CDNS - Earnings call transcript Q4 2018 | Cadence Design Systems, Inc.

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Operator

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

Alan Lindstrom

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

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

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

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

Lip-Bu Tan

you joining Good us thank afternoon, everyone today. for and

lines. delivering XXXX result base XX% growth cadence XX% report with and achieved to product for pleased excellent non-GAAP that are operating across year-over-year We broad operating margin revenue strength

overall that mixed, machine strong the continue the center environment remain technology and remain XG including AI we macro in confident While to drive learning, activity. design cloud data trends

In custom QX, we expanded mixed new our solutions broader industrial adoption Analog progress we Samsung which in marquee Our defense. design business, vertical Devices and our ranging targeted digital, EDA a We our IP our significant as applications, in into all automotive, cloud, and strong expanded partnership and areas. wide our company. medical of IoT, with verification for our and development of breakthrough newer of have included aerospace the with and relationship including importantly, segments reach achieved and to companies such broaden verification adoption long-term continued growth lines business signal continue several these made to with their make system digital through automotive products. We core is particularly growing when for the products. the in our We a in product in enablement that verticals delighted report I'm adjacent system strategy across semiconductor US progress and cloud expand of and our datacenter to areas. good

GE contract the in with major business top with year EDA in Hills our invested approximately Hills, in with technologies ownership automation developing machine advance Software. the EDA, of defense progress and and an Green the Earlier million won partnership contractor. new companies year, this very BAE IP about and a won research I'm we of Cadence contract and as including some have have beyond with aerospace We a productivity. with learning Systems finished made Green major interest the space good to at and look And about DARPA representing we we core very significant enhance Aviation expanding XX%. and excited XXX strategic

the customers been aerospace operating across as the and player Green deployed some is particularly including investment EALX+, automotive for and Hills with Martin, and are INTEGRITY-XXXB and security operating in and Lockheed the concerns in including greatest security X level and space critical safety safety in with such automotive, having an defense, including domains, social Ford. many Green aerospace industries, are leading top because Toyota increasingly and Hills certified is to defense, with highest especially its application the customers the hyper important and medical. security and in system broadly achieved Our Criteria Common of multiple embedded customers in connected system. the products real-time with OEM software Tier Boeing world,

Cadence wins of strength and our for customers and system, growth surveillance the a our loyalty digit good growth had the growing a XXXX. revenue highlights led in with our Xcelium during leverage in ZX. of reality also new both our customers. to in for good and trend the remains audio by continued outsourcing during teens for expect and year. XXXX market solution soft the companies expanding with technology year business accelerate both embedded which applications. growth fastest adoption and growth lead will for Tensilica strategy to highlighted strong high and IP strong in strong new safety, with with functional market refined for automotive at with Protium, demand we the Growing our significant I our opportunities drive expansions ZX open verification, customers by beginning had customers was IP The steadily. maintain We challenge QX up several now in our suite applications IP existing FPGA-Based augmented and simulator other grew vision companies. shipping double and to reveal XX the commitment XXXX key won verification year Palladium growing Palladium Prototyping of similar deliver security execution adoption

generally influencing hundred ideal which DNA of available the customers embedded half new for year. to our first Tensilica in is the be engaged with processor, for have We will and several customers applications

we we in MediaTek the grew we advanced the digital the in XXXX. selling design our solutions digital include very began flow XX pleased earlier the particularly relationship we tape X-nanometer Customers are Synthesis delivered using Signoff, year datacenter gig digital food For growing Signoff with new SerDes market flow with chips test in XX and On we cloud XXX with solutions DDRX with to out wins. our in actively our at the and X-nanometer XXXX our proliferation customers customers. than We're X-nanometer the technology. most market, first and IP the through QX test full on in more X-nanometer announced and notes of engaged long-reach chip We had from adopted early designs shipping two

front, was our growing solutions photonic Virtuoso collaboration Microsoft Virtuoso we adoption cloud analog Cloud. custom customers not adopting players, solutions. On Cloud flagship Last of the major one large industry have of our layout committed the RF Amazon using Services, Web with remaining both And that very Google June, in we it. Azure and to Cadence last introduced and

are to industry momentum We transition as continue the to lead we the the cloud. adoption pleased with

let it me turning quickly my comments. before John, over summarize Now, to

and a across products Software, the it our provide as that, the Verification will was design And security IP as financial business. good well to and now call and year I to outlook. review our and for our turn the over Green Suite safety enablement excited a our very our strategic our in With of software. defense about new John aerospace strategy system leader embedded verticals. particularly strength in Hills execution product broad I'm to partnership lines and Continued led with results

