Welcome to the Rambus 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, we will conduct a question and answer session. If you'd like to ask a question, you may press star one on your touchtone pad at any time. If anyone should require assistance during the conference, please press the star zero on your touchtone pad at any time. As a reminder, this conference call is being recorded. I would now like to turn the conference over to Rahul Mathur, Chief Financial Officer. You may begin your conference.
Thank you, Sonia, and welcome to the Rambus second quarter 2018 results conference call. I'm Rahul Mathur, CFO, and on the call with me today is Luc Seraphin, 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 855-859-2056. 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 5:00 P.M. Pacific Time.
Our discussion today will contain forward-looking statements regarding our financial guidance for future periods, including Q3 2018 and full year 2018, 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 new revenue recognition standard that started in Q1 2018, 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 statements.
In an effort to provide greater clarity on the 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 from the investor relations page under financial releases. The order of our call today will be as follows. Luc will start with an overview of the business. I will discuss our financial results, including the guidance we issued in today's press release, and then we will end with Q&A. I'll now turn the call over to Luc to provide an overview of the quarter. Luc?
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 five 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 $56.5 million. For reference, our second quarter revenue would've been $98.8 million 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 groups and continued technology leadership on strategic programs. Our licensing program remains strong with a record number of deals closed in Q2, including IBM and Socionext , 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 million in Q1 and $8 million in Q2, and continue to execute to remain on track to hit our target of $35 million-$40 million for the year. For next generation DDR5 memory buffer chips, we maintain our leadership position as the first 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 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 cores with record revenue for the first half of 2018 and multiple new customer wins for GDDR6 and HBM2 on advanced process nodes.
As the first IP supplier to offer a GDDR6 phy, 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 cryptography, 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 cryptography product group launched the CryptoManager Root of Trust to enable security by design with a secure core embedded directly in the hardware.
The CryptoManager Root of Trust builds upon our first-generation CryptoManager security engine by adding flexible and secure processing capabilities within the trust boundary of the core. Featuring a secure RISC-V CPU custom designed by our security experts, the core helps to address wide-reaching CPU vulnerabilities like Meltdown and Spectre 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 to securely provision those devices with unique and trusted keys and identities at manufacturing and in the field. With nearly 5 billion devices provisioned to date by our CryptoManager 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 U.K., we announced the implementation of our smart ticketing software with West Midlands. We are also pleased to report our Host Card Emulation or HCE Ticket Wallet service has been selected to bring mobile ticketing to passengers on Scotland's national rail network. With that, ScotRail passengers will be the first to be able to use their smartphones to securely buy, download, and use their tickets to travel on rail in the U.K. For our payments product group, we also announced last week that we have been selected by Coles, one of Australia's largest retail groups, to secure its digital payment solution.
Featuring a unified payment platform, Coles will be leverage our bank-proven tokenization solution for retail to enhance the customer buying journey and provide a hassle-free omni-channel payment service. Last, 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 code and hybrid 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 learnings to drive licensing and product engagements with our memory and 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 Rahul to discuss the quarterly financial results. Rahul?
Thanks, Luc. I'd like to begin with our financial results for the quarter. Let me start with some highlights on slide five. As Luc mentioned, we delivered solid financial results in line with our revenue and EPS expectations. As you know, we've chosen to adopt the new 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, 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 $56.5 million. Under ASC 605, we would have delivered revenue of $98.8 million. 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 memory and security.
Let me walk you through some revenue details on slide six. Revenue for the second quarter was $56.5 million 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 $98.8 million 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, is the foundation of our success, and is 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 $73.3 million, and our security business revenue would have been $25.5 million. We continue to gain commercial traction on our security product programs 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 structured over a longer period of time. As a result, we now expect security revenue in 2018 to remain roughly flat year-over-year. We remain confident in our ability to grow this business long term and are excited by the growing number of engagements and customer wins.
Let me walk you through our non-GAAP income statement on slide seven. Along with our solid revenue performance in Q2, 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 $66.8 million. We ended the quarter with headcount of 791, up from 771 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 million. We recorded $7 million of interest income under ASC 606 related to the significant financing component of licensing agreements for which we have not yet received payment but recognized revenue under the new accounting standard.
We incurred $0.8 million 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 $0.7 million, up from Q1. Using an assumed flat rate of 24% for non-GAAP pre-tax income, non-GAAP net income for the quarter would have been $23.8 million 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 eight. We are very pleased with the strength of our balance sheet.
