Welcome to the Lambda Second Quarter And Fiscal Year 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. At the conclusion of our prepared remarks, As a reminder, this conference call is being recorded. Would now like to turn the conference over to Rahul Mastor, Chief Financial Officer. You may begin your conference.
Thank you, Sonia, and welcome to the Ramba Second Quarter 2018 Results Conference Call. I am Raul Mather, CFO, and on the call with me today is Luke Sarafen, 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 You can hear the replay by dialing the toll free number and then entering ID number 3034809 when you hear the prompt. In addition, we are simultaneously webcasting this call and along with the audio, we're webcasting slides that we will reference during portion of today's call.
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 regarding our financial guidance for future periods including Q3 2018 full year 2018, prospects, product strategies, timing of expected product launches, demand for existing and newly acquired technologies, in our financial reporting due to our adoption of new revenue recognition standard that started in Q1 twenty eighteen amongst other states. 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 statements.
In an effort to provide greater clarity on financials, we're 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 Luc to provide an overview of the quarter. Luke.
Thanks, Rahul, and good afternoon, everyone. I've met many of you at our annual financial analyst days and investor conferences. Before we begin, I wanted to take a moment to briefly introduce myself. I joined Rambus 5 years ago as the leader of our worldwide sales organization and then became General Manager of our Memory And Interface division. Now as the Interim CEO, I'm excited to take on the role of guiding the company.
With that, I'll turn now to the results for the quarter. We delivered a solid second quarter making progress across all of our businesses as we continue to execute on strategy and maintain our growth trajectory. From a financial perspective, our performance was in line with our expectations. We delivered GAAP revenues of $56,500,000. For reference, our 2nd quarter revenue would have been $98,800,000 under the prior ASC 605 accounting standard.
If we compare under the same accounting standard, excluding the impact of our lighting division, This equates to a 9% increase year over year. Overall, we performed well with strong execution in our product group and continued technology leadership on strategic programs. Our licensing program remains strong with a record number of deals closed in Q2, including IBM And Social Next and continued growth of our IP portfolio fueled by collaboration with our industry partners. For the Memory And Interface division, Q2 was a positive quarter with ongoing broad OEM and cloud customer qualifications in chips and record first half revenue for IP cores. Our DDR4 memory buffer chip business continues to grow with steady gains in market share and revenue growth.
We hit our financial target of $6,000,000 in Q1 and and continue to execute to remain on track to hit our target of $35,000,000 to $40,000,000 for the year The next generation DDR5 Memory buffer chips. We maintain our leadership position as the 1st and only supplier with working silicon support the top end speeds for both the RCD and DB chips. We are leveraging our head start in product development and continue to have strong collaboration with the memory vendors as well as the broader ecosystem to bring high quality DDR5 solutions to market. We continue our leadership in high speed IP course with record revenue for the first half of twenty eighteen and multiple new customer wins for GDDR6 and HBM2 on advanced process nodes. As the first IP supplier to offer GDDR65, we continue to see traction from customers across multiple high performance applications, including AI, automotive, and networking.
We continue to collaborate with our ecosystem partners to expand our foundry access and gain traction in next generation technologies maintaining our market leadership in leading edge process nodes and performance capabilities, while feeding our best in class IP portfolio. Turning now to our security division, which consists of our cryptographic, ticketing and payment product groups, We continue to gain commercial traction on our product programs and build upon our global leadership position in embedded security and tokenization. As we discussed previously, early in the quarter, our cryptographic product group launched the crypto manager root of trust to enable security by design with a secure core embedded directly in the hardware. The crypto manager root of trust built upon our 1st generation crypto manager security engine by adding flexible and secure processing capabilities within the trust boundary of the core. Featuring a secure risk sized CPU custom designed by our security experts, the core help to address WU wide reaching CPU vulnerabilities like meltdown and Spector in a broad range of applications, including IoT, networking and automotive.
As the importance of device level security continues to grow in multiple segments like IoT and networking, We are seeing rapidly increasing interest in the ability and in the field. With nearly 5,000,000,000 devices provisioned to date by our crypto manager infrastructure, Rambus remains the most mature provider of device level provisioning solutions and expects to continue to see steady growth in demand and customer traction. As we look now to our ticketing and payment product groups, Q2 saw the announcement of new customers for each group. As a market leader in smart ticketing solutions for trains and bus operators across the UK, we announced the implementation of our smart ticketing software with West Mid We are also pleased to report passengers on Scotland's national rail network. With that, Propswire's passengers will be the first to be able to use their smartphones to securely buy, download and use the tickets to travel on rail in the UK.