John Wall

metrics operating quarter Thanks, everyone. its delivered results and Lip-Bu financial the Cadence XXXX. and good all key for afternoon year and of strong fiscal exceeded fourth

otherwise annual new into as ASC sets unless The accounting and standard was adopted are ASC and against stated. on numbers quarterly XXX me under let results, XXXX more rules for XXXX present results both fourth you Before our We provide these of results. to we for to that new show XXX quarter for our our comparison year transition fiscal get known direct a XXXX based XXXX. Cadence rules I QX today remind and our revenue the XXXX.

Now for through fourth the the with quarter starting the let's the and go key P&L. results year

$XXX XXXX recognized year. some shift was we the revenue revenue on previously million the for for and and of billion total expected benefited timing that and systems the $X.XXX reported, hardware from QX both XXXX. As to quarter in deliver

just year for the quarter for fourth As XX% XX% a the EPS was margin GAAP EPS over $X.XX the $X.XX for and just for was over operating for the quarter $X.XX $X.XX non-GAAP for and non-GAAP and result, quarter the year. year. and the

XXXX. than XXXX, of the for be was the can $X.XXX benefited old from hardware directly earlier total million year the also and revenue the rules For delivery compared qX billion and quarter in which systems expected fourth $XXX to for

was $X.XX for margin the the operating for approximately over GAAP QX full for year. recurring $X.XX the The than hardware systems extra the quarter was QX revenue slightly the non-GAAP for and year. mix and result, for was EPS a in due was delivered The approximately As just XX%, quarter Non-GAAP usual both the $X.XX year to for $X.XX XX% EPS and for mix XX%. lower QX. was year. the

end. cash turning the million in our Now at Hills revolving million down drew fund and end totaled of cash balance credit $XXX Toward investment flow, $XXX sheet we facility year December Green to the Software. to on the

million flow at XX outstanding was million. in a cash million old $XXX were were quarter days; year. $XXX debt days. $XXX the for XX full result, under As was DSOs rules end the DSOs and QX Operating

during $XXX Cadence remains Our for DSO XX XXXX target repurchased we shares. million were days. of QX And

the guidance, our note Now rules. new for we accounting have to the completed revenue transition that

reported going ASC basis. be all XXX So forward, numbers will an on

XXXX. $X.XX midpoint we $X.XX at For the representing of compared to X% approximately range growth revenue in expect billion fiscal of XXXX, to the billion

to We EPS expect in of the to range non-GAAP non-GAAP of in of $X.XX operating to margin $X GAAP the $X.XX, .XX. XX% $X.XX EPS range XX%,

cash to range flow common in million. the cash $XXX to approximately flow be operating expect use expect of XX% And free XXXX. $XXX repurchase Cadence We to stock we million our during to of

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

conclusion, guidance execution, CFO our website. financial and will further as our as across analysis with You for our progress items well the pleased of performance additional I'm available commentary all find In businesses. in on

strategy enablement for in value paying is design and that operator, system driving investments questions. Our off creating with now take customers are and shareholders. we'll results And our

Operator

Your from from Pitzer John Credit first [Operator Suisse. comes Instructions] question

is open. line now Your

John Pitzer

ask afternoon, good me in letting for question. think should I through margin just gross it want March. we about December go Thanks the guys. solid how Congratulations Yeah, and on then the for the John, to results.

the having going as you March quarter, that there there? was sequentially or just was sales hardware else gross guidance. you quarter, December how towards the in And the For look margin margin anything at the But up all in higher know do impact us I March. the about we mix gave of on think

John Wall

XX% gross XXXX. shift every XX% That due to hardware margins like shifted and to XXXX quarter Palladium ZX XX% dropped into John, Yeah, it was being or from that the for entirely shipments consistently QX. in

for to and XXXX, to QX expect For we back go normal.

