CDNS - Earnings call transcript Q1 2020 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Josh and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session.

turn of over Investor now Senior Alan I'll Director Group Relations instructions] the to call Lindstrom [Operator for Cadence. ahead. go Please

Alan Lindstrom

Thank by Senior Lip-Bu Vice like would Chief Executive first conference and and John everyone Tan, I Josh Wall, and call. today our earnings quarter Chief to joined am President Officer to XXXX you, welcome I Financial Officer.

through will of call is our the cadence.com be be archived website today's on available and copy A remarks our this June through of website XXXX. webcast conclusion also call The available of prepared XX, today. will at the

Please note that, from and will the differ expectations. results those contain forward-looking that materially discussion may statements today actual

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

In comparable non-GAAP evaluating addition GAAP, also Relations the useful financial present Investors GAAP the at are addition direct in accordance cadence.com. using also with encouraged it with we results. business, non-GAAP reconciliation measures available to Cadence to The will of are Investor financial of Principles financial results GAAP certain in Accepted to certain and Accounting review most their review using be reconciliations Generally measures. measures potential investors section believes that or today. non-GAAP results management in results can our financial to prepared financial

or today's note call glitches remote that if longer from Apologies earnings conducting and the social ended our are financial April there are in are take the than practices also usual. dated release related for would CFO today's and like website. handoffs a also to I commentary XXXX, advance we locations. XX, on distancing you therefore are quarter Copies of available tables little to March XXXX press XX, adhering

And it to over Lip-Bu. turn I'll

Lip-Bu Tan

report afternoon, a for Good environment us achieved joining to Cadance that in you XXXX. am pleased quarter results thank and difficult of financial everyone for the first today. I excellent

going will and times commenting rapidly through by your hope on I safe I evolving healthy. families and truly all are are start COVID-XX We the and that unprecedented situation. you

priority has first be and employee continues well-being majority of our time home safety vast communities. to customers gone of At Our smoothly. and base the ensuring very from that is the transition global and our working employees, this

productivity maintain infrastructure, business continuity level high platforms and of R&D to innovation collaboration projects customer track and a enabled tight From and perspective, well. us a our our continue to communication have deliverables

and work sales model also have on continued the fronts. Our engaging business, engineering support with new this well adapted productively to customers have and and teams training application

the activity renaissance a hyperscale and I in there’s stated silicon being As such earlier, Industrial been by with have design generational driven XG, technology computing IoT. AI, drivers strong industry, as

R&D in an the So even and far, for to market-shaping in accelerate further to opportunity, environment, slowdown believe in customers do especially period innovation. do this not activity, any design and see be invest their we I current

Our all model, business times. ratable our resiliency serve business, of base, and to semiconductor the billion challenging tied broadly in our $X.X R&D addition, customer highly backlog is over to and business of in highlight predominantly particularly diversified

the we results the will QX our After and commentary comfortable provide revenue year. year. John the a details feel reaffirming time, guidance for more this at moments our carefully for few situation, QX In assessing and guidance and on

EDA and maximize enables Excellence strategy Design these Pervasive into Innovation and opportunities TAM, proliferation while Our us tripling through Intelligence. Intelligent our segment, Design in beyond our to System foundation expanding System

for Design the Signoff. & Digital of some the at look quarter, with us let Excellence Now highlights starting

optimize further node advanced has digital across flow, enhanced full area areas. power, PPA performance or been tape-outs, and proven through of Cadence hundreds was which multiple to Our results significantly application

plus innovative capabilities, full and PPA. our flow includes iSpatial faster unified engines, optimization physical new placement XX% up featuring delivers which learning throughput up improved and machine technology, to The to XX

new by endorsed and is being used leading MediaTek Electronics. and several Samsung was flow customers full The by

for Digital flow Additional the and deploying hyperscale quarter the include X digital learning used & and flow inferencing a the X Signoff tapeout Cadence highlights a machine successfully company Asian major full to nanometers. is full chip at

nanometer marquee low-power production targets EDA vendor a automotive electronics committed design. Cadence customer its flow power for on a Asian first company completed digital its and market-shaping process, it's Cadence systems digital A semiconductor full tapeout primary beating to as X