For our payments product group, we also announced last week that we have been selected by Kohl's, one of Australia's largest retail groups to secure a digital payment solution. Featuring our unified payment platforms, Kohl's will be leveraged our bank proven tokenization solution for retail to enhance the customer buying journey and provide a hassle free omnichannel payment service. Last, but certainly not least, is our emerging solutions division, which focuses on advanced research, innovation, and IP development. Through our ongoing partnerships with industry leaders like Microsoft and IBM, we continue to build our portfolio of advanced memory IP and develop technologies that help move the industry forward. Both our cold and high grid memory programs continue to progress with each in varying stages of prototype development.
By collaborating on research and development for the future memory architectures, which includes a growing list of ecosystem partners, we are also able to leverage our security customers. In closing, Q2 was a strong quarter that continued to reinforce our confidence in our strategy and execution to plan. With that, I 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 line with our revenue and EPS expectations. As you know, we've chosen to adopt a new accounting standard ASC 606, using the modified retrospective method, which does not restate prior periods, but rather runs a cumulative effect of the adoption through retained earnings as a beginning balance sheet adjustment.
As a result, any comparison between second 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'll continue to present our results under both ASC 606 and ASC 605 through this transition period. This way we can have a meaningful discussion regarding the performance of our business instead of focusing on accounting changes. Under the new accounting standard ASC 606, we delivered revenue of $56,500,000.
Under ASC 605, we would have delivered revenue of $98,800,000. Under ASC 606, we delivered non GAAP diluted loss per share of $0.03. Under ASC 605, we would have delivered non GAAP earnings per share of $0.21 just above the midpoint of our expected range. 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 with a focus on Revenue for the second quarter was $56,500,000 under the new revenue accounting standard, higher than our expectations due to the structure of license agreements signed within the quarter. Revenue would have been $98,800,000 under ASC 605 at the high end of our guidance range.
Year over year, excluding the lighting business we shut down in Q1, our business was up 9%. As we've mentioned previously, the new revenue recognition standard has a 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 and it's core to our initiatives in both our memory and security businesses. Going into additional detail under ASC 605, our memory and interface revenue would have been 73,300,000 and our security business revenue would have been $25,500,000. We continue to gain commercial traction on our security product program and build upon our global leadership position in tokenization and embedded security.
As we develop our business, we've grown the size of the opportunities in our pipeline creating a different revenue profile than we previously anticipated. Specifically, some of the revenue we projected for 2018 will now be part of larger agreements structure over a longer period of time. As a result, we now expect security revenue in 2018 to remain roughly flat year over year However, we remain confident in our ability to grow this business long term and Let me walk you on a non GAAP basis. Cost of revenue plus operating expenses were what we refer to as total operating expenses for the quarter came in at $66,800,000. We ended the quarter with headcount of 7.91, up from $7.71 in the previous quarter.
Over the course of 2018, we expect to invest in headcount to support our growth initiatives in our memory and security businesses. Revenue and operating expenses under ASC 605 led to operating income of $32,000,000. We recorded $7,000,000 of interest income under ASC 606 related to the significant financing component of license agreements for which we have not yet received payment but recognized revenue under the new accounting standard. We incurred $800,000 of interest expense, primarily related to the convertible notes we issued in Q4. This was offset by incremental interest income related to a higher return on our cash portfolio.
After adjusting for non cash interest expense on our convertible notes, this resulted in non GAAP interest and other expense for the quarter of $700,000, up from Q1. Using an assumed flat rate of 24% for non GAAP pretax income, non GAAP net income for the quarter would have been $23,800,000 under ASC 605 or $0.21 a share, just above the midpoint of our guidance. Now let me turn to the balance sheet details on Slide 8. We are very pleased with the strength of our balance sheet. Cash, cash equivalents and marketable securities totaled $298,300,000 up 7,100,000 from the previous quarter due primarily to proceeds from employee stock plans of 4,800,000 and cash from operations of 3,600,000.
