CDNS - Earnings call transcript Q1 2018 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Jessy, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2018 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence. ahead. go Please

Alan Lindstrom

and today's and that archived and June quarter Jessy, by welcome XX, to our Vice site everyone Tan, prepared call of discussion Thank be available also will our is forward-looking through earnings I'd conference that first through XXXX. President Senior Wall, Web XXXX and today's site, statements note those joined A be actual differ call. available our the at call. webcast CEO; will contain this cadence.com, you, Web of John results like CFO. will conclusion remarks I Lip-Bu today's materially A copy Please expectations. on and of from may am

difference For the information including filings, recent Form statements press in release cautionary filings to the we and please Securities reports the and comments future earnings regarding on include with our refer today. on the results, factors Cadence's a XX-Q, Commission. issued company's cause our These Exchange XX-K most in the Form that and forward-looking could

XXXX Web most the ended are with press related available to today's of Generally In with prepared and and available GAAP be management investors non-GAAP comparable our CFO review it that measures April Copies at Cadence Investors section potential the financial quarter Relations Accounting Principles, March financial will to their results on financial present also useful dated in results direct Investor are can financial cadence.com. today. accordance results. release GAAP, results certain non-GAAP to review measures. the addition financial XXXX, in reconciliation addition measures using financial our in believes commentary reconciliations also tables, encouraged XX, certain the or site. evaluating non-GAAP GAAP XX, to The are also of we business, Accepted using for of

Finally will week. note this be XX-Q later that our filed

Lip-Bu. over will I to turn the call Now

Lip-Bu Tan

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will QX. I of from highlights review the Now some

companies, enabled us Enablement system with Design Our increase strategy tailor System our our vertical to and solution for footprint segments. market

this business Aerospace is of expanded and in orders Defense, segments where we vertical companies. these with One large from QX, our

industry-first momentum Imec, research products, three innovation business Innovus hub Implementation nanometer Genus strong our Systems, and with in Solution. market its the collaborated chip QX. signoff international Cadence to Turning on an continued using and Synthesis tapeout test We and digital

customers, nanometer added as company the networking five XX% front-end leading business system faster Suite our a achieved Palladium design strong [Ph] and adopted nodes. strong for digital defense performance with We SX, The to and Both our continuing advanced in process over with design. in-house customers, for our would customers, momentum at ramp brought year-over-year. a adoptions to to flow market-shaping contractor verification solutions digital digital booked Palladium common amongst a have marked processor company within platform. as our and design, our Protium market a new prototyping and in up Verification continue the we design We we QX. including Cadence proliferate And other use realized targeting the seven grew ZX chip XX orders. customers flow continue major due repeat top solutions bring quarter most our that communication

During Protium customers orders. we and new quarter, four booked the repeat added five

hardware Our for the in verification. in Suite; our customers complement nicely additional Thirteen products simulation Xcelium parallel QX. and software for Verification Xcelium JasperGold solutions formal adopted

and XX also design layout line. nodes improved modern to Our do design custom We Virtuoso to set our innovative That design IC product technologies and for introduced analog in lead to virtual system the methodologies and electronic major of business lead nanometer we flagship productivity. custom FinFET continue IC extremely with market enhancements efforts. new well, platform. A support five reduction a and including our

system automotive platform, with multi-die analog integration. semiconductor using especially our companies, products a new collaboration Customers electrical-driven Design for in lead Virtuoso of both their and design. Cadence saying the heterogeneous contractors, to including customers, Bosch, mobile crucial new long-term our endorsed electrical-aware that are defense layout adopting System innovation chipmakers has One and

business strategy and faster for flagship IP for a announced application that and QX, new We QX leading built roadmap XXX well-positioned refined Our successful continue in augmented significant DDR SoC with device trends. with highly Kirin continuing is to the from including our HiSilicon. of designs. for processor processors, and products PX seven used processor advantage Vision Momentum many vision, sourcing take this our AI architecture. The applications is latest PCIe built upon embedded our nanometer our on Tensilica especially new Vision on wins, Vision

about to Cadence are I the that at Finally, culture underlines building success. talk all our we want

global diversity highlighted culture we Best to on for received our the Companies culture XX recognition the We list of that is Fortune's in For, are committed the of innovative spot to from list XXX year of We Top Fortune. the the and are by fourth to earned driving strength incisive our workforce. the row. the The number an proud Work and make embrace