Verification because its by QX Cadence class” the best In Palladium, engines Protium. we and various had in place verification Suite wins the Verification cloud/data market automotive Jasper, four “best in driven delivers across multiple including it center, verticals networking. and Our wins throughput, Xcelium,

family hardware adding expansions. Palladium major nine and banner Our new customers had quarter, with a ZX four

as Protium Our accounts. in Palladium and FPGA-based its increasingly momentum, is repeat prototyping six orders the customers XX adding continued strong six platform deployed new

strong result performance and providing XX’s while unique in a Protium scalability its early superior for Palladium momentum complier having front-end of capacity hardware common ZX, the a is differentiation and also regressions. with development software

ZX showed particular strength at Both platforms at momentum to XX hyperscale shaping customers. market in semiconductor addition and systems the companies,

benefit tier growth, several IP revenue wins as and at compelling top well Our startups. as ongoing our trend, companies delivered as offerings design the outsourcing to IP from business double with at expansions digit continued

and Tensilica mobile audio as DDR datacenter, well strong our did PCIe computing and IP, particularly was was for our segments. as Design applications adopted as there as particularly customers. by and high-speed In portfolio in demand and well AI surveillance high-performance multiple SerDes well IP, for

Now of acquisitions we Earlier to acquisitions System and AWR year customers. potential we strategy. progress of our Innovation this the have Integrand, our I completed Design new partners our segment positive very of and System the from response in many and Intelligent received will highlight the

offer integration a our wave frequency to we us comprehensive combining are Virtuoso all high and and millimeter technologies products. will for well progressing on which platforms designing platform is The enable these Allegro fronts RF with

forward we into year including momentum Analysis new and customers, strong the System have tools and their now than more Our Enflame. XX Rohm, Renesas, carried

accuracy, without and Allegro provide our platforms. better compromising In tighter and addition design and also to with Clarity providing Virtuoso integration flagship significantly capacity Celsius performance a

With that review call outlook. turn I provide to and over to our John updated financial the the now will results

John Wall

everyone. and Lip-Bu, good you, Thank afternoon

me currently customers. begin remote in of on our a offices few comments of the employees are a vast Let of with environment. the working China a Our in back the while in pandemic: employees, remains from safety Cadence and working region, our are workforce already COVID-XX our some and health global priority partners, majority first our And

from many Our team home. continues to be though working very effective even are

of are grateful. I our with the operating or Even disruption am in global very QX. and proud report uncertainty created key this, very to the and exceeded, met, by pleased we we For COVID-XX metrics pandemic, all

was Now was results Non-GAAP let’s EPS XX.X%, million, key GAAP EPS $XXX operating first and review was the quarter, for beginning the was $X.XX. margin revenue non-GAAP the with Total $X.XX, P&L:

borrowed under facility global of the a turning revolving pandemic. COVID-XX Next, balance to as precautionary to uncertainty additional credit mid-March, provide liquidity measure sheet $XXX by the and recent the In caused million light flow. economic our we cash in

QX $XXX $XXX outstanding of million the million while was quarter, at result, shares. $XXX for was and DSOs our principal debt Cadence during balance million, XX cash totaled flow a of were the $XXX value the we end million, repurchased days, Operating cash of As QX,

QX a to for to provide points fiscal in important our like are address moment our and think the that I guidance XXXX, take to assumptions Before outlook. I’d understanding some embedded I

of for of which certain Our all revenue remain a recognize pandemic hardware today exist guidance create completion XXXX. to related in The that fulfilling as COVID-XX are result for export up-front we the and for upon that continues in some customers effect the of challenges assume delivery. orders, to product place logistical orders limitations shelter-in-place that some IP today

year. end recommended of second today assuming the of low the the our the that the delivered At deliver range will remain QX, QX the hardware and half we end for IP revenue place our effect we remainder for in will any shelter-in-place of in before quarter, or orders of cannot products government-mandated the that or be are in

sometime May, range the to closer other we get hardware if, access we QX. end the starting be of to revenue physical hand, On expect can complete high in and deliveries, for IP our sufficient to

access sufficient of complete to from not the delivery delays the negative have are any QX, QX. impact expect hardware and physical end we to IP we year for guidance deliveries by assuming do we Assuming full our

of our $X.XX EPS shares. QX, we of to is $X.XX guidance in range of non-GAAP million range EPS operating to Non-GAAP million $XX of $XXX For as and the million, $X.XX, follows, range to to the $X.XX, in expect repurchase Cadence XX%, of the in GAAP revenue margin $XXX