We expect to maintain our ability to generate cash from operations in 2018. This will be an important metric to monitor as we adopted ASC 606 We expect cash to go down As a result of adopting ASC 606, at the end of Q2, we had contract assets worth $751,000,000, which reflects the net present value of unbilled AR related to licensing arrangements for which the company has no future performance obligations. 2nd quarter CapEx was $3,600,000 and depreciation was $2,600,000. Looking forward, I expect roughly $3,000,000 of CapEx for the 3rd quarter and roughly or $11,000,000 for the full year of 2018. I also expect depreciation of roughly $3,000,000 per quarter in 2018.
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 third quarter on Slide 9. As a reminder, our forward looking guidance reflects our best estimates 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're also providing financial outlook as if we were still under ASC 605 as well as ASC 606 during this transition period. 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 amounts of invoice to our licensing customers during the period adjusted for certain differences. The differences between licensing billing and royalty revenue under ASC 605 are primarily related to timing as we don't always recognize the revenue at the same quarter we bill our customers. As you see in the supplemental information we provided on Slide six 18 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 third quarter between $45,000,000 $51,000,000. Under the ASC 605 revenue standard, we expect revenue in the third quarter would be between $97,000,000 $103,000,000. Excluding the impact of the Lighting division, this was up 5% year over year.
We expect Q3 non GAAP total operating expenses, which includes COGS, to be between $68,500,000 $64,500,000 in line with Q2 spend. Over the course of 2018, expect we will keep 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 the year as we ship more product. We continue to target $35,000,000 to $40,000,000 in buffer chip revenue in 2018. Under the new 606 revenue standard, non GAAP operating loss for the 3rd quarter is expected to be between $23,500,000 $13,500,000.
Under the ASC 605 revenue standard, non GAAP operating income for the quarter is expected to be between roughly $5,600,000 income for ASC 606 and a $1,400,000 expense under ASC 605. This includes $800,000 of interest related to the notes due in 2023 and $200,000 related to the remaining notes due in 2018, which we expect to pay off in August. 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%. The 24% is higher than the new 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.
Under ASC 606 and based on a 24 percent tax rate, we expect a GAAP benefit between $4,000,000 $2,000,000 from taxes in Q3. We expect our Q3 share count to be roughly 108,000,000 basic shares outstanding. This leads you to between $0.13 $6 of non GAAP loss per share for the quarter. Under the ASC 605 using the same assumptions for operating expenses $7,000,000 to $9,000,000 for taxes $111,000,000 fully diluted share count. We would expect between $20,600,000 $28,200,000 of non GAAP net income and between $0.1925 of non GAAP earnings per share for the quarter.
Looking ahead, while we do not issue annual guidance, as we look at consensus estimates from our sell side analysts, we remain comfortable with current quarterly consensus estimates for growth and earnings for Q4 2018 as reported under ASC 605 prior to the new revenue recognition rules. 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 has a level of complexity to our financial reporting, it's important to reiterate that the underlying financial strength of our business remains strong. We continue to generate solid cash from operations and remain very focused for continued success as we head into the rest of 2018.
With that, I'll turn the call back over to Sonia to begin Q And A. Could we please have our first question?
Thank you, Your first question comes from the line of Sidney Ho from Deutsche Bank. Your line is open.
Hi guys. This is Melissa on behalf of Sydney. Thank you for letting us a question. I was wondering if you could provide some color on what the customer adoption is looking like in your security division. So across cryptography payments and ticketing?
And how can we think about those contracts contributing to revenue this year? I know you kind of guided it to be more Waddish. If I understood that correctly, thank you.
Thank you. This is Luke. So first of all, last week, we announced that our unified payment platform that was selected by Kohl's in Australia, for the digital payments. And this week, we announced that Scotts Reyes has adopted our ticketing solutions. So we do see commercial traction across the board with our security product programs.
That build upon our leadership position in tokenization and embedded security. But as we develop the business, what we see is that we have grown increase in our pipeline, creating a different revenue profile than we previously anticipated, specifically some of the revenue we projected for 2018 will now be part of larger agreements structured over a longer period of time. So as a result, we now expect security revenue in 2018 to remain roughly flat year over year. However, we remain confident in our ability to grow this business long term I'm excited by the growing number of engagements and customer wins.
