CDNS - Earnings call transcript Q2 2018 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Second 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

Vice and our Rob am like welcome Wall, to by of The XX, available forward-looking June statements Thank quarter I differ the results Note call and archived is XXXX and materially to be Senior John discussion may and expectations. second our that Tan, through this that from I and cadence.com earnings today’s website, will everyone CFO. Lip-Bu webcast you, CEO would President through conference joined XXXX. contain those will call. actual

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

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

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

Lip-Bu Tan

John quarter us revenue XX%. and everyone for operating Good provide second moment. X% operating excellent afternoon, details you results margin a increasing year-over-year for of the will non-GAAP in today. Cadence and with joining achieved thank

and the data-driven multiple positioned strategy driving system it. to key is enablement enable waves perfectly design technology economy the Our

products segments. our Cloud, customers. Amazon is to first introduced environments. tailoring systems industry’s cloud/datacenter Google technology at productivity of intelligent the cloud Cloud include are past market one solutions bring companies only This Not development from Cloud flexibility. Design us footprint Cadence Conference, vertical also the we cloud significant design Cadence and for Automation to our innovative electronic We Web the our increased the semiconductors. and Azure and portfolio enables it Microsoft systems most to scalability, increasing month the customer-managed broad Services, with drivers, and and cloud-ready our collaborated to solutions in optimized using with productivity, We improved security of Benefits deploy the

easily customers We also customers is launched markets. peak requirements emulation emulation existing solution and addresses which brings a cloud-based Palladium to Cloud, new that and of

Amazon first with Cloud, we partners, and conjunction for in techniques Cadence Cadence and XX using than Finally, the are close Trio, launched more and the our library an Cadence Liberate optimized CNEX is characterization employs Annapurna customers Company, unified Cloud solution that Cloud, endorsed including by and learning Labs, is TSMC ARM cloud. machine Labs.

quarter. and design had for vendor and hardware verification, Aerospace including the the software as A another products. & Defense Cadence and primary strong vertical selected company SoC aerospace Additionally, our defense major

on speed area tomorrow. more a with technologies won results. power, up announcements Watch develop and also for advanced this learning and to that project We exciting significant machine research optimize contract DARPA performance

megatransfers chip, with for rate another achieving strong highlights review business. XXXX quarter TSMC’s It a of QX. will a in DDRX our continues our I build and Momentum Now, few world’s PCIe for data products. first DDR prototyped second was flagship from We up to the IP per additional photonics test leading storage IoT, applications crypto logos a wins with company, mobile wearables, application. for are working on X-nanometer for X-nanometer new customer PCIe major a DDR and with in significant a had wins a and X semiconductor for with Tensilica mining. process. we sensor We added company,

its broad-based Verification are on next-generation well Computing Ampere our designs, year-over-year Parallel LG of the new large renewal Other of for X% Two with our to Moving Digital In our continued processor server an their and with debugging was Palladium Design the of chosen the AI new included Cloud. Palladium key added Xcelium large availability of repeat Palladium Electronics Palladium startup. stability features, QX, ARM-based customer development to included art adoption System growth. Simulator. and state very do with ZX cloud. a the using signoff for Xcelium customers the Solutions. ZX adopters scalability and chip. X and orders. over the chose for Chinese X customers revenue

in Power signoff TSMC IC full RF ICs to solutions. and Voltus support We future defense. also market-shaping More segments that Continuing advanced and digital and extensively an and stacking flow in automotive, packaging packaging, to proliferate algorithm MEMS Cadence RF solutions new customers. and CoWoS XX with medical devices, for proliferate adopted plays an also and new enabling the through vertical that In critical gigascale and design deliver our digital more and aerospace performance development. HiSilicon More-than-Moore XG with and and with support customers integration we semiconductors capacity signoff, Our our enhanced TSMC the provides of silicon as customers added like the Reliability to Xx can we verified sensors analog partnering wafer-on-wafer the Integrity industrial RF, process streamline verification innovation as Virtuoso chip InFO advanced new and comprehensive, becomes new already National improved we such tooling up solutions solution in continue modules. now Solution, new cloud-ready. technologies results performance technology. launched better existing the providing Instruments Voltus and with than parallel first important half XXXX. win for our Solution role of in their