Cadence products innovation team to has new developed in commitment seen years. more three that past significant Our in than can the be XX

of the and building by Best recognized for our We the Back. the Workplace are company, my top Cadence. we can global We make priorities our how have making, be encouraged Fortune central been proud I am differentiates that the our business of accomplished. I to strategy. have are on continue Since culture culture a one will Giving been as had and to progress joined we community, also focused by supporting we

meet over adoption it quickly turning summarize and based to let our results comments. of the broad excellent me solutions drove needs Before John, through execution the proliferation We data-driven and consistent economy. of to my

are guidance our the on We year the raising for business. of our strength

Defense quarter. strong business a growing and Our had Aerospace

introduced our our With flagship Virtuoso designs. upgrade digital line processor and of call of We and financial outlook. a major Vision adoption for turn continue seven updated would provide grow to we higher our nanometer I analog results now new over and product designs, John applications. that, the the flow Tensilica custom to to AI for performance for And review a

John Wall

good report and very pleased Thanks, I operating of Lip-Bu, everyone. in all QX. we afternoon am exceeded key to metrics our

we As strong increasing across fiscal our XXXX. for outlook business, a of our are result execution

prior for are Cadence. not rules refer were the we first than has Under use recast rules of transition otherwise or new get new Topic of are results, XXXX The Please for the revenue unless the periods, we that report remind modified based the known we do standard results. Cadence also mind to to keep often rules. now rules reported on present Before to directly adopted retrospective Topic old as quarter rules. stated. numbers GAAP these transition method, ASC to Cadence in them reference, this our method our into I ASC new on to rather QX as are comparable for accounting adoption are numbers under I XXXX. XXXX now These for fiscal XXX XXX, under like you new ease those required new of the XXXX the would which that

the you for go first first new we So, will XXXX. These the XXXX reported results are results through let's Having provide old comparable the our with results rules. P&L. rules also for that, alongside starting our under the as rules, key quarter to under today GAAP covered directly old the quarter

Under that year-over-year for of rates non-GAAP new attributable tax changes $X.XX improvement the revenue EPS attributable from resulting of Tax difference in rules, note new in revenue was million. for was million $X to recognition was that Cuts margin in between and million. the is U.S. old was XX.X%. $X IP. our comparison operating approximately $XXX revenue operating EPS note against GAAP and EPS Please margin total total direct our $X.XX. $XXX GAAP was XXXX to in old Act. is for was $X.XX, rules directly As revenue under and also was QX Non-GAAP rules $X.XX. our Non-GAAP the QX reported the $X.XX, Please non-GAAP recent effective and results, Jobs million EPS non-GAAP the was XX.X%. rules, EPS the reduction

approximately cash balance outstanding sheet Now short-term flow was $XXX at and investments of $XXX flow, to were turning which, was million. on-shore. million was at XX% cash quarter-end million. Operating the $XXX Debt cash and quarter-end,

used million credit borrowings revolving facility. QX, $XX our During under $XX to pay share repurchases for we and million down

DSOs the were Under XX reported, DSOs the As will updated provide days. now XX days. were rules, old I our guidance.

momentum now expect heels the rules. XXXX our raising our apples year. old an business, strong quarter for for the on We and are approximately basis continuing we revenue apples of of our first for execution to outlook On in the X% growth under

of operating range margin of revenue to range $XXX $X.XX For the $X.XX, range and in to QX, of days. GAAP of $X.XX we non-GAAP $X.XX, million expect to to XX%, DSOs the in results: EPS the million, the EPS XX% $XXX non-GAAP range XX of following in the approximately in

non-GAAP the XX%, to to the billion, range XXXX for margin in is: to non-GAAP the EPS in GAAP $X.XX, Our $X.XX operating of range of of in updated billion in $X.XX to fiscal range guidance of revenue $X.XX. range the $X.XXX $X.XXX EPS XX%

rules million approximately rules, repurchase changes that $XX recognition for the our And old in There to common at increasing $XX under the the flows, $XXX no higher cash of to the new a revenue of of difference operating continue at that we is or rate million impact are our $XXX $XX $XX be cash We increase to during expect to million of note will million stock million IP. business. we flow million, attributable range than to per operate XXXX. under quarter Cadence we to an revenue Please how expect to with midpoint.