Okay, got it. Thank you. And I guess as my follow-up, I know you guys have said that Rams remains committed to its previous business strategy, despite the management transition, but given that you reevaluated your lighting business, a few quarters ago. Is it fair to say you'll continue to sort of reevaluate your portfolio of product offerings going forward? Via, both acquisitions and divestitures?
Thank you.
Thank you. Yes, so the first thing I would say is that through the transition. I noticed we have a strong, very collaborative management team. And I'm really pleased with the teamwork that we have with this team. I would say that the transition has given us an opportunity to look at the composition of our portfolio and to continue to refine the portfolio as we focus on growth.
I think that will help us accelerate and improve the quality and the speed of the decisions we make. As you said, in the past quarters, you've seen us reduce investments in areas where we haven't seen customer traction like the smart data accelerator the Imaging business and our lighting division. And I think you'll see us continue to accelerate our decision making in this regard. And we'll focus on areas of growth organically and inorganically as well.
Your next question comes from the line of Gary Wobley from Benchmark. Your line is open.
Yes. Afternoon. Welcome to the call, Luca. I know we've met in the past, but, just with the welcome to the call. Raul, I noticed you mentioned that you've with respect to the fourth quarter of 2018, you expressed comfort in the 4th quarter revenue estimate versus the full year 2018 consensus.
And so therefore, I'm assuming you're expecting seasonal sequential uptick in the fourth quarter. And given the upside that you showed in the second quarter and as you're guiding to in the third quarter, Therefore, does that put the full year number somewhere in the neighborhood of $404,000,000 in billings?
Hi, Gary. Thanks for your question. Let me make sure I look at the same numbers that you do. I think what we did today in terms of guidance perspective. And again, I'm talking about ASC 605, which I think is the numbers you're talking about, is that, the midpoint of our range for Q3 was $100,000,000 in revenue, which is up slightly from Q2.
Remember, excluding the Lighting division, our revenue in Q2 was roughly flat from Q1 when normally it's down 5%. So it does kind of show that underlying growth rate of our business. What I talked about from a Q4 perspective is expressing comfort with consensus. So I think consensus estimates is about 102, from a revenue perspective. And so if I at maybe $100,000,000 for us in Q3.
And if you had the consensus of 1 or 2 in Q4, I think that gets you closer to kind of a 401 for 2018. But again, we guide 1 quarter at a time. So I gave you kind of top line and bottom line for Q3 and expressed comfort for top line and then consensus EPS also under 605 for Q4. Hopefully, that's helpful.
Yeah. I know we're just splitting hairs here. You mentioned record licensing deal activity in the second quarter. Can you give us some color as to where you saw that record licensing activity achieved or generated? Was it on the patent side?
Was it on the core side? Or was it on the security side of the business or all the above?
Thanks, Gary, and thanks for the introduction words. It's actually across the board. Although we are covered by NDAs with our customers, I would say that we were able to close contracts on the Patent Licensing side, on the IP cores and on the security side. So it's a combination of all of those.
Gary, if I can add a little more color, I think it was part of our press release where the first half of the year for us from a core perspective was a record for us. And even if you look at the divisional trends, this is something I said last quarter, because that it's hard to look at any one of our divisions on a quarter to quarter basis just because of how those deals could be structured. But we absolutely saw strength across the board. And you see that just in the growth quarter over quarter on the security side as well. Hopefully that helps answer your question.
Sure, sure. My last question relates to the timing of DDR5 buffer chip revenue. I know it's your belief that you're first to market with working silicon. And, I'm just wondering if you can give us a sense of of how far the lead you have compared to your competitors and having working silicon, how that can translate into and to share as we transition to DDR5 and when you think the market opportunity in dollar terms evolves for DDR5.
Thanks, Gary. We see DDR5 ramping in volume in 2020. So it's some time away from us. The lead, in DDR5 sampling is important because it allows us to work early with the ecosystem partners that are part of these DDR5 launch. So the memory partners and the professor partners or have to develop the ecosystem around these DDR5 technologies and to verify that we were the first to introduce our chip was very important from that standpoint.
Of course, our competitors also introduced products, but that's going to be a race. Between now and the ramp in 2020. But having a head start and every we have new samples being able to improve our relationship and deepen our relationship with the ecosystem partners is really, really important in our ability to gain share when the product runs.
Your next question comes from the line of Atif Malik from Citi. Your line is open.