first industrial automotive, we than simulation and XXXXX Solution the tool component software a develop to and receive functional to of quarter for the safety analog which challenges of factor defense. ISO This Hitachi Like Legato that for very a safety certification to Cadence industrial safety the reliability, in meets verification, XXX. its JasperGold and solution high-reliability ROHM by Solution, used for critical controller. successfully Infineon automotive signal Automotive designing more runtimes platform important chain ICs. introduced is product compliant our the is mixed speed aerospace used industry’s used chips. and Reliability an this up

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

business defense quarter. strong Our had another growing aerospace and

Our very in marketplace. flagship well our doing are IP of Parallel Xcelium the Adoption Simulator growing. products is

are market-shaping electronics to are the Cadence technologies. financial and with the now customers call turn to the solutions I review innovation Our digital in solutions new and winning enable through John More-than-Moore’s over outlook. over updated customers signoff and provide helping continued proliferating results With that, will and

John Wall

across outlook met and increasing operating good as to XXXX. result of And report we in fiscal for our or metrics Lip-Bu are all strong am our exceeded a our I QX. execution pleased of key afternoon Thanks, we business, everyone.

revenue results, second fiscal rules, often Topic known them, present XXXX. XXX the we The are those into accounting we year that comparable based we remind as GAAP. standard are which old in are get refer is to were keep as on Topic for these you new for mind or stated. XXXX, QX unless this like the of rules. that otherwise are These new new to the reported now rules numbers reporting Before I’d our ASC new directly ASC I first XXX rules to under which Cadence adopted Please also under the not quarter

comparison the For quarterly as to will the Having quarters the to starting an four rules of the second go P&L. basis. results apples-to-apples all show we covered through XXXX, that, XXXX now with on under results quarter for old reported let’s key allow our

was under EPS revenue rules margin non-GAAP the XXXX, comparison year-over-year, and million, GAAP was was total was $XXX direct margin and EPS old $X.XX, EPS GAAP for XX%, was was total XX%, $X.XX. non-GAAP $X.XX. X% reported, up million, operating non-GAAP non-GAAP And EPS As $X.XX $XXX was revenue was against operating

$XXX cash was million. here that turning Now cash Cash short-term totaled U.S. flow. investments of end and the and Operating the at QX of million outstanding balance million sheet was the in flow at to $XXX in million. $XXX $XXX approximately end Debt with QX, quarter cash

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

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

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

to cash in new For fiscal revenue approximately old of expect $X.XX billion, range in expect $X.XX, $XXX under non-GAAP be in to XXXX, billion the the margin million revenue GAAP of $X.XX the difference now in the in flow range of rules EPS to $X.XX $XX and $XXX range we to to and XX%, million. the $X.XX of operating operating non-GAAP $X.XX EPS now the of range approximately million. We

margin at is approximately the revenue both is expected rules, $X.XXX business. and of XXXX of EPS accounting rules to now $XXX old is As cash the to non-GAAP operating our $X.XX, operating we just guidance there under operate how our operating expect our GAAP XXXX non-GAAP we and approximately no a as change under approximately be be approximately flow the the of million. that of and expected note to approximately new to to an EPS rules, the XX%, impact $X.XX, in a old cash billion, result, result our or same be our implied our midpoint Please because cash to flows is and new transition flow

the filing sum that on want highlight website. included more today revenue with in and we rules please the details to see On new was our to impact compared our X-K I am revenue expecting more is which commentary, to our than the statements, X% basis, CFO to we XXXX. achieved the available progress. financial annual X% pleased on now growth I increase call, an apples-to-apples are our transition today’s with our by For of To up on

non-GAAP improvement year. $XXX the for And expect midpoint which expect the a to of $XX operating the me profitability for much it’s approximately million on to year basis cash, XX.X% last XX% of pleasing through of to We compared rules to million at of improve last over XXXX, in to approximately see old land operating so the to flowing margin, to year. we increase an now

passion now and with I make Cadence team large to operator, drive finish, the I their Before thank to have year. for in would successful, discipline, extended the they operational very that, take for the us we our to part will all like raise our customers And questions. played for allowing their guidance and