EPS GAAP $X.XXX $X.XX, in to in For in range operating $X.XX our of margin $X.XX. of of is follows; range range $X.XXX fiscal to XXXX, non-GAAP revenue $X.XX XX% XX%, the guidance billion, non-GAAP to the EPS the to as of

$XXX million, to Cadence range operating We cash cash expect of of to shares expect million flow the flow to be to XXXX. and free in $XXX approximately repurchase our use XX% we in

in You will analysis Commentary find our further items available as the well CFO additional as on guidance for website.

capability, impacted so all facing to is to with by pandemic. pleased and results COVID-XX in anyone agility this deeply we delivered business times, the global are of am effectively QX, have Cadence operate and sympathetic environment. continue been world we I has I at to model unprecedented and The who our and been by the summary, In the of resilience in impressed our team the

We My employees advance a if than and are all that distancing so usual. hardworking would locations. glitches social our in longer are and our like conducting that we all from call the partners, therefore handoffs do. clearly that in practices there apologies little this today close for reviewing remote I thanking to are earnings take Please together, note customers, are by they or

we’ll questions. operator, that, with And take now

Operator

And from ahead. Rich Valera Company. [Operator go question from Needham instructions] & Please your first comes

Rich Valera

in you was China delivering results to team challenging solid wanted the Thank ask of your year-over-year. conditions. about congratulations in that the to actually which percentage just up quarter revenue some obviously I and revenue Cadence very a for as With

last customers. very other restrictions Huawei or a comp on Chinese several since didn’t year, you have entity Despite tough likely

strength you terms what it the were drove can quarter? customers, for which in new just of So customers wondering existing if demand in products it is demand color if this was about Was any there? ramp China high in there in the and talk

Lip-Bu Tan

here. Lip-Bu

So let me start.

QX IP products, was Our hardware by detail up more business good and us. aided which both to quite and business color John future business was can of and on electronic revenue enabled here. mostly provide design remains China

John Wall

say is I this an Yeah, would unusual.

the low to business, back do which a higher of both both QX are 'XX. revenue and XX% a past was quarters due this revenue QX China between XXXX over mostly is in IP revenue. in Our upfront and quarter and QX high fluctuated nine hardware of X% for

Rich Valera

accounts customer to new on Great and question product great. is ramp, the which I your like just that's system sounds up then new heard XX

provide and back been i.e. Just order customer up sort anecdotal if have of license single you able wondering any ordered it if see. to can scaling multiple have license presumably come evidence to a penetration out customers like seen of you’ve way you'd any customers the proved that

Lip-Bu Tan

I that with we're so think very into momentum Yeah far think pleased QX. analysis carry system I tool our

correctly providing you’ve we're think we product results Celsius point under out the I then As Clarity than line and more and compromising XX any and high-performance then customers not accuracy. better have scalability and clearly

Rich Valera

just went explain the -- same your just the your EPS you can quick I stayed quickly John, delta one Great one you actually GAAP there? non-GAAP and for Any noticed up. but

John Wall

between now. the the integration slight assumptions M&A in for of just had where start the we we and Yeah a in are what difference forecast year our the for

Rich Valera

it. Got

very Thanks much Okay. gentlemen.

Operator

question Your Please Securities. Griffin go from with comes Jay Vleeschhouwer next ahead.

Jay Vleeschhouwer

were the $XX million. at this you. to according and on record questions, your mix China geographic revenues Thank evening China about XX-Q generally, first Couple

had instance year dependency would how other last think the the there refocusing years that explained so over over a the but so number again it US perhaps go, very perhaps Europe You China and why in perhaps of year region are notwithstanding on do how you about results thinking where in that all reasons focusing mitigating about perhaps risk you policy this China on next a surrounded world, the by may EDA, government parts XXXX good thinking to about the as an looking and for think be strong of geographic very out about mitigation strong, was for the issues quarter, example. the

question number that's So one.

with the and number you your far those of which great Clarity products, compare products, [us Tempus, experiences two, Celsius, the a highlighted with deal how we Voltus, Question products generation PeGasus, newer frankly [ph] um] thus haven’t would about. two heard you previous and

than the would or in it to be Is that different generation of meaningfully terms introduced? customer tools prior adoption your you you experience of different expect signoff