Cash, cash equivalents, and marketable securities totaled $298.3 million, up $7.1 million from the previous quarter, due primarily to proceeds from employee stock plans of $4.8 million and cash from operations of $3.6 million. 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 in Q3 as we pay off the remaining $81 million balance on our notes due in 2018. As a result of adopting ASC 606, at the end of Q2, we had contract assets worth $751 million, which reflects the net present value of unbilled AR related to licensing arrangements for which the company has no future performance obligations. Second quarter CapEx was $3.6 million and depreciation was $2.6 million.
Looking forward, I expect roughly $3 million of CapEx for the third quarter and roughly $10 million or $11 million for the full year of 2018. I also expect depreciation of roughly $3 million 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 nine. 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 invoiced 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 the same quarter we bill our customers.
As you see in 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 third quarter between $45 million and $51 million. Under the ASC 605 revenue standard, we expect revenue in the third quarter would be between $97 million and $103 million. Excluding the impact of the lighting division, this is up 5% year-over-year. We expect Q3 non-GAAP total operating expenses, which includes COGS, to be between $68.5 million and $64.5 million, in line with Q2 spend.
Over the course of 2018, I 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 million to $40 million in Buffer Chip revenue in 2018. Under the new ASC 606 revenue standard, non-GAAP operating loss for the third quarter is expected to be between $23.5 million and $13.5 million. Under the ASC 605 revenue standard, non-GAAP operating income for the quarter is expected to be between $28.5 million and $38.5 million. For non-GAAP interest in other income and expense, we expect roughly $5.6 million income for ASC 606 and $1.4 million expense under ASC 605.
This includes $0.8 million of interest related to the notes due in 2023 and $0.2 million 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 forma 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 million of cash taxes each year, driven primarily by our licensing agreements with our partners in Korea. Under ASC 606 and based on a 24% tax rate, we expect a GAAP benefit between $4 million and $2 million from taxes in Q3. We expect our Q3 share count to be roughly 108 million basic shares outstanding.
This leads you to between $0.13 and $0.06 of non-GAAP loss per share for the quarter. Under the ASC 605, using the same assumptions for operating expenses, $7 million to $9 million for taxes and 111 million fully diluted share count, we would expect between $20.6 million and $28.2 million of non-GAAP net income and between $0.19 and $0.25 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 adds 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&A. Could we please have our first question?
Thank you, Rahul. Ladies and gentlemen, if you have a question, please press star one on your touch-tone telephone. Your first question comes a 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 ask 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 flattish, if I understood that correctly. Thank you.
Thank you. This is Luc. First of all, last week we announced that our unified payment platform was selected by Coles in Australia, for the digital payments. This week we announced that ScotRail has adopted our ticketing solution. We do see commercial traction across the board with our security product programs that build upon our leadership position in tokenization and embedded security. As we develop the business, what we see is that we have 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 structured 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 are excited by the growing number of engagements and customer wins.
Okay. Got it. Thank you. I guess as my follow-up, I know you guys have said that Rambus remains committed to its previous business strategy, despite the management transition. 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. Yeah. 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 that 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 Acceleration, the imaging business, and our lighting division. 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.
Great. Thank you.
Your next question comes from the line of Gary Mobley from Benchmark. Your line is open.
Good afternoon. Welcome to the call, Luc. I know we've met in the past, but just with the welcome to the call. Rahul, I noticed you mentioned that with respect to the fourth quarter of 2018, you expressed comfort in the fourth quarter of revenue estimate versus the full year 2018 consensus. Therefore, I'm assuming you're expecting the normal 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 million 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 from a 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 million in revenue, which was up slightly from Q2. Remember, excluding the lighting division, our revenue in Q2 was roughly flat from Q1, when normally it's down 5%. 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. I think consensus estimates is about $102 from a revenue perspective.
If I look at maybe $100 million for us in Q3, if you add the consensus of $102 in Q4, I think that gets you closer to kind of a $401 for 2018. Again, we guide one quarter at a time. I gave you a kind of top line and bottom line for Q3 and expressed comfort for top line and then consensus EPS also under ASC 605 for Q4. Hopefully, that's helpful.
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. 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. Even if you look at the divisional trends, this is something I said last quarter, is 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. 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. 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 how far of a lead you have compared to your competitors and having working silicon, how that can translate into 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. 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 the DDR5 launch. The memory partners and the processor partners all have to develop their ecosystem around these DDR5 technologies. The very fact that we were the first to introduce our chip was very important from that standpoint. Of course, our competitors also introduced products, that's going to be a race between now and the ramp in 2020. Having a head start, and every time 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 ramps.
Okay, that's it for me. Congrats on the strong execution, guys. Thanks.