Operator

[Operator your the question Instructions] And from Garg line of from Monika first Capital Markets. KeyBanc comes

open. is line Your

Monika Garg

questions. Hi, thanks for taking my

you equivalent X of XXX your if operating pretty I do operating be think where could at to margins, X at all, years? you First next XX%, look as John, good margins highlighted,

John Wall

operating Hi, grow to Monika. Yes, we believe there is room still margin.

and confident are model our strategy us. design opportunities believe that enablement We growth additional our opens system for up in

Monika Garg

growth would if plus X% we back like X.X% of revenue looking – guidance, first see the growing guidance. Then deceleration look to Alright. I at X% half close is plus the is the reason in back at half half? but Any why in year-over-year, kind

John Wall

of good. one quarter the is wouldn’t business over or half the results too any focus Overall, intensely on one individual I other.

operating up I all we are for reasons now focus for strong The X% improving mean, to more Lip-Bu to compared revenue is XX% year-over-year. business and that organic about. Our that that’s talked and on almost we non-GAAP last said looking of all XXXX, over is achieved at the year. like very XX.X% on is growth margin,

the timing The is a note other of cash, collections, due for the strong just half and within between to that’s flow year. quarters particularly on to thing first this shift cash operating

Monika Garg

you. Thank it. Got

security enteredsoftware you could would about talk strategy? be So Cadence last and X Thank that you. on Cadence years M&A Synopsis back, your interesting for market views here for one Lip-Bu. about Lip-Bu, market

Lip-Bu Tan

Sure.

the on design really to think in is our are the I verification is part our there parts question, then high-quality and and stronger that success clearly and then security looking we are how two of drive also of side, customers, for customers. it, provide to one including security at to the

So question again? can the that’s the – regarding one. second second And repeat you then question the

Monika Garg

Yes.

for Just views the wanted how look to understand you at M&A your strategy Cadence?

Lip-Bu Tan

to it -- managerial approach talent and to a M&A, either the top of we into and fit also on with clearly, Yes, side, the a And technology in focused the very really also day shareholder the differentiating recruiting disciplined end bringing at in have M&A. and providing our we want or technical the strategy return. the the overall customer the it’s

Monika Garg

Thank so much. you

Lip-Bu Tan

Thank you.

Operator

Your the line Gary next from question comes of from Mobley Benchmark.

Your line open. is

Gary Mobley

my Can Hi, question. hear okay? you for taking Thanks everyone. me

Lip-Bu Tan

Yes.

Gary Mobley

about drove the and strength, I can licensing recognition of it strength, upfront asking want the was an start business product emulation during revenue what second IP the your the conversely strength quarter the to quarter, like to second looks you that’s and speak repeatability line. in then the quarter of we know weak

what’s the year And weak of in was can you your for so the quarter emulation? in and outlook balance confirm the that emulation

Lip-Bu Tan

let start So, then first will John and in. me fill

TSMC, at X-nanometer us. sensor another strategy, refi our of and I [ph], with application. We a on PCIe. the quarter with storage major company, like and and chip mentioned success company strong also So, is with couple the customer, X-nanometer working DDR key at the it’s leading It’s couple first PCIe test leading the customer in overall, highlight working working mobile DDR well of a and for really DDRX TX we semiconductor the us of with IP

over business IP and the think and above logos then Tensilica at I mentioned overall, XX% new also doing -- So, is revenue. going the of well X

new also minimum our we think even be this as we a for acquisition year. I so And impact will quite And IP leadership overall, it just though know, happy portfolio. added are the with of and recently you our semi

Going forward, very exciting infrastructure, for exciting hyperscale. I that think critical the The is one for would it’s us, for an be us.