John Pitzer

and can the then you helpful ask I question. the That's maybe

continue EDA through and the are of guys right just customers up solid You And of going of lack think the results. one – I your model enjoying the despite volatility the to industry some strengths that of is volatility now. put are your

some growth think had will what backdrop by at you by in end the do of think be resolve you macro kind right China? markets some in and about year-over-year, these most What guidance that's uncertainties participate of for it for themselves being that in you think if how – year be look X% the impacted you the now? this the impacted the by fiscal you of macro, could If of

Lip-Bu Tan

impact the And thanks front in also have even and that of because they machine only very some clearly don't a the on see so a are design though activity good for and focused are so especially design but other John, mix, and our we We less end, vertical we very these the the front that that confident and opportunity shipping for impact of to on will that are the in growth some with we SD opportunity engaging strong and opened we market into for opportunity good are cloud Pacific Yeah, remain drive development so of system in is questions. we some driving can we us. continue market benefit in success very XG, the not we some and up more clearly of manufacturing learning, environment that can very volatility much and design kind customer. provide see, of we autonomous AI datacenter, end challenges focused we these other that And terms serve customer leading we have. company the place strategy put our the in markets us the that that the Asia better of end then and tremendous this driving a

John Wall

And John, here. it's John Wall

mix ticked XXXX. the XX%, revenue that some for of up page information CFO know of I China. asked Asia commentary. see by from You'll XX% our that that on On was that Of that you'll just see XX% four under to in geography last call. you

John Pitzer

Congratulations. Perfect, thanks guys.

John Wall

you. Thank

Operator

you. Thank

is from Capital RBC Markets. Our Mitch Steves question next from

Your line is open. now

Mitch Steves

two. thanks guys, had taking Hey really I just for my question.

not of embedded numbers, kind is gave there, but expectation terms of in just a the and core The to so very, one cycle out full very hardware focusing is years or actually of first relative guide, you this the obviously assumptions mean looking so exact what guys good three year EDA? on in kind but that the been the four rest of for what's it's now business hardware, I

Lip-Bu Tan

let hardware Verification is platform Suite whole Suite for the VIP, the customers our Yeah, I that's love and And mentioned Verification first. that XXXX providing the very have And XX for and customer, my providing just nice the get the be and very the Cadence critical design verification hardware function the Xcelium, existing for customer. predictable me just will the also providing and package we design. and earlier is clearly be demand customers. increase note a the started the Jasper, and very whole capacity challenging box not so the customer a and very for our the scale for so new for The advanced cannot to find side, compelling strong won a we on great customer more we that and

John Wall

XXXX, question very we relation and we Mitch, with mean, course, XXXX. for I hardware revenue in XXXX expecting was delivered of And And verification. to to in that for to XXXX that from included what's deliver it benefited a regard originally year of your functional it in guidance strong in shift were

verification. So compare functional and to XXXX that's tough make for going

Mitch Steves

and being here, longer a it in you twice terms Got margins this then now I had range. have a secondly, term mean, the target in you've I XX% above row. of of around been guys guess,

a four up is years if mean, I So now, coming base, revenue that let's essentially out? or say get you three guys higher

John Wall

an Yes, very of our pleased we're on and with both progression we're XXXX XXXX Mitch, hardware results we're years, with our from XXXX. to very in XXXX for that there for the guidance feel with impact margin very was confident but pleased and shift Naturally, making. operating revenue happy

Mitch Steves

Got it, you. thank

Operator

you. Thank

is question Rich Company. next from Valera Needham from Our &

Your line is now open.

Rich Valera

demand, had vehicle over in Lip, understanding think we've really areas the those Thank of good you. of experience of I AI demand have the have or with just wondering the and stress environment. My autonomous you have startups electrified seen market and emerged last the particularly that attrition of a Both some areas. startups lot seen turmoil China, current in any years. those I'm in few potential and weaker

Lip-Bu Tan

management I Habana do medical, I a and we're think, datacenter, startups, Graph and vertical I startup good well. and question. addressing the to they'll data to broad continue of the a so others think significant. machine you saw because of the money, many not to auto impact think so and I we're it's think lot very think it's intelligent to raise is the them AI And energy Lab the just moving heart, and so some learning Call, Yeah, is to for economy application dear into I my driven this the very Rich across

we and Besides are R&D continue significant offer. big. it. influence delighted encouraging out some seen IP yet and big in on player, put with to our market Tensilica tool tool, haven't shake of also EDA have customer deployment, on machine very, very and on application our the some improvement that see our us up to apply player dough the then embedded in clearly we it and We learning into be them AI lot massively is part hand, are tool tool actually for for clearly high we of other we because applications is deploying any machine and system very learning so And AI augmented company the the turned the other the a the And into to our the a support hyper scale they now to important the also applications. the that love reality –

well the received. very So XXX been have DNA

are about it. We excited

overall machine in is new stay compute think front AI and the this impact also I to training I in tuned, So side. going not think only learning the