Thanks, Gary.
Thank you.
Your next question comes from the line of Atif Malik from Citi. Your line is open.
Thanks for taking the question. This is Amanda on for Atif. Can you give us a quick update on where you stand with the CEO transition? Luc, I know you're sort of in an interim role at this point, and congratulations on the new role, but can we just talk a little bit about how the transition is going, how the search for a permanent CEO is at this point? Thanks.
Sure. Let me talk a little bit about that, Amanda. This is Rahul. Let me just talk about what I've been authorized to say by our board. The board has commenced on a comprehensive search process to identify and evaluate internal as well as external candidates with assistance, I should say, of a leading executive search firm. Frankly, as I look at our company today, we have a CEO. His name is Luc, so we are continuing to go run our business. In terms of timing, what I'll say is that we expect it'll 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 Luc has knowledge of our company's operations and has a strong relationship not just with the internal team, but also with our customers. We're continuing to move forward as before on our strategic and financial objectives. I think you heard Luc just mention 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. 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. With a bit of delay, that means our analyst day may be pushed into Q4 instead.
Let me also say some other words that I've 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 Ron Black an opportunity to present his side directly to the board. After evaluating the information presented to them, the board determined Ron Black's conduct fell short of the company's standards and terminated his employment. In connection with his termination of employment, Ron 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.
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, 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 how you are building out those contracts going forward, in order to have a 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. Of course, we'll continue to do what's in the best interest of our 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 report our revenue under ASC 606.
For example, Q2 under 606 was certainly above the guidance range that we provided earlier, 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 billing, so that you have all the information you need to read the underlying health of our company.
On a related note to that, with 606, do you see more of an impact if there are delays in node transitions at customers on the memory side? Is that something that would impact being above or below guidance?
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.
Well,
What would impact the up or down above guidance range?
Got you. Most of the transitions we're talking about have to do with the adoption of DDR4 and DDR5. As Luc 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. That's for our Buffer Chip revenue. 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 that what you see in my balance sheet, or you should see in our balance sheet, is $751 million of present value of contract asset for something that we have no performance obligation. 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 determine whether or not we'll meet our guidance from a 606 and 605 is just signing contracts. 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 away value for our company in order just to make a quarter if it's a material difference for us from a revenue and cash flow and precedent perspective.
Great. Thank you.
Hope that answered.
That's all I had. It did.
All right.
Thank you.
Your next question comes in line of Mark Lipacis from Jefferies. Your line is open.
Hi. Thanks for taking my questions. Rahul, thanks also for all the detail on the 605 and 606 accounting standards. The first question on 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 CapEx forecasts up. I'm wondering if this is 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 orders could be like that might be above and beyond what you have been talking about in the $35 million-$40 million range? That's the first question.
Sure. I'll ask Luc 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 years ago, we signed long-term, very profitable, stable, predictable license agreements. That really allows us to, one, 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. Certainly, our engagement with each of these customers is much broader.
I'll ask Luc to talk about what he's seeing in terms of the ramp for the Buffer Chip, I think, which is what you're asking for in terms of DDR4.
Yes, thanks. We do see great potential for our DDR4 ramp in 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 OEMs, the hyperscale vendors, so that we can track those shifting demand. We believe that we are going to continue to grow this business in 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. As the demand shifts between the end customers, we stay close to that.
Fair enough. Thank you. On the GDDR6 PHY product, where are you in the deployment cycle? Are customers sampling this and testing it, or are they putting this into production systems yet? If not yet, when might that happen?
Without breaking any NDAs, we are engaged with customers as we speak, in the development and deployment of GDDR6 IP into their products. It is an IP as opposed to a Buffer Chip type of product.
I believe it's still a little bit early in terms of that adoption. Is that right? I think you'll start to see some of the revenue growth probably starting in next 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 Luc mentioned on security, really help fuel our future growth.
Fair enough. On the record number of licensing deals that you signed this quarter, are these some things that are a long time in coming, or are these deals that are conceived of and executed within the same quarter?
Very rarely are any of these deals conceived of and executed in terms of the first quarter. Typically, what we have is we have scores, or I should say, dozens of different partners that are under a license, Mark. What happens is those licenses usually extend for a certain term. 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. 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.
Those are usually negotiations that are not in quarters, but usually longer, sometimes around two years in the making. 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 FPGA. You've also seen us be able to expand our footprint from a licensing perspective on the security side as well. Our licensing program goes very well, and it's very strong. Between that and our core, I expect licensing for us to be roughly flat and continue to serve as the backbone of our company.
All right. That's 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.
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 time, and have a good day.