the compared at the under of the our $X.XX. estimate midpoint operating to result, rules approximately of of guidance of a margin $X.XX, growth XXXX GAAP of new the implied non-GAAP XX.X%, revenue billion, old representing or rules is X%, EPS $X.X and approximately non-GAAP under now previous EPS of As X%

see our read you There site. and and will today, quarter, I with reconciliations This urge comparisons how of entire through business XXXX. the of quarter especially which can additional [Technical you and across commentary, of with quarter our is old And all our find verification revenue the you first our was strong suites. and Web on CFO new accounting had rules. filing difficulty] great X-K perform to the throughout included lines for available particularly a information verification momentum

The X% Operator, with thank the see in to successful their our apples basis. for and pleased line to our for be across core [technical part sum drive we to To strength software would up for XXXX today's that business, with continue work fastest-growing prove that, business. year. to take With to team call, difficulty] of it projections discipline my lines IT financial our performing lines business We want I now on the am off. will I an make of Cadence performance and to and is pay the for of customers across that questions. all to business is to our like starting highlight their will passion all hard our I expectation apples extended

Operator

with [Operator from Gary Instructions] Your question first comes Mobley Benchmark.

Your line is open.

Gary Mobley

the everyone. question, year. to allocation. Thanks I capital to for off to question and start start afternoon my taking a good congrats wanted about Good the

mentioned you year. cash for outlook your that flow raised You the

how aggressive would you the You valuation And versus the share there targets to from out not to have more on respect of characterize respect some more end buyback? just in environment the curious the now points M&A with you percentage getting U.S. of capital are the I'm why whatnot? your and with of your XX expectations cash allocation, at year.

John Wall

then the are capital at use and and Act, And we on to new and second liquidity, Tax of good Lip-Bu as That's regularly in part, take in for of to But Cadence you risk, structure options needs, value. investment said last balance on will we in to M&A. year Also, and first-half the of I this our including question, first call, review overall as the the board ask tax review allocation we Gary. returns. will the repatriated creating laser-focused capital our position the light managements plan take cash. shareholder know, part capital I

all focus right in now. that's So,

Lip-Bu Tan

I on EDA's our are value, been and and M&A the had on a disciplined, disciplined with attracting in shareholder the in think Yes, and M&A managerial, on front, the management focus strategic-driven, acquisition. to also the always philosophy have technical and and creating we customer and return Gary, laser-focused strategy, board to very our tie approach. And term investment on differentiating provide STE products able also best technology talents, of talent and compelling into

We our all else who the have management, acquisitions. are board, for [indiscernible] with with our key accountable [Ph]

that so, our discipline been doing that. have for And

and to our So I on think our using laser-focused to internal development continue we're organic going M&A growth. supplement

Gary Mobley

if you systems, IC specific, you you companies, a guess the contribution was I first between what figure have mix know but and companies merchant companies, and mix I systems, don't merchant an the about question you would non-IC your asked and IC results, state can your for QX companies, quarter? between question your QX? even what you design I the A from do know revenue exact in And get probably guesstimate lot, Okay. estimate more

John Wall

measured semiconductor you have changed I XX% Gary, business the last in seen around companies. but the it the haven't QX, we for while, know systems mix our was growth I So tell a also into but that hasn't that both we mix, that's we system it drilled from because and business. time can the

Lip-Bu Tan

this and in put side. meet our to Aerospace Same doing and a and of and approach customer focus And with that in the [Ph] System PCB that the we is starting customers. business received now IP and Defense supporting -- and Enablement from the quarter, are the and the we and well, multiple great in large really to companies. quarter add in our IC Analysis term And tailor of some the on we in the meanwhile, pursuing we contractor, last some have solution the can quarter. driving twin automotive, I Integrity IP especially System more the IC our are aerospace we if system Gary, success, will to defense success Design this side system highlighted orders thing several we of

large are we hardware and We maker, with IP in automotive And vertical solution market a the part, last customer, we of IP also filed in of thing we pursuing. year with semiconductor very automotive, pursuing in and market the of major some income other the last are are quarter with And then service driving optimization, success relationship automotive cloud/datacenter, delighted the for term other and we this in a design And very some and then and solutions. highlighted same strategic the software shipping the customer. beginning part, a also them.

