecting revenue for fiscal year 'eighteen with revenue, just over $400,000,000, memory, I'm assuming be $305,000,000 to $310,000,000 for the year, contracting out roughly $50,000,000 in cores and $37,500,000 in buffer chip revenue. It looks like your patent licensing is somewhere around, what, 220,000,000 dollars, $220,000,000
Hi, Gary. Thanks very much for the question. And I think, Luca, appreciate your congratulations. I think your overall forecast for a member is roughly correct. The core number for us that I typically talk about roughly $50,000,000 includes not just our our memory cores, but our security cores as well.
So I think you'd see maybe that core number would be slightly lower than what you talked about. Patents could be slightly higher. But I think the forecast you had of memory being between $3.05 $3.10 for the year seems about right.
Okay. Well, those are kind of setting up the main question. That is really, what are the puts and takes on the patent licensing side? I think in the recent comments you made, you mentioned some step down, which may represent a delta of about $15,000,000 or so And, I know you've just gone through a wave of license renewals. So all factors considered, how do you see that business, patent licensing trending, long term?
I think you've mentioned flattish, but what about for next year, 2019?
Yes. So, Gary, that's a great question. And as I've mentioned publicly, and I think this has been disclosed in some of our larger agreements, We have certain customers who have contractual step downs just in terms of their licensing. So one particular has step down about $4,000,000 per quarter, but there's a few others as well as I think our partners try to manage their cash flow and what they thought was going to happen with our industry. What we've talked about historically is that the backbone of our business, which is, have licensing in our cores, stays roughly flat.
So I think that does come down a bit for us in 2019. Hence, the muted outlook that I talked about a few moments ago for 2019, But what I'd expect to see is that you'd continue to have product revenue that would grow and that would offset some of that licensing step downs that we have structurally. So specifically, we've seen very good success in our core business and we're very pleased that we're meeting our commitments this year from the buffer business as well.
Okay. And just to change gears on the to the Rambus security side of the business, I'm curious to sort of get into the considerations for possibly selling this business. Was this this contemplation, was it driven by some of the approaching Rambus to buy it, or was it a function of some manager transitions? I know Ron was putting a lot of time and effort into this business group. And Luke, I know your lineages from the memory side of the business, So, does that play into it as well?
Hi, Gary. Luke, as far as I think that we are still very excited by the progress and opportunities that we have in the payment and ticketing programs. And we continue to see market traction for tokenization in a growing number of verticals. But these businesses are far from our foundation in semiconductor as much as our embedded security is very close to our core. We have about 70% overlap on our customer base.
We have the same delivery mechanisms The structure of payments and ticketing is going further and further away from our core. But their performance is really, really good. So with that, we made the decision to explore strategic options to maximize their market opportunity and success But we are in the early stages and it can take any form at this point in time. We just want to give them the opportunity to continue on their growth path which is diverging from the growth path we own for our core business, including the embedded security, which is very close to our core.
Okay. I guess the main question that may come up is then what becomes the growth driver for Rambus with the buffer chip business, demonstrating revenue delta $20,000,000 to $30,000,000 annually. And it's a fairly finite surveyable market there, and you can only expect so much market share. But and so therefore, what drives the growth from this point forward to the business security side of the business?
I think we see tremendous opportunities in the embedded security space. You saw the recent press releases about what happened with the chip on the microchip board. I think it's just a reminder everyone that unveiling security is becoming critical to the industry. So that's where we're going to invest. We have a very broad I see the broadest lineup of off the shelf products to offer today in embedded security and that's never been the case before.
And we make the consumption of what we offer in embedded security more, more, more easily consumable, if you wish. We're moving our course and very close to a rich side architecture, which makes them broader and more formidable and are delivering mechanism of team in silicon is proven now. We've had 5,000,000,000 chips using that technology and we're expanding our customer base. So between the fact that we are expanding our product portfolio, We're making the offering more easily consumable by customer and we are approaching the similar set of customers with a similar business model makes us confident that we can grow in that area. And again, I would say that we are very pleased with the performance of ticketing and payment.