In the I excited of but and mentioned have. it’s quarter-to-quarter are of highlight are Jasper, year we coming is to a the X may Palladium, do think performance. I really overall Verification just change, Suite the well. up also business, This that, with Cloud, lumpy full up but new We customers for emulation, Palladium orders, and X is Verification overall, we what consists terms we clearly to quite and VIP. pleased And and nicely. we X repeat very our we continuing about so want the on that third like focus of Xcelium, Overall, then Suite Protium,

Gary Mobley

there Okay. model your license duration no I no to is should follow-up a model recognition, a point or the going Cloud, your to be had assume question to it really to Cadence SaaS change we Cadence, differentiation about perhaps just change we larger expense revenue and vis-à-vis average really should competitor? that of operating and view as more of

John Wall

Gary. fair optimize customers product It’s for early Cadence and it’s another more a That’s valuable a assumption, offers say Cloud too to customers tools. that. both Cadence portfolio and our their investment in way than addition to to Cadence

Gary Mobley

the you the change no, in recognition average duration? expect But Okay. license don’t a revenue or

John Wall

too it’s that I don’t, but early to definitively. say

Gary Mobley

you Okay, Thank fair guys. enough.

John Wall

you. Thank

Operator

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

Your line open. is

Jay Vleeschhouwer

for in regarding Mentor, the of in Synopsis; industry with more of start hasn’t John. of parallel sense kinds have and become with have seen with month answers that job Thank interestingly quite in with more more that. of examples and these done the you focused more we are technical that some evening, Cadence also been seen examples industry? you overall and and me partnering and we you in seen in has your more increasingly But of the Siemens. Synopsis have it’s And really this Lip-Bu, following participate earlier more we and around relationships more with and the EDA Good the kinds let think of software to Lip-Bu you I also and and universe on partnering, development relationships; do answers it’s you. in important great know that always you a a the little internal much bit [indiscernible] becoming evident participating own in very landscape,

Lip-Bu Tan

Yes.

think I So two questions. part of you have the

technology and to have drive the strong activity, think I machine especially when driven overall the driven one design very about learning overall the of is technology, the applications. in EDA also So, by learning, EDA, the data the waves whole is deep whole I terms and good we say

in So, and are it that. very see design see increase the activity we we to pleased

side, are is the broad-based demand solution, also So have overall And other designed been innovative we our EDA part then the quite excited. well from the enabled system for received.

So overall overall, we excited are the about EDA environment.

Regarding of the them on also couple that. mentioned partnership, and we you clearly, are working

cases past highlight on And and couple partner important also peers MathWorks what the we and the so customer of and in customer in think to we the our partnership many with I and ecosystem to partnership National others. and the really Instruments working some focus them partners success that it’s together with support with needs

And and have also. then that so a we continue great to we do success

Jay Vleeschhouwer

which if you Pegasus, With for respect succeed in at I you about announced over is year let new status but some that growth to hard that? might know haven’t you incremental important is ask them. to stimulate DAC, of shift talked market, products that for me about it’s three technology, what’s but share one the a ago Number you. it they you, product really

PCB Secondly, have a Sigrity ago? business that just so incremental then you clearly for XX-nanometer for lastly, we of of resurgent saw do launched that Synthesis years XXXX, see stimulate for there Synthesis, you? as requirements some incremental you could perhaps And source under growth as you in X

Lip-Bu Tan

it’s good Jay, a questions.

one know, non-manufacturing related Pegasus, the address is by this the you for as me area. Let one. –

customer excited making of have with multiple side addressing progress tuned. some all the line our good, that is we any And foundry quite Sigrity cloud we requirements. Synthesis and with in to great massive but cloud and that then then on specific have far are the we that clearly, then from then focused are other success is are product a terms guiding far not great we on we the certification partners and the parallelism approach new are really stay then the is just product of also unique. now, excited the in that it And that very Sigrity XXXX, not clearly part back We capability we have are with most in advanced design that the can helped and PCB very about and we so so right and about the and voters nodes enabled, so and a I the we XD think tied

think for XXXX. into point, So, this But built to we our all back great are making just true already Stay guidance overall your it’s I tuned. progress.