Rich Valera

then in say the the if for Got it bogey. the if and John. the functional them could you give to XQ expect to X% wonder respect sort to us you'd I then with maybe grow to that out and of growth XXXX this rates verification is for where willing be corporate you relative put you'd segments you IP and a

John Wall

– teens yeah, I for high it verification and me actually to IP for – for mid Rich, functional let for Sure XXXX. for teens see, functional that high in mean year the verification for high was teens

to for – then and Let me the relation next in see year.

that the out addition came shift the we've I QX to of pretty 'XX. key think for thing out inline 'XX that hardware point that quarter much of is here an into with

we the But compare knock perform the all it's I think average strongly get there of 'XX, think verification. tough for the to rest us for on should think therefore at is, businesses we a So impact X%. functional to

Rich Valera

you. Thank okay. Got it,

Operator

you. Thank

from Davidson. Diffely is from Tom question next Our D.A.

open. now line Your is

Tom Diffely

the impact there's unusually it from Yeah non-GAAP, behind was what quick GAAP from I that? the guidance, to when looks for taxes good an non-GAAP so John, high question going guidance, at first look afternoon, curious like

John Wall

I'll you have Tom. to back get that to on

Tom Diffely

maybe nice you had Okay. – to defense that what market or the look and gain in share your enabled Alright products behind it wins aerospace through market. then sounds for you Yeah, and space? what core like big products in is is your it some how some that

Lip-Bu Tan

in so also the machine I learning targeted but we significant we're this customer, four contract clearly see a and defense excited. mentioned have excited working significant there's space income and are is vertical contract. we we And the really also why they DARPA breakdown we're us don't them that defense with you a can couple lot of contractor our of about successful IP think that with of a activity potential, we signed we're aerospace of couple especially and major Yeah, AI market have we area, development and that's aerospace and very big with EDA a a and and have that

automotive So this focus I defense overall vertical, on so aerospace and think a we're XXXX. excited kind we verticals the and three datacenter, one that we of good and cloud this have is about very

John Wall

Tom between price share to GAAP this not and that compensation, And our return, share results back non-GAAP we but GAAP tax based difference could come may it's year so the impact, our results. tax the but of need non-GAAP but doing in to that's with with share do expense use on it just comp in up you we a lot picked in well based our

Tom Diffely

into eventually. it's it at sounds like that on that developed sounds space is Aerospace is moving where goes for market critical their Green the security with belief this additional sectors as when like the other your kind into you're automotive well and really look helpful that's and focus the Okay acquisition Hills over cloud technology finally you regional this of Defense

Lip-Bu Tan

we for I an Yeah, this acquisition I XXX and strategic a of investment is that this of board we're join very think and this million that make, the investments all, would I XX% company first something and is excited. not the Tom, think, is

us. to level in and is this this X That's to and embedded business. safety beyond and spec connected up underwriting billion new software about we very First EALX+ aerospace, well to This a industry and billion industry nearest system our and will exploring core excited. critical the expand safety this with the tight that very medical, my us customers design we up strategy for as security. Cadence and system that hyper a it script are the been and embedded Green and in combining is that is of level open of our many being they ties of adjacency industrial I providing the security the X differentiating hardware very become are automotive, Hill all, challenge the that have now opportunity implement the doors expertise terms certified value try a unique mentioned closed of world, with lot e shareholders. next estimate, And for security the and system well for the they expertise positioned very and so at This and critical to in like highest

Tom Diffely

Okay, that's helpful. Appreciate it. Thanks.

Lip-Bu Tan

Thank you.