ultra for You know, high a provide that us really clearly nusemi speed acquisition is we great for that them. connectivity can

Gary Mobley

Thanks. to the else. somebody Okay. turn Thank over I will for that. you floor

Operator

from comes Garg question Monika next Your with KeyBanc.

is open. Your line

Monika Garg

taking for question. thanks my Hi,

ASCXXX, million accounting give is on you down kind idea the maybe you an revenue it though otherwise? ASCXXX, of would year-over-year, to the could just have said much the IP, due of in $XX how on IP first and looking just The is what us

John Wall

royalties back that revenue Hi, part for $X question. new added extra in of the IP of XXXX. in our you the Monika, quarter recognized million to if thanks We transition an to standards. Yes, of it's accounting remember, XXXX, about revenue QX QX

the to $X revenue IP impacted difference between IP. when QX recognition was transition; So XXX by million allow XXX and most million that XXX are was yes, for related growth. considering for you the Also $X of revenue revenue

our our -- that that XXXX. and that expected part that's in in apples to the made in in be and are we point to that the for the I business apples actually up out fastest-growing XXXX, revenue expect on call we IP despite still of that generate was to highlighted did year-over-year, significant script fact fact XX-K acquisitions XXXX a I not my So, but basis, an the to

Lip-Bu Tan

same then add think -- augmented And clearly IP and then the new, we we differentiating continuing. and And is I the And this for QX, some of know, advanced trend on, most also under other notes. part focus high the IP and Tensilica, highlighted Monika, have you the about you most acquisition DDR and said of is the then business the new nusemi speed XX, refi to on the the some also also and this I just PCIe. clearly, know, where strategy then

a to semiconductor So, good our have we very drive for the and of portfolio some customers. system success

Monika Garg

processor provide in as comments seeing this Lip-Bu, then follow-up, are Tensilica product? for interest from talked I your think you you on a regarding Vision, Thanks for about details. could customers details you

Lip-Bu Tan

Yes, we just announced recently.

is Vision and we far, positive, are some from this processor. vision, aggregate be can And providing intelligent for and of is artificial -- then because application [Ph] the software we the hopefully and adopted be very based on-device are just response them now will solution capability our really that broadly we performance, the the not broadly so that the clearly broadly also application to is success audio, They quietly are upon meanwhile, of the overall just capability, for adopted. PX. the up vision, very building higher drive will a customer this the embedded and not and And

Monika Garg

right. All

a emulation details? very verification, in Just you functional -- one, performance the in after muted 'XX, strong course, of the very last QX last given year, more seems the Thank you. could very, maybe performance very in was strong provide

Lip-Bu Tan

Sure.

new did and is orders. integration seven an four our year, Protium. very Protium we of and and five We Rocket Incisive, hardware I strong we a Protium, teams, as for new [Ph] quarter with we And both SX So, from customer highlighted then repeat with suite. order in also are delighted business also QX, clearly year-over-year. very then grow a the for a strong Palladium is and last prototyping and that Verification for Palladium. as And System backlog together. recall Tag are clearly, highlighted, we with And do very have that think highlighted, completely five pleased John we -- and our I that, then customers I And Xcelium, then XX% integrate

it. We XX new customers adopting are delighted this we quarter have

So, we critical complex design. overall, I think is order verification for

hardware see and entire front-end quicker And to them. clearly, I the that the from the most benefit of the think very we customers design provide to using for have an software attractive able customer also compelling. ZX suite Palladium as the same is

Monika Garg

you Thank so much.