Jay Vleeschhouwer

Thanks very much.

Lip-Bu Tan

you. Thank

Operator

comes next Your Rich from from the of Valera & question line Needham Company.

line Your open. is

Rich Valera

some your Thank we affect to couple on versus far customer with on some the you. the market. the are issues where some CapEx, you. of base? been your semiconductor the but would demand as cycle of which on the sense The concerns of you of you they has as are get how question macro I within noise about now well, I memory the side particularly the the business, none environment around seeing which strength say customers, just on push-outs industry for quarters cap with how a EDA side kind your in in and expected expect wanted trends as has Thank your of are there of just been you semi in And there industry the would see ago

Lip-Bu Tan

good question. Yes,

to side, and clearly for of area well factors some the will as big silicon on workload And analytics that. we earlier, related increase data [indiscernible] I the to mentioned and the and the deep on see whole couple data-driven very be think like we of very well-positioned technology macro activity mentioned changed earlier, data, learning that. next related, photonics the And due are some and decade become that we the more of I the and the are new going I So, and fix machine-learning, for also economy. positioned then XG design doing

design is that. we and really related EDA overall activity to the think our increase see I more the So, and of

am overall I cautiously on think optimistic I that. So,

for Regarding us. will to storage the be critical clearly memory memory the related memory, data and

delighted. We are

customer. We are memory the great progress making and on player a

in the highlighted quarters. two have past We

on some progress the engagement continued related, we progress We that with storage make saw good storage player. very and of some to the all of IP the highlight we on just

I the so there And continuing cycle, optimistic, cycle, semiconductor am a because design the trend I cautiously And is overall see activity very know as look good. has regarding lot. to we is think all we the demand increased a but

we So, very excited are and are well positioned for we that.

Rich Valera

more do on could, appreciate there, fairly I what penetration that in surely I trade your I technology, you of they that market risks current I in affected think also potentially how types China past market sense that development knowledge all the just including more wanted about you that you China for on in have the get do to market you. the think one of being are and Thank by the of to EDA but with situation if maybe sensibly color, that talked the opportunity Lip-Bu. internal just actually if your U.S., market. And you. and your see of and Cadence you driven could? Thank opportunities the

Lip-Bu Tan

questions. Good

best, done the to meanwhile customers. make about but lot the priority be being our something So to think be own tool to us. of And we support we best that for our you overall sure lot well-positioned that’s to of them are customer China be growing committed for developments opportunity. that sure as is we partner clearly and attention paid self-sufficient we and attention a globally, the really domestic to very war and we And are well is And – pay to important China build supporting industry the for including customers I government we is our and high make hope for IP trade us then a the most our and overall, the and China, that. we a continue know, a we on in have trusted

Rich Valera

case, to you your had that I as still helpful. confirm at the of businesses still final this growth I grow but that? the being you just of about the wanted assume Okay, am IP the quarter case all talked this assuming is last would was your to maybe segments fastest here. so I And the commentary, segment from Is but think likely were that double-digit looking that’s that year, but another likely one, one

John Wall

mean, Yes, can growing at look what I not for we groups, to expect yes, XXXX. I continue individual but group fastest to that Rich. revenue the results when Yes, by are be say is I our product guiding we product IP Yes, that’s true.

Rich Valera

very much it. gentlemen. Thanks Perfect. Appreciate

John Wall

Thank you.

Operator

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

line Your open. is

Mitch Steves

I Hey, two. guys. Thanks really my for taking have question.