Operator

you. Thank

Our Jay next from Griffin Vleeschhouwer Securities. question is from

line Your now open. is

Jay Vleeschhouwer

in about last terms differences Good systems Lip-Bu, mix other. those what or your perhaps they in behave talk one you you the select about of as any the more tool how discernible of versus buying customers over customers their terms talk how evolution customers in could evening. patterns, you. they importantly, serve years, and semiconductor Thank of mix of the couple of and

be had the post connected in up? your which increasing – for AE follow opening for your that year, largely in I but a or over requirement is year, AEs the to last would noticed is broader also that that especially been globally, We for systems for you particularly significantly over domestically EDA, business instance you have then so last a case AEs,

Lip-Bu Tan

questions. Yeah. Thanks very the Jay so much for two important

to comprehensive better and we're and more important even service demanding companies and very all they then them terms their of of the serve much to and that them about then of performance are silicon total their that. satisfying board tool, packaging, really, are timetable them. modeling at is time system and So that differences. model PC more system, they to and to we first for we and provider, critically are for them really simulation question service we're envelope the very as support that beside terms also we are And of to also ASIC the well them to to they our in understanding you important we are also and system product. that requirement doing to how some requirement requirement is customer, the them. then meet able they their are providers their supporting the semiconductor power are compelling they and layout the the the is schedule, building in then you their many requirement up system can them love the – come They EDA have about Clearly tell, system the and also meet From are to positioned us. deliver system modeling market other meet subsystem they're And the excited differences level and part company and looking and have and providing

very and overall, I why So US this, a Samsung, you clearly call and that and company very and in to game opportunity support very the Synthesis we to had very, we We success, them I requirement fashion meet semiconductor marquee digital to have adoption then support what explain we're well. adopting need – And both increased the why drive we to to for it requirement think the doing the full increasing wreck of timely we excited the them, tool, about changing The of side of to that's side highlighted semiconductor AE flow semiconductor scalability. of our performance AE on our broader we're from we our course that couple had support Signoff I yeah. for the us. MediaTek because and are and demand, our system

Jay Vleeschhouwer

follow could broadly you and UM US up, about but you're momentum portfolios. seeing Protium speak mentioned you the with the and Xcelium, As more

a in instance, adoption the Tempus, you've of are Innovus years? momentum For other is seeing digital newer that or last fact digital in for over broad you Pegasus introduced the Genus, seen products PnR Voltus, the largely in few

Lip-Bu Tan

I increasing so our good we steadily adoption, question we're emulation hardware clearly pleased mentioned and the a as very also earlier and Yeah, that. think with it's it's Protium

In about to of customer and Tempus clearly also excited I the is adoption for very digital Innovus, successful example & Genus and flow the MediaTek leading point you for way Place same adopting Samsung, and think then our out them terms that Innovus many with thing market Route broader flow, shipping excited Synthesis, are for digital we from also our all we about.

we little critical will think sometime our terms the turned Signoff off think very time, Place we because corner. every takes think and a of to in the I the will besides bit best & take and now is Signoff of kick So critical I to tool want finally, of kick category be Synthesis it I maturity I think in longer it Route production. is our very kind time Genus now and off the will and it

have hard full XXXX. flow on working very we XXXX, for win are stay XX We tuned

as by. We the have more time too exciting to share you count with go

Jay Vleeschhouwer

much. very Thanks

Lip-Bu Tan

Thank you

Operator

Thank you.

question Capital Munda next from Gal is from Markets. Berenberg Our

now is line open. Your

Gal Munda

questions. my taking for thanks I

kind one, the of and what few more just each contribution developing said bit a the revenue in Jay to can in maybe maybe of we last seen semi XXXX versus of and bit terms a versus years? be on and just maybe I first John, today proportion expand systems, you growth that share The represents of what if how like have specific

Lip-Bu Tan

winning we using also customer. semiconductor notes. both market leader broadly over you the they are because will proliferating performance our significant and they for. scalability and parallelism are learning they and time you can run and AI as shipping most advanced using share They the scalability us. improvement happy in are to well of see The PPA very tell, some see are And for we and moving performance, and mentioned Yeah, their not can approach the the earlier, I very marquee have, with I the and and machine look as clearly to doing we the time, and cloud the side, sector that the now we think in are of the

have stay provider, of from the success. opportunity in in heavily On are tuned. and engaging we tuned, and very service front we we are system time highlight time will and of our we us excited, Stay a lot to

John Wall

XX%. our the two is pretty growing, the companies that Gal, is business. comes been business of but consistent because last That's three years. so from is approximately or systems our the And businesses semiconductor system That's mix

Gal Munda

do focus a me growing obviously base understand makes base lower how in you And like Thank you. is. very think to fast to big a midterm, Thank up, fast the can what probably a That on now how cloud, as the market follow grow the how you. maybe maybe this it's opportunity I'd could like you sense. and just from is then bit the and addressable just tell

Lip-Bu Tan

we've mentioned conference industry STAC launched – last earlier in and leaders that June major with and Cloud three Yeah, largest exhibition and this Amazon, our we on the Cadence and [ph], Microsoft is Google.