Lip-Bu Tan

you. Thank

Operator

Your comes the from Jay Griffin next question line Vleeschhouwer of with Securities.

open. is line Your

Jay Vleeschhouwer

record contracts then upfront Thank and with revenues evening. -- or quite then and And the did just the to quarter could are you. A or the sub-XX extensible you some of that implementations going XX John, for? it on I'm first, the Thanks. upfront were quick for hardware, and a if you you end are in you number might highlighted tend which besides that words, so flows into kind -- of whole but from and quarter other deal were to we Aerospace on -- seven D nanometer. obviously going compete for emulation, under-XX see upfront Lip-Bu licensing? of and unless and times, below And carry unusual EDA, licenses inference changed? have in for a you to comment the Defense new down a to had market. of In round in any market, John, for perhaps if So from quarter strengthened to sub-XX done questions increments finish XX, Good selection that's well, looks couple mentioned to even an and up nanometer? the prefer prior forward there and end historically sorry, like in advances and wondering increment perpetual it's Lip-Bu, any forth,

John Wall

revenues the lines QX. in business Jay, was of was no of question. of and our first all our performance time, recognized part pleased I that the will XX% with your different QX. for certainly I of over Approximately take

has as QX entire but know, the model, year, see And So our you nothing there ratable a that the you'll with we guidance bigger for strong on QX into in unusual. impact let's QX, so -- was the the it pass see strength year, and business our digital to in -- Lip-Bu. has continue carried strength off software to custom and the to IC strong through

Lip-Bu Tan

Yes.

points, we highlighted think think, I one collaborations, patterning announced three shipment nanometer I So of and with test a tapeout. successfully couple Jay, quadruple I Imec

clearly We lot into engagement in nanometer. rapidly our the nanometer customer are very term design moving in the seven is more A of we point seven the view, XX, five volume pleased with of are and that. nanometer. in is XX a five but very IP of then business lot of activity, And and

new for And to win there marketplace us that can in so proliferate. they our so customers every far, help opportunity in to process the node, is

tool the clearly, winning we some we go it so, design capability and that At and production processing, now, they distributor, the advantage. PPA advantage parallel, And the one-time, supporting our learning in even applying with machine and planning in our of our can faster end opportunity so about further for customers that excited And drive and is day, are of also the right marketplace. verify, our learning to are are we using to the the into front, verification the to terms tool. of learning, been have machine the massively then

Jay Vleeschhouwer

Quality less discounting, in forth? the or apply in customers of you Just on case to are or any specific more think pricing account "Deal philosophy could or more and with finish you of -- be terms off terms you about price pricing, broadly you in pricing, management, looking so might you Metrics," as more of talk of specifically call, suboptimal your which increases at John, than how to specific, your pricing let's part level,

John Wall

and is product-to-product. and customers deliver But and drive and pricing disciplined way a believe Cadence, products our to business, that with we solutions, competitive best our clearly on value sector-to-sector, Yes, collaborate and successful. deeply it very but are differentiated is and the Jay. we customer focused from innovative to for to value-driven, that can Hi, from make pricing very vary

Jay Vleeschhouwer

All you. right, thank

Operator

question comes with Credit Farhan Your Suisse. Ahmad next from

is line Your open.

Farhan Ahmad

division Thanks of you talk three for business ago? are the the are and months from just quarter, for year, you compared the think the that guidance taking to this my specific last parts about question. stronger to quarter now Can what

John Wall

custom John. the is entire see quarter business. across an strength as This to broad Yes, with IC a in we Functional momentum in Farhan. was strength basis. based. our earlier. quarter great Suite, the well particularly apples And mentioned and Verification digital that had Hi, as our line to fastest-growing the software strong verification part But continue on expectation with IP of business to performing going be our apples in is Cadence Lip-Bu

So, based. it's pretty broad

Farhan Ahmad

year, the for meant for just I the quarter. Sorry, not

John Wall

it's broad year. based pretty across the Similarly,

We of we I grow our that expect year. all think expect to last we -- quarter businesses this said

Farhan Ahmad

in in And about in emulation then the dynamics you they -- claimed Can Mentor the talk that the market Graphics Got have competitive emulation, we market? it. within the and are introduction terms recently And in cycle? taken emulation. just of leadership how position product

Lip-Bu Tan

Yes.

very full ZX this in would and this And the a with providing performance, Protium Farhan, clearly, SX, know, verifying also site, are are verification, And is pleased the and we software our our hardware prototyping to So business is the very complement we -- clearly really excited, customers. for important in you design. this suite our and is -- and hardware and our term Lip-Bu. of

we about doing. respect progress year-to-year great they our have, we made excited very what growth. and XX% we competitors So overall And are I we in think are what