This is Amanda on for Atif. Can you give us a quick update on where you stand with the CEO transition, Luke? I know you're sort of in an interim role at this point. And and congratulations on the new role. But can we just talk a little bit about how the transition is going, how the the search for a permanent CEO is at this point?
Thanks.
Sure. So let me talk a little bit about that, Amanda. This is Rahul. So let me just talk about what I've been authorized to say by our board. So the board has commenced on a comprehensive search process to identify and evaluate, internal as well as external candidates.
With an existence of a leading assistance, I should say, of an leading executive search firm. Frankly, as I look at our company today, we have a CEO. His name is Luke. So we are continuing to go run our business. In terms of timing, what I'll say is that we expect it will take several months to evaluate internal and external candidates and have full confidence that the board will conduct a deliberate and thoughtful process.
The benefit is that Luke has knowledge of our company's operations and has a strong relationship, not just with the internal team, but also with our customers. So we're continuing to move forward as before on our strategic and financial objectives. I think you heard Luke just mentioned now of having an opportunity to accelerate some of the resource decisions we've already been making. I think the only difference from a timing perspective is that this change has caused a bit of a short delay in our annual strategic planning cycle. So as you're aware, we typically present our strategic plan to our board in the middle of Q3 and then to our investors in an Analyst Day at the end of Q3.
So with a bit of delay, that means our Analyst Day may be pushed into Q4 instead. Let me also say some other words that have been authorized to say just about the transition. The termination followed an incident from earlier this year that was unrelated to the company's strategy financial or operational performance. Once our board became aware of the incident, they hired an independent outside investigator to conduct a thorough examination, The board also gave Doctor. Black an opportunity to present his side directly to the board.
After evaluating the information presented to them, the board determined Doctor. Black conduct fell short of the company's standards and terminated his employment. And in connection with his termination of employment, Doctor. Black resigned from his position as a board director. As the announcement we issued indicated, this decision had nothing to do with our strategy, financials, or operations, and our board acted when it had the information it needed to make a decision.
But just to come back to what I said earlier, we're running our company. We have a CEO in place and we're moving forward.
Great. Thank you for all that information. Very helpful. Another question that I have is sort of on the accounting change. And is there any change in how you're interacting with your licensing customers in terms of renewing contracts that are up or signing new licensing customers is there a different outlook in in how you are building out those contracts going forward in order to have it more simplified, I guess, revenue recognition process?
Amanda, it's a great question and something that we've spent a lot of time on internally. What I'll say is that we've been unequivocal that we will not give up long term value for our company in order to try to resolve a change in accounting standard. What we have been doing is looking at different contract terms that would allow us to take revenue ratably under ASC 606, much as we have had under ASC 605. But of course, we'll continue to do what's in the best interest of partners as well as our company going forward. I think that's also one of the reasons that you will continue to see variability in terms of how we record our revenue under ASC 606.
For example, Q2 under 606 was certainly above the guidance range that we provided earlier, but that just has to do with the timing of contracts that we sign. That's why I'm also trying to give you 605 as well as licensing billings so that you have all the information you need to read the underlying health of our company.
And then on a related note to that, with 606, do you see more of an impact if there are, the leads and no transitions at customers on the memory side, is that something that would impact being above or below guidance?
So let me make sure I understand your question, Amanda. Could you ask that one again? Are you saying if there's delays in transition to new memories from our customers?
Yes. Is that what would impact the the up or down above guidance range?
Got you. So most of the transitions we're talking about, right, have to do with the adoption of DDR4 and DDR5. And as Luke mentioned, We already have samples for what we think are going to be the standards for DDR5. He has certainly much more customer intimacy in terms of how those start to ramp, but I wouldn't be surprised to see that ramp starting in 2020. Now that's for our buffer chip revenue and the revenue recognition for the chip revenue is actually pretty similar between ASC 605 and ASC 606.
Where you start to see differences is in licensing agreements because under ASC 606, If there's no performance obligation in the contract, then we recognize the entire value of the deal, the moment we sign it. I think if I can see a benefit in ASC 606, it's at what you see in my balance sheet or you should see in our balance sheet is $751,000,000 of, of, present value of a contract asset for you know, something that we have no performance obligations. So I look at that as almost $7 per share is in our stock for something for which we have no performance obligation in order to go collect. I think from a quarter to quarter basis, what's really going to term and whether or not we'll meet our guidance from a 606 and 605 is just signing contracts. And I think what we've showed pretty consistently is we will continue to do what's the best interest in our company over the long term.