We excited that partnership collaboration. are about and

that them security organizations. very with we productivity of driving their so focused within have the of closely lead on cloud of customers customers the driving the then we're taking we that. pleased productivity on it's not in really and sake cloud, cloud it's the own the we're adoption clearly the momentum really can industry And transition and customers, our very enabler performance and they selected and for and are that our the and terms for We and with providing work our with scale and the performance to provide just focus

Gal Munda

have wait cloud move an have in and kind of of those is Do what could the on Or for the workloads we'll that you proportion have maybe the customers? kind flow see? to future of of idea to

Lip-Bu Tan

the I only of momentum performance from then June growing simulation, that we and workload some is it's because think the we quite to last and productivity drive and characteristics, and have cloud to customer. of adopted want And the happening. see have Palladium the still the you wait to early, now is make then the customer clearly adoptions we really cloud. And sure the also by broadly

customers our the make doing of So kind just the and tool performance and having see benefit we're driving that. of by that tool sure then

Gal Munda

so you Thank much.

Lip-Bu Tan

Thank you.

Operator

you. Thank

Our Gary next Mobley from Benchmark. question is from

open. line now Your is

Gary Mobley

couple IP to almost it's afternoon, Thanks more really first IP more business growth a about was the of relates question. and that one XX%. growth haircut IP of the hence of in million verification the ASC taking that in for just A for gentlemen. Good IP has of the your versus been business, questions XXX my from $X revenue business roughly well, XX% all like

John Wall

rules X million, and Gary business reason approximately of it's the XXX very, it's because thought and – in the reason X consistent in new million way. shift timing in So – kind that a ability earlier not we XX the underestimated grew under h that's XX% from our as in million – write we business the in of revenue IP the the XXXX, XXX to year to that the XXXX was very terms XX%

revenue we much the So very ended same up with timing.

end. X million of IP kind that in wasn't the difference was So all it across all spread businesses,

Gary Mobley

the IP, now adoption proliferation architected invest out standpoint myths this to open, how strategic helpful. course being and options it there. And that's source? you a ability with RISC-V And with guard the license of is in impacting right, against open of Al for source respect or to how process Tensilica open from the Okay. do

Lip-Bu Tan

well I very augmented a coexisting tool us. all shine it coexist specific, so architecture and and clearly reality, And – embrace different double it's them. mentioned excited digit And very IP we in And we source also position well, our And think cases, architecture support and now – and XXX in open call RISC-V towards automotive, support on right some growth surveillance IP, we so really support and it some about is I the we Tensilica and for the then as and really now the are clearly processing. we in so and very to more strong for are another embedded DNA Tensilica are we we is any we cases specific moving processor and depends then by workload vision and different a clearly audio architecture applications. I received Yeah, application. is moving our domain is

the speed so is with big then And open high connectivity. other also And this we think opportunity I that.

in excited datacenter proven speed it's [ph] the we're for gig the this and XXXX that the silicon the X-nanometer is at also. and high XXX well and is about So received that very have a long-reach and must opportunity cloud a

Gary Mobley

Okay, Thank got it. you, guys.

Lip-Bu Tan

you. Thank

Operator

you. Thank

Garg is Our from Monika next from Markets. Capital question KeyBanc

now is line Your open.