And in so, to marketplace. we compete the continue

Farhan Ahmad

through we And OpEx one can for Got question then just on the OpEx should the model the year, it. about year? you linearity how last talk

John Wall

Right.

using new that -- take be flat would of reasonably be flat should the away some the the rules, year. think the will profile. the transition So -- with you the numbers, you the probably are to revenue year. expense to expect so more I expense that throughout XXX commission if throughout It But

Farhan Ahmad

have. Got you. it. That's Thank all I

John Wall

Okay, thank you.

Operator

question Needham Company. Rich & next with Your Valera from comes

open. is line Your

Rich Valera

that, follow-up down like I'd pretty turnaround, year-over-year emulation about you. whole sharply on in a the the know, probably hardware like up dramatic verification of the and question. I first than is like your relative year, thank call, presumably software. the in X% last seems stability Yes, And you it It was now last you believe category just given quarter. meaningfully hardware more it's said seems quite down was the of

color year you of if what that simply in off product turnaround on marketplace turnaround? year? real matter 'XX? dramatic Was versus anything the might point the the So you. pretty for for just account just any strong is difficult wondering a or else really comparisons give to you it could Or 'XX can Thank in dramatic there that

Lip-Bu Tan

last Yes, QX, this that the hardware carry Rich, -- momentum strongly in have I we And is very think us Lip-Bu, and but QX. and in as first-half year lumpy the the times, we a multiple mentioned questions. I And start, have very business. thanks for the a finished is has little soft

Protium we mentioned, know, then the new we ZX, Palladium have customers have repeat customers, I we customers, Protium, As you orders, have repeat new and and five five customers. hardware and then XX and four

our Xcelium in software we quarter. this customers think And also and the overall I have new XX just so, hardware, not it's

together simulation. Finally, parallel And Tag with the put then the is it and for Rocket we the for integrations, the other [ph] JasperGold. former part verification

So overall, customers. entire delighted that whole border, are like mentioned, for suites to across and provide I is strong, verification the the John think it's we verification our

Rich Valera

know QX? that QX. strong another you quarter repeat translated customers, in you've you bookings? numbers about new specifically that's real XQ nice say of into bookings, Got in it. bookings for had and customers, then, called the I out strong customers a strong Anything And you clearly I hardware would say said but would specifically we business real bookings, hardware and you think

John Wall

worth. the entire typically say get value that I don't a ensure suite we very been value-driven We hardware portfolio. on And and bookings is would say that the view quarterly disciplined believe complete would about is verification we as we I pricing a component the important our to it we've that on of basis. hardware that again talk that very

Rich Valera

then a it one I digital you number, but more, just you John? And how was don't I did on looks know said specific kind it fast of Great. specifically that digital, if say grew, number, could like if double-digit

John Wall

No, X%. it was

Rich Valera

X%. sorry, I'm

Okay.

I double-digit was that last willing or to there go whether again a year, at point? know you not to might yes, this growth So be that think be year. this Would you business hazard double-digit willing

John Wall

comment we other that generally than are not group. going XXXX, thought rates IP growth likely be for or to guide No, the we product line would individual fastest-growing to say on

Lip-Bu Tan

add, I we we couple can a we provider I on have, adopting the the leading as adopting nanometer. seven and quarter, mentioned, communication processor highlight expand that if networking and the of shipping they're think Yes, the customer, premium, to footprint; continued a I the it And very excited scale our into market and and using company continue are And us with digital then seven overall proliferation top flow. successful about of just our our hyper just us, stay-tuned. nanometer, entire one Last suite. we moving the will

Rich Valera

very nice gentlemen, Got much, it. thanks. very and Thanks quarter,

Lip-Bu Tan

you. Thank

John Wall

Thank you.