I'm not going to give the way value for our company in order to just to make a quarter if it's a material difference for us from a revenue and cash flow and precedent perspective.
Your next question comes from the line of Mark Lipestas from Jefferies. Your line is open.
Hi. Thanks for taking my questions. And Rahul, thanks also for all the detail on on the 605606 accounting standards. The first question on the the memory buffer business, If you listen to the earnings calls of a lot of the hyperscale, cloud players, you hear them talking about taking their forecast up. And I'm wondering if, if this is, is this filtering down to you guys?
Are you seeing any better visibility in the demand profile or any conversations with your customers qualitatively about, what the demand environment is like or what what orders could be like, that might be above and beyond what you have been talking about, in the $35,000,000, $40,000,000 range. That's the first question.
Sure. I'll ask Luke just to talk about in terms of the demand profile. I think one of the benefits for us is particularly in the memory market is, you know, years ago, we signed long term very possible, stable, predictable license agreements And that really allows us to, 1, just continue to invest in the future and what happens in the industry. I think the other benefit is exactly the second half of your question, Mark, is that by then engaging in a partnership allows us to then grow in other areas in some of these product areas, that we have both on the memory side as well as on the security side. So certainly our engagement with each of these customers is much broader.
I'll ask Luke to talk about what he's seeing in terms of the ramp for the buffer chip. I think is what you're asking for in terms of DDR4? Yes, thanks.
We do see great potential for our DDR4 ramped this year and next year. We do see those dynamics between the hyperscale data centers and the OEMs and the memory vendors. One of the focus we had over the last year is to be in direct contact with the end customers, the OEM, the hyperscale vendors so that
we can
track those, shifting demand And we believe that we are going to continue to grow this business this year and next year. Our footprint is really strong. As memory vendors introduce new memory types, and as the processor vendors introduce new versions of their processors. And as the demand shifts between the end customers, we stay close to that.
Fair enough. Thank you. On the GDDR6 PHY, product, where are where are you in the deployment cycle? Are you are are customers sampling this and, and and testing it, or are they putting this into production systems yet. And if if not yet, when might that happen?
So without breaking any and NDAs. We are engaged with customers as we speak, in the development and deployment of GDPR 6 IP into their products. It's an IP that's a as opposed to a buffer chip type of products, right?
So I
believe it's still a little bit early in terms of that adoption. Is that right? Yes. And I think you'll start to see some of the revenue growth probably starting in year related to that, not as much this year. I think some of these initiatives that we talk about, both on the memory side and security side, like the announcements that we had, earlier this week, that we've mentioned on security really help fuel our future growth.
Fair enough. On the and then on the the record number of licensing deals, that you signed this quarter, are are these some things that are a long time incoming, or are are these deals, that are conceived of and executed within the same quarter.
So very rarely are any of these deals conceived as an executed in terms of the first quarter? Typically what we have is we have, we have I should say dozens of different partners that are under a license mark. And what happens is those licenses usually ascend for a certain term. So what happens is that, usually about a year before the end of the term, we start engaging with our partner in terms of renewing that agreement The reason that we do have any seasonality in our business is just we just happen to have more agreements signed in Q2 than we do in other quarters. But I think overwhelmingly what you're seeing is for us to continue to renew at a very favorable rate What you're also seeing is that we are able to add new licensees as well.
So those are usually negotiations that are not in quarters, but usually longer sometimes, you know, 1 or 2 years in the making. And one of the things that's been really pleasing to see is that you've seen us be able to expand licensing from not just the DRAM industry, but also into broader memory or semi in terms of SOC at PGA. And you've also seen us be able to expand our footprint from a licensing perspective on the security side as well. So our licensing program goes very well and it's very strong. And between that and our core, as I expect licensing cores to be roughly flat and continue to serve as the backbone of our company.
Alright. This is very helpful. Thank you very much. That's all I had.
At this time, there are no further questions. This concludes the question and answer session. I would now like to turn the conference back over to the company.
So as you can see, we continue to demonstrate our leadership and execution across all of our products and deliver profitable growth across the company. Thank you for your continued interest and