The nuance, first the of what bit to guys strengthens, was quarter? dollar there the when I so one a you is that quantify tailwind anyway is know this kind U.S. of benefit

John Wall

There tailwind, was Mitch, was but a minimal. it

Mitch Steves

going the well the rates case are next same? same assuming quarter that to as be is And the

John Wall

Assuming guidance. the it already be will the rates are same embedded in our

Mitch Steves

is talking cap schematic Okay, so integrated not kind more how the perfect. with semi kind they doing. guys more EDA is a are design now And just are second of then the one, being about of question what

So any guess semi why reason is the there cap in the EDA the and both you company integrate would I future? company

Lip-Bu Tan

Yes.

Mitch, include cap speculate closely with from work and all so am So to ranging I to going foundry semi think, the our clearly I we and the not ecosystem of agreement. the partners IP all first

the for providing And customers. IP to whole are we best best focused terms so this partner of the tool the be the do on is in ecosystem how I and in we think

Mitch Steves

market last companies at just DAC, for the of automotive specifically then automotive there is on I how one that design? that one guess guys view And the a specifically still is private fragmented side I noticed, it. or Got do space you lot

Lip-Bu Tan

are that. about excited very clearly, very are automotive vertical. on we we Yes, well-positioned And

automotive a big can into terms the also platform. tell, putting this machine connected a components by As EDAs very automotive think maker the we X and deep are have now great in they the and effort I in more stay electronic they tuned, of from a you engaging Tier learning cloud lot everybody with device them learning, of heavily are driving vehicles is and and to to

in and also We terms tool. have opportunity IP great the of the

well are supporting positioned We for them.

Mitch Steves

you. Thank Perfect.

Lip-Bu Tan

Thank you.

Operator

of question from Davidson comes Tom the D.A. next Your Company. Diffley from line &

Your line open. is

Tom Diffley

follow-up is Maybe on more board design chip have circuit you first side? to more printed the of it on question good Okay, exposure your Rich’s business afternoon. China, there, side on on the do

John Wall

Can question you repeat the again?

Tom Diffley

Yes.

your it Your design more exposure – is actually in or exposed design chip semiconductor your or tools? to PCB chip to China tools

Lip-Bu Tan

don’t but for we are I clearly we more design breakdown, think overall PCB packaging and some the – our side, from that clearly a opportunity activity. then then it’s related more the continue support I Allegro we the in good customer. have think but area, engagement And and our chip have us we to

Tom Diffley

great. Okay,

the several the you or aggressive moving think advances right now what a the little be security been questions of talking on on there in but increases been make there is the for and to cloud? that about cloud, do couple Just the to has moving there time industry on cloud the years has and some the more towards small movements here

Lip-Bu Tan

Yes.

cloud is clearly good I and us. questions high Cadence think cloud priority have for you datacenter and

on to in cloud adoptions Trio and Palladium customer co-readiness to something traction our Amazon, that is liberate we customer and that’s that cloud delighted, is are are provide from of TSMC. and by available Microsoft the to highlight collaborating available and exciting endorsement a term couple Pegasus have and cloud manage we offerings Arm of Google we and We with cloud and a great

available foundry and out to in customer working way So that last feel been customer. we our more and have IP through to security cloud. and that overall, deploy it’s scalability rolling have And provide the and exciting flexibility importantly I their our satisfied years to to really and issue managed an optimize make to with then broad drive really partner a sure in that XX comfortable and our something the partners productivity, by we is think that is security in very that’s and product products cloud customers

We are customer the success very on focused here.

Tom Diffley

Okay.

are you moved it point benefit talk customers when a the also of you about customers economics moving cloud, seeing the view? of from that capacity can of the is smaller mainly just more larger some of their customers, overflow their the So really is to

Lip-Bu Tan

tools question the both and of see major all be when some And productivity can answer the really it. that can over is unlimited And the see verdict is really the to you design the to that in really, company to from cloud customer your really of of and key performance then want embark also that and us, very driving the benefit smaller some excited for really and so to the spread performance design. and your drive for partition on really the thing the able benefit. the Cadence they day server And That it. can envy

So the the end performance for bottom big the and then either company really drive small and scalability line that the at design. or is to company productivity the the is

Tom Diffley

years X – business Okay. as you X And finally percentage becomes then look cloud big what business? how the when your is your your what as overall far vision at of as to years a percent of

Lip-Bu Tan

guidance this on Cloud customer are excited bit too a and then new success. focused about the we give and clearly we it to then on early Cadence It’s and are focused

with partnering hyper-scale leading the guy us. web is service delighted are We cloud

us. Arm also endorsing this. clearly we are very effort the are supporting are is major a We TSMC in and excited. and leader And and this

Tom Diffley

you. Thank Okay.