Operator

with question Tom from comes Diffely DA Davidson. next Your

open. Your line is

Tom Diffely

good Yes, afternoon.

in next on I'm IP year this like does that question the would that about well? year, has XXX the wondering IP there Another sounds that a year, reverse impact it front, additional or one-timers are so as impact out XX%

John Wall

-- we similar for revenue million in we about in into at million last that on rules the that $XX sets the $XX the the we it's last was XXXX if for year impact that the would is impact about talked saying a is would IP, quarter, proportion we total but have is all out of in into this the years. than thought XXX but And IP XXXX, haven't in expectation that smaller are million. $XX look think you XX now And we and slightly XX I think it So, we our between thought drop think XXX expect drilled XXXX, two difference quarter. at of between for been

Tom Diffely

Okay.

ratio You year… said in for the that holds same roughly

John Wall

I so, yes. think

Tom Diffely

Okay, ratio a as the and of same percentage? IP

John Wall

guess. good a That's

Tom Diffely

Okay.

growth are or you're this in of when before, at you guess, So with slower -- market refined are you market you in at that double-digit IP believe I look the serving are going faster that new growing point? or line overseas strategy you do you kind the

John Wall

going not are specific… to We

Lip-Bu Tan

focused that think, to we are we you growth are pursing IP And higher clearly, customer on we more strategy -- XX and mentioned just like like focusing silica, the profitable high the scalable new more success, focus refined this advanced and the focus. augmented star nodes. are most on the And as to highlight we on to know, semi map, are third we I Yes, and XX. you, speed ultra

focus on and We build going to don't to we kind do leading-edge, on of the really type The differentiating IP, and are the we focus they that. one-off are scalability. really high of things, quality. So that continue most then on

Tom Diffely

percentage IP, Okay. you what And is that think do market, then just is percentage looking where still of what the merchant broader outsource and goes time? in-house, or over penetration FEIT done and

Lip-Bu Tan

I outsourcing think Yes, as I trend the continue. mentioned,

as standard, I think a they need our really have -- are we that's product the our self reliable, of IP reliable as somewhat position differentiate and want gone from a to their provider. that trusted, has clearly customer how IP offering, industry to out unless high-quality in to their point view,

datacenter, that's for of of over that. acquire this and will in unique lot IP automotive, room especially higher will build as and a are percentage and the some we the over of line. the this the new product mentioned, our applying time datacenter, about of can the growth term of term growth, key datacenter, John hyper scale distributor in are think of And we lot that I to vertical excited to time a be that's a do area, and vertical, very IP aero-related either excited, we

Tom Diffely

Okay.

outsourcing point you are the from line? this point we trend at an think in at halfway So,

Lip-Bu Tan

all are, can't know, -- baseball we the put I where like you can say is terminology I would early -- I in round. down still Yes, and the

Tom Diffely

Okay, all right. you. Thank

Lip-Bu Tan

Thank you.

Operator

of Your next from line Auty Sterling JPMorgan. question comes the with

is Your line open.

Sterling Auty

guys. Hey, Thanks.

autonomous you IP, to traction seeing what want at of follow-up point IP cetera, around those I driving, elements the on line I'm apologize Just IP is between what and demand artificial this the the lots of within of built the earlier, you intelligence get et for and that kind but I core questions of if bouncing said are questions franchise? calls, you

Lip-Bu Tan

Yes.

or focusing drive PCIe then related know silica AI some and high it we work that how speed think, we to of the high-speed call and senor-related. on Sterling, this, are autonomous first of addressing USB the and using I some the or So either side, data some connectivity requirement, XX to driving vision the storage all, of XX, of with

and autonomous the beside of medical So and then It's this we driving, And AI and IP AI then that so we of automotive That's requirement doing some to this is the maker and and some sequencing. mobile we our the some AI, quarter, for learning last just is a part vision, beside for broad and design EDAs have on-device surface. our autonomous really that. application some can then the I you on the customers premium key even the this beyond, think so highlight on two genomics a help the into other is of part, of IP and is machine lot. tool one touching our the fascinating, And driving. to of lot, to there adopting providing some audio, move the datacenter, and are addressing

so And to there. grow a room lot of there's

Sterling Auty

you of perpetual of those anything kind contract payment terms are in on And for types capability? mix of versus the subscription opportunities, getting changed the versus upfront terms of that structure of in annual has