They're just diverging and going into different markets. And as we look at strategic options for them, this will allow us to also focus better on what we do best. And that's why we're confident in further growth in the embedded security space.
Your next question comes from the line of Sidney Ho from Deutsche Bank. Sydney, your line is now open.
Hi, guys. This is Melissa on behalf of Sydney. Congrats, Luke, on getting the official role. I'm gonna keep it high level up first, but I need you guys could remind us or I guess clarify which parts of the business you see as a stable recurring set of revenues and then Where do you see the more incremental revenues, but less recurring quarter on quarter?
Sure. Hi, Melissa. This is Rahul. Let me see if I can help. Certainly one of the things that's very attractive about Rambus is we have a long term licensing revenue, which is very fixed, very stable, very predictable.
So ironically, the one thing that makes us very attractive, I think from one of the things that very attractive from an investment perspective is also what causes some confusion on 605606. So just for a base business, as I talked about, I think that that backbone of licensing and cores is generally roughly about $300,000,000 a year. As I mentioned previously, not just on this call, but in prior quarters, we have some structural step downs on the licensing side. Which I think will be offset I talked about on the core side, as well as on the Doctor. Chip side, as well as in other places in terms of embedded security.
And I think that's where you'll start to really see some leverage in our model.
Okay. That's helpful. And then one other question. I know you guys are tied to the service market. Little bit with your chipsets.
And I was hoping you could give some color. There's been obviously really high growth in the market recently. And as of this quarter, if you started to wonder when it's going to start slowing down. So I guess my question is, how do you guys see that dynamic playing out for your business if the market were slow down? And then also, with the transition to new generations of server products, how are you guys looking at that and testing your business as well?
Hi, this is Jade. We still have a relatively small share in the market for buffer chip. So just by that fact, we see growth going forward. As you could see from the last few quarters, we've systematically increased our revenue from quarter to quarter in buffer sheet and we see that trend continuing for us. And the reason we see that trend continuing for us is that we're also tracking the progress we make in qualifications with end customers and the number of qualifications we have for our chipsets going forward in the current platforms and the future platforms keeps increasing quarter over quarter.
So although we can may see this macro movements in the market, we are confident with our growth in our buffer chip business.
Thank you. Your next question comes from the line of Suji Desilva from ROTH Capital. Suji, your line is now open.
Hi, Luke. Congratulations on the new official role. Hi, Rahul. So, following up on the last question in terms of memory buffer, how much of the thanks for the guidance in 2019 as well as 2018. How much of that growth is coming from existing designs that will ramp to more full volume versus is, newer designs supporting the incremental revenue coming to production, supporting the revenue?
I would say it's a mix. I think in the next 6 to 8 months, we see this both going from existing designs. As you know, there's a new platform, the new existing market on a regular basis and we track our design wins with those new platforms. So we're very confident in our current designs generating growth. In the first half of next year.
And we also confident with the second half of the year, given the traction we have with those customers. In the future, we, as you know, we're also investing in DDR5 We have a need in that space. We believe with offering both the DD and oxygen chip. We engaged very early with the ecosystem, which gives us a head start in the market. History has shown that first time to market typically translates in higher market share.
So my view is we've caught up on the DDR4 generation. As the rollout of new processors happen, we have more and more design wins that creates the growth in DDR4 And I think we have a leading position in DDR5.
So to be clear on the new platforms coming out, your DDR4 design win activity is up versus the prior platform?
Is that? Absolutely, absolutely. They are up and we were earlier in the designs than we used to be in the past. So it gives us a lot of confidence.
Good. That's helpful. And then on
the redeployment, I guess, in the security business, are there any R and D assets or personnel being redeployed? And if so, to what areas are some of the investments being focused on? And maybe you could talk about opportunity for growth, inorganic opportunities you might be considering versus the organic growth that's been talked about in Q And A thus far?
Sure. So, it's Raul. So there's no assets that are being redeployed. We're still fully investing in these businesses and think we're that they have a very bright future ahead of them. Certainly, we continue to invest to them from a people perspective, from a resource perspective, from a market awareness perspective as well.