Monika Garg

taking my question. for Thanks

do to for looking I'm up First, more have you the what what about with are when develop from details partners on partnership? talk any you And products Hills, with to to Green with them? expect this? your contribution you're you looking Could looking achieve

Lip-Bu Tan

I'm very lot way also and we architecture first I it. in the offer, Monica, reliable class protect a need very take that all exploring and it proprietary the couple I real joined and and are time not they a this hardware excited clearly protecting we ownership in about with of about security performance the tools security very We collaborations. partitioned development to are software system of call this and and have [ph] so [ph] just for highly embedded it. excited safety middle system board this operating you and areas and world Yeah, to of

how and fronts. of go-to-market some different aerospace secure the that we bringing besides and clearly multiple the into can EDA strong and are terms technology embedded can end-to-end in to solution that each something go-to-market. They of and – is semiconductor proliferate that then software and we many we defense clearly leader and is the and in and collaborate leverage all very their medical IP to and this verticals unique we really the collaborations how then one strong in providing very and clearly defend software in and the solution. a do automotive First then our strengths areas is security And are hold explore of good respective industry there's secondly, in safety

we system the way. together of also co with collaborations Verification can IP also future. activity Suite, And a effective explore serve others look terms more our we so can in In our the that can collaboration markets vertical in the our and of marketing technology we clearly at some

this get – from both prioritize about exposed do so excited you and stay and can for we're and we customer how the on companies we reporting explore that So do the wait – to how it and agreement finalized something increase this we go. have to can be revenue us the I'm multiple tuned as together then that we we that will all that and had it to and to just really work we can't then we meetings

Monika Garg

X% ish did guiding posted you're you're Are being midpoint XXXX 'XX. from then 'XX? still adjust for goal less revenue X% for emulation to kind than of XX% like for I I conservative? mean for And 'XX and million just like but from you even percent you guiding X.X – John, in if XX 'XX, 'XX

John Wall

Yeah, to hardware benefits Monica, that say, impact shift remember thing while XXXX, exception has with an doubled Like on XXXX, to quarter was the is of it think from there I the and inline the revenue XXXX it XXXX. that.

talking XXXX. from about X% like $XX for impact a XXXX growth got It's So a you're revenue XXXX. million into shift to

XXXX, revenue to that 'XX X% like we'd million be the revenue of if has XXXX, impact. be It's growth into on a growth in would closer but $XX hardware had instead So of it, fallen XXXX million revenue without X% swing 'XX. XX doubled

Monika Garg

look 'XX if XX XXXX, around generally, million specific nine XX been you're I guiding kind ish Got for of hard range, any then expenses you million, CapEx to it somewhere are and for but Cadence about? for thinking has zero

John Wall

correct expansion in what CapEx support and flow there footprint were you're on R&D seeing and of on that's resources Monica the field that's market customers. And through engineering shipping the that side. our investing to Yes

Monika Garg

by normalize ish million it Does that to XXXX – then? XX should range back

John Wall

XXXX it's hard to say we're Well, not guiding now. right

Monika Garg

improvement two you margin margin way 'XX. Is mean, have for bps XXXX years, longer seen that you bps, the one, the I almost expansion? we then getting think Thank last much. Hardest, very are so about XXX last to term strong operating

John Wall

Again, in everything know our guidance. we're not XXXX we guiding beyond and is included

Monika Garg

you. Go thank it,

Operator

Thank you.

Our final Auty question from comes Morgan. JP from Sterling

Your line now open. is

Sterling Auty

And on video squeezing the end a can Hi, guys. AMD and the understand still earning as see exposures end, as the I of help get go couple one from be for on to questions thanks. that your them questions the season whether or landscape Yeah, other me lot in. different put across into a they context? results Thanks the and helping they here, should investors one give just is through of it you how semi a sense

Lip-Bu Tan

and so the as clearly the mixed happy and that with clearly the I are sector. in And Yeah, earlier, the question. customer, a very leader the they far leader are again, Sterling, that's is mentioned a our very we supporting with good are environment, we them industry engagement in

So that. support to that we kind is you of priority to highlight our high

I infrastructure and think some with renting that OEM I autonomous way AI In the leading cloud engaging and also we're all infrastructure is mentioned phone exposure, leading and engaging the clearly Tier cell driving, to the of provider. the the and there this from terms very we earlier, of learning machine sector, are well we datacenter that heavily positioned of are then X then the XG, some the customer

and are the and new area well customer we're broad we of increasing also and SDE, are success vertical in our also a we companies thereby one of clearly a our like we're base related that I Design very that position, whole to in Enablement, so the in then terms of is for and over And System think have diversified, is system Defense expanding clearly very clearly Aerospace and side overall we're also there be excited some we of that's also thing another a automotive area going us. the big the medical market opportunity lot time

remains and expose broad, we very system think the very don't and design to market. vertical then specific semiconductor I strong activity any specific company overall, we're across or sector So