Lip-Bu Tan

much. not No,

as photonics, to development there's out silicon mentioned semiconductor activity think fascinatingly on with going software, growth. [Ph] requirement complete lot quantum opportunity design, and I the to and the for we so lot and the add AI, it's I whole We are of pretty that a I design and clearly the it, want their and there's much their just to the lot a come exciting. to same, on earlier; architecture new whole hardware us. so see a drive They of increased are the and computing

Sterling Auty

the you where question, about have years. as guys been digital in side change growth you great. the improvement analog competitive analog kind last talk the and the on that your don't the seen about franchise? That's anything we in much in talk space; you Have landscape of One through so dominant

Lip-Bu Tan

why and and lot. new down we major that's customizing then able Bosch, terms the for Virtuoso think just and one [technical defense that innovative leading -- analog also drive on tremendous the had a enhancement value all is they highlighted and of that love, our been respond I company, triple technology And partners contractor of just the we adopting than five also to platform new that difficulty] then Virtuoso And would in we new that. Clearly foundry. and with to XX the drives significant asset. tool [Technical and that the customer's leadership, of down methodology way nanometer customer, some see nodes, highlighted difficulty] a overwhelming. process more semiconductor our announced chipmakers our Not mobile we in drive we

Sterling Auty

you. Great, thank

Lip-Bu Tan

you. Thank

Operator

Your Mitch of line Markets. last RBC from comes the Steves question with Capital

Your line is open.

Mitch Steves

taking for thanks guys, Hey questions. my

So to in the systems side. I touch wanted really quick

kind standard us guys they own So anyway a I disclose do there that customer? how the know of can't of spins semiconductor customers, create kind is than but some to their spend, when meaning spend differently systems you on maybe any a give chip, they information company

Lip-Bu Tan

have the to pretty general, we or the side have much have the and for time all system system, beside is the then want for to our critical market are then IP unique especially we the PCB And design the same. their In them. and the to we only position, them, very a power win in want guy simulation, and and silicon critical tool they the They marketplace. system because different on also more

move And and value on delighted the also advantage focused appreciate that work think time to are the I more quality are the the critical of their to they success. is them. for so focused on First to and provide, with we they more market, And are clearly products. we

basically the system is quarter XN new the will we them we we IP on with delighted then design with make like work chip, the sure and really a some our from order creation, panel and of aerospace. ECAD-MCAD delighted. off. also, for that their library is solution our level to with from tool automotive have. of and complex design clearly And acquisition integrated some complex and most some did this driving That them Mathworks, And the partners they are good make to job and more really mechatronics chip whole And and really in PSpice, up ticking implementation. is system last help the are most an SFM we outcome we Our are with we way our

opportunity about So us. we are excited all of this front in

Mitch Steves

essentially it just a talked but a sounds then increasing stayed you years that's revenue, one, the guys couple percentage one And small system like it. about of Got as ago, same. have of

of happened guess original the of So cause essentially what years the essentially couple last revenue? expectation maybe that I a of be to in growing same versus that as percentage

Lip-Bu Tan

Yes.

growing, you fast. overall is semi growing know, far revenue growing our and So also very so system our and

we so And are delighted.

highlight. nicely, I John think both to are want and growing may engine you then

John Wall

Yes.

for we analysis both that seeing highlighted mix around that but we the year the -- across to and exactly is are end system mix the Lip-Bu system system and haven't at so same. much updated was companies business the still QX, the for of as XX% Just growth highlight, semiconductor the the companies last and it's pretty

Mitch Steves

Okay, perfect. Thank you.

Lip-Bu Tan

Thank you.

Operator

call Lip-Bu the the have today. will Tan, to questions back That's for we that turn you. all I

Lip-Bu Tan

we will opportunity support. based all for this well-positioned are continuous In afternoon. Enablement broad with building and solution our us joining all we of to And at execution, customer Thank Cadence. Board you and shareholders, proliferate closing, I innovative to hardworking continued to with for we customers. partners, our through take Directors, this employees global like and culture Design the thanks of System are are their inclusive of innovation that strategy and further our proud

Operator

in participating Cadence call. call. This Thank XXXX concludes you earnings today's conference for first today's quarter

may disconnect. now You

Cadence Design Systems (CDNS) 23 Apr 182018 Q1 Earnings call transcript