I don't know if you had a chance to look at some of the materials we recently published in terms of a launch of Vaultify Trade, but really pulling together a lot of these very key portions of our tokenization business and an exciting new market So there's nothing from a refocused perspective in terms of those resources. However, what this change does allow us to do is operationally go back and focus on that core semiconductor business that we've had in the past. And as Lou mentioned earlier, I think 2 thirds or 70% of our customers on the security core side are the same as our customers on the memory core side. And as we just look to the go to market for that business, it's certainly very different than what we're seeing some more engagements for on the security side in terms of tokenization. It's certainly in the business the payments and ticketing business, we are continuing to invest in those businesses that could have bright futures ahead of them.
And then Raul, perhaps you can talk on inorganic opportunities versus the organic opportunities you see in front of you?
Yes, we've actually spent a lot of energy internally just as part of Luke coming in reorganizing to where we have even more focus in terms of potential inorganic opportunities as well. I think that we have have branded appetites for looking at things that would make sense to us that would help support those core businesses that we have. I think there's many opportunities we look at on Hana daily basis. But what we look for is something that is going to be the right fit for our company, something that we can help grow and be successful as part of Lambda.
Okay. And Luke, thanks and Luke, good luck in the new role.
Your next question comes from the line of Mark Latas from Jefferies. Mark, your line is now open.
Congrats on the appointment loop. My first question is, is it the change in management that triggered kind of an audit in the strategy? And I'm wondering if there's potentially other changes from the previous track you guys were on from here?
No, not necessarily at this point in time. Sure.
And I can help bridge that gap a bit, Mark, as I've said to the company for not as long as Luke has, but certainly been part of this conversation. For some time, we've been talking about making sure that we continue to invest in portfolios that are part of that core and part of where we continue to have traction with our customers. I think if you go back to even a year and a half ago, and I apologize the competitive conference in January of last year. What we talked about is, hey, in the next 18 months, we'll know which ones of these investments are working and which ones haven't And if you look at our performance over the last 18 months or so, that's what you've seen, right? What you've seen is that us continue to focus on areas where we have customer traction, where we have growth, where we're being successful, and then reducing investment from our company in areas where we haven't had that traction.
So this is something that we've been doing fairly consistently over the last year and a half or so. And one of the things that I think is easy to lose sight of is really just our improved financial performance because what you're seeing is a relatively stable top line as we refocus into areas where we have this expertise and we're being successful. But what you're seeing is a dramatically better bottom line. I think if you look at the midpoint of our guidance for 2018, that comes out to about $0.91 of earnings for the year, up pretty significantly from last year. And we continue then to show better earnings.
We also continue to show strong cash flow. Last year, we had about $117,000,000 of cash from operations. We had a lot of collections activity that was pretty strong for us last quarter. I don't know if we'll get that that high. But I think we could be somewhere in the $90,000,000 to $100,000,000 range against this year.
And certainly that cash flow machine and engine just continues. So that's a relatively long answer to your question, but I think this is part of our company continuing to focus in areas where we're going to be successful. And I think today's announcement, both with Luke as well as our announcement on payments and ticketing is just part of that evolution.
But that's helpful. Thank you. And a follow-up if I may. Can you share with us the size and profitability of those businesses?
So as I mentioned in prepared remarks, I mean, that business is roughly breakeven. It's a high growth business. So we continue to invest in it to continue to grow from a top line perspective. And from a 2019 perspective, And I think we expected those businesses to be somewhere between $35,000,000 $40,000,000 of revenue for us for 2019. So what I'd expect is that as we identify really what these options are for the business, it won't necessarily impact us from a bottom line perspective, but I would expect the company to them have dramatic improvements in terms of operating margin because that business is roughly breakeven as we're investing in it.
Got you. That's helpful. And last question, if I may. DDR5? When do you expect that to ramp in volume?
So we expect to see sample in 2019 and ramping volume towards the end of 2020
At this time, there are no further questions. This concludes today's question and answer session. I would now like to turn the conference back over to the
across the company. There's tremendous opportunity ahead, and I look forward to leading Randas to its next phase of success. So thank you everyone for your continued interest and have a good day.
Thank you. This concludes today's conference. You may now disconnect.