Lip-Bu Tan

you. Thank

Operator

question final JPMorgan. line the from Sterling Our of comes from Auty

open. is line Your

Sterling Auty

Hi Thanks. the questions. of guys, continue line wanted I to

the the the traditional your solution understand, On on-premise solutions? what the for versus is structure cloud pricing Cloud, can you help Cadence in us

John Wall

is Cadence part more Cadence will way to become that mission-critical Hi, believe to make our Cloud A product tools, and offers portfolio customers we another this our strategy key valuable. Cloud customers investment increasingly in optimize their to but our Sterling, John. is Cadence of

Sterling Auty

a you are that to pricing But traditional or of user Amazon, mean just understand opportunity how on per grow? some like process per Okay. priced per sort metered does this will

John Wall

that I valuable with and lead us value generally it’s operationally, key pay Again, drive to receive. portfolio Cadence use excellence and the security our makes flow to improved development customers cash that with That on and innovation flexibility. reward innovation, our said a when addition flow operational product productivity, at Lip-Bu and to continue Cadence scalability, We things, become increasingly as cash the virtuous gains the virtuous on value in we we focus cycle creates – product employees, to And company. will and then look cycle. we creates which customers return that believe they Cloud, for across customers will to invest and I cycle. virtuous a three they mission-critical new mean, earlier, focus which shareholders

Lip-Bu Tan

Sterling, Okay. customer support and want that, pricing clearly the really I improvement from our feedback productivity support is we really the way, delighted, because performance mean we the success. think, see In I to they improvement, can some that customer

Sterling Auty

you for impact it or the gross with is margins? hardware typically it of the cloud the products, verification obviously your actually to as is sense capabilities when margins actually given that you maybe that better look of margin makes And be those seeing what the and in elastic platforms, given to at particular neutral solutions it the low the perfect wondering are margin emulation first you Yes. compute which area, sense gross ship have gross to

Lip-Bu Tan

scale drive then to the think and partnership with can out and also TSMC scalability and hopefully customer for but really cloud. success a the unlimited enjoy too benefit provide service encouraged I we time-to-market customer a so of the the that and will our the feedback very very that early to the terms and partners able hyperscale strong and and far Sterling, productivity to are of really little Yes, and in bit tell,

Sterling Auty

that the anyway? sounds so earlier the it. Got collections then you just like you collections and mentioned expected, And John it perhaps last we of very year cash on collections, was in that the seeing flow what this some up-sell drives collections, question with things allowed just was renewals that either to early it other through anything in those timing maybe you of change walk or the have further into do the Can customers? would expected those

John Wall

No, strong hardware some operating first within it in year cash and and for be received flow, the first have We the a normally was evenly on the particularly this would mainly but and is quarters between half fallen IP payments more hardware shift side. across half the IP this caused just that to though. year that

Sterling Auty

Appreciate you, Thank Understood. guys. it.

Operator

will Chief I remarks. call now over Officer Executive Lip-Bu for you. the Thank to closing turn Tan,

Lip-Bu Tan

of strategy further execution, technology multiple with base In customers. proliferate leverage system through our the broader with waves enablement continuous design are to a and solutions innovation we well-positioned that our closing,

of of like shareholders, all support. employees proud hardworking of are innovative Thank are you this the afternoon. continued to and culture partners, We globally all Cadence. inclusive our thank customers Board their I Directors we and building would us at and joining for for

Operator

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

disconnect. You may now

Cadence Design Systems (CDNS) 23 Jul 182018 Q2 Earnings call transcript