Sterling Auty

great. Alright,

of while gave target. Synopsys hot margin reported other a three in topic year out terms their they fourth is The conversations quarter, came

I to it. the head of to just hit one questions call alluding the want earlier think was it I on on.

an whether given give kind three You target back first when future, of margin we to if update as your that a give started and years a in operating come decide and target you five all subscription et you the out it to you ones to cetera? guys new transition one way there success the margins and over pointed a had expect out, long-term be XX% you've to is in you the might of back were years thought XXXX, when the

Lip-Bu Tan

question. good very a it's Sterling, Yeah,

disaster now if followed then year XXXX and we last continue to point success see point very efficiency, me XX time are the where we the success continue also initially for will years, we been it drive we I in time then for guiding to meanwhile then tuned the and XX the at you long-term continuing to we of shareholder and will If that we you every and and can that a now a the to digital clearly 'XX to at now. side see you and are sector have our teen reaching can recall then invest We're and you – we from XX you mid for you you then and and guide we the right the in G&A, see stay that and the going. starting is R&D, implementation to lot right right investing highlight to place

X-nanometre those investing a customer, provider move now SD and system Our take future, the and the we're the and investment. leading also we with on the cloud and of – leadership the the we're and in to into in some custom had moving be focus service we X-nanometer, to analog vertical continues

longer the for. And drive time to when efficiency operating AE support, we success. And shoot you stay to term continue will right so comes, we the guide with the that then tuned, drive and margin we like

Sterling Auty

Hills Excellent Green one accounted? non-GAAP income statement And general revenue The What little John. the get catch. we sense at the for the didn't where accounted last this for? does see just and run actually of investment, in of How question Hills just in terms it's rate at will any I moment? actually housekeeping Green

John Wall

in for Hills anything using revenue account of disclosing a not run investment at equity the Hills, we're Green Green we'll Sterling about accounting. private but they're the So method company, rate

proliferate results. our But there'll is and see our in GAAP especially you'll income other our a it nothing has proliferated the such of won't required and defense only levels line line. on only, show aerospace expense profitable, as are security safety especially industries be and and base results – of automotive. so of non-GAAP Green So in where for Hills results. Hills be Green yes, and the portion GAAP non-GAAP through flow broad up is top and highest in customers It'll our income other and expense

Sterling Auty

thank it, Got guys. you

John Wall

Thank you.

Operator

Capital Thank Markets. you. we Mitch from have Steves And follow a RBC from up question

Your line is open. now

Mitch Steves

in. thanks guys, for back putting me Hey,

any Just really or change different guess has trade quickly, dynamics. Have one of seen as the is negotiations of usual? other of topical China items there in I sort kind US, you the or it of guys been your terms still any sales business essentially

Lip-Bu Tan

Yeah.

question. I Mitch, good think So

in well industry. have China continued We domestic – we continue semiconductor growing has opportunity. on out done China to And representing representing and build a remain to to in we committed

we well so throughout. And global positioned are customer And are our supporting we there.

our to stay And think so as business support we continue and usual tuned, customers. I

John Wall

we've Mitch, steady And in seen in China. growth revenue

of it's you of now in in drove Asia of revenue in X% XXXX, under X% that roughly our CFO XX% page revenue just XXXX referring is four and XXXX, XX% in you'll Asia, If China of XXXX, of XX% XXXX are XX% XXXX. in there, commentary China. is our see to revenue but

Mitch Steves

thank Perfect, you.

Operator

like would Lip-Bu the closing I call you. for CEO Tan, to now Thank remarks. to turn back over

Lip-Bu Tan

proud ago, Board customers list to continued Fortune for. is as for the in magazine thank hardworking for our a best and wins solutions from culture and our and capitalize through further the this Thank us received by companies joining strength you. customers. Thank afternoon. innovative all we fifth year recognition innovation we highlighted of a few their proud partners, like and of at enablement of support. shareholders, Top strategy the row execution building all you on inclusive our XXX make Fortune We're closing are to design the system globally that of our would days technology work broader employees I the our Cadence. us The continuous culture In has to positioned we're of base Directors with multiple for we and proliferating

Operator

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

disconnect. now may You

Cadence Design Systems (CDNS) 19 Feb 192018 Q4 Earnings call transcript