Lip-Bu Tan

in then me fill details. let so and Yeah, get can more started John

were we philosophy, can China, for I the and give So to include all customer product want that first of and complying their while them best regulation to and expected all provide support US, global everything the and law our with do them we we application Asia-Pacific, is to best design. but in the EMEA support tool customers our that think

and in came product, system pleased out coming our analysis And think the that clearly of tool with I with customer more order term more new the the and that backlog products are delighted clearly differentiation and we're us. in very a we have show we

TAM two It us. for a big is XXX is products These the about [end] million. [ph] market

and a that So of clearly I we aggressively we'll advantage big terms in have performance. think pursue

we'll to continue PeGasus and you Voltus to update In do continue time. to terms well and then the of time from we

are I process over coming the and quarters customer and we driving foundries, XX quarters. node few with the [indiscernible] important have XX stay the starting at been different think we're PeGasus in the our highlight of success various the process most to last and tuned some really now foundries is node

John Wall

would see look I as see encourage benefits I Jay that at as year products from geographies our for guidance that add results much platforms from and think and investors our we the you and business But get to quarter. diversification And not across about and quarter, IP our can I never in we the from so focus to start XXXX XXXX strong lumpy our hardware contributed should any and happy we're annual for a single XXXX. China and on for to one are revenue revenue and of XX% one any you mean off that

Jay Vleeschhouwer

Okay.

correctly, If Just I'm John. hardware. like a the that. quick it reading detail If comment some on you Q on you question could you so took inventory looks for reserve

John Wall

we'll there in to hardware from in any quarter, reserves but if we being referring we even that's into P&L but are demoed section have COGS, depreciation amortization quarter haven't and generally you our consistently I think presume out was it in and take it. though loan, we include I sold COGS on to reserves do we significant where that. change include hardware we say Jay, a system for the inventory don’t inventory that our or

Operator

Your comes question RBC Please from Capital Steves next Mitch with Markets. go ahead.

Mitch Steves

for Hey taking guys. question. Thanks my

up look actually they like sounds little a on at for accelerate the comments more activity. activity is when design is that one to are design Lip-Bu, first your I it The [indiscernible] trying picking

and little verticals. So market any maybe terms what in you're different in can are the end you seeing of give us [indiscernible] what sort we're or datacenters design across looking activities a of bit a markets the doing guess in broad overview how and of of I China like in

Lip-Bu Tan

let try give you So color. little me a to more

hyperscale XG driven [indiscernible] this own they in deploy up in more we're earlier, see finally going this driver the even the technology As then silicon I generational we all are industry. actually and silicon renaissance machine building team. either design mentioned strong activity through Clearly their learning AI they platform [indiscernible] this by the and environment

to in really whole been support design And our we their far shaping of business much clearly really down transformation lot the are activity group, digital see R&D we slowdown then really opportunity the double activity as tied with triple see support various market we been and delighted in kind and us them the don’t customer, them down, I then way customer R&D see I of a it we're on and today, -- to all designs. that's we industrial the market the predominantly we think they any very we their have excited so in and so especially call they that the benefit the and see very in and in focused shaping semiconductor have some of

Mitch Steves

can to revenue? type of that's then the percentage think hardware? second a look little a significantly. up of and a talk not? there or us the China it's John was give be but full I to any it year maybe it just Got more should around from is about should like think revenue little What financials, you percentage way bit surprising, good just or you about that if what is do pretty maybe just one China sustainable Is of of guys they be the comment high-level that in

John Wall

in the conservative we and quarter Sure, bit it At and was to first me upside. I the royalty not to of lower that large surprised quarter in the mainly the QX a hardware in business. business, quarter, we start revenue were of think. QX it too start it's were in and we due at the IP region was revenue the At the thought IP mean

So on expectations my IP based outperformed for QX.

the X% in happy like 'XX, least China I'm in is a with this our And of low your well to QX to I get from but high strong to by reasonable. revenue of digits a terms then start of said now ranged XXXX for a QX 'XX quarter and continuing is in year, in at back double-digits for it's of double XX% off thinking we're terms annual China contribution to and quarter

Mitch Steves

you better Okay. much can you. mean I Perfect. guys than Thank that. do

quarter. great a So

Operator

from John next Please Your go comes Credit from ahead. Pitzer John Suisse. from question Pitzer

John Pitzer

helping look the curious you I end your revenue high you COVID that and cushion absolute COVID, outlook just of to had dollar on year Congratulations the even coming as of are would this. was you the the an round it a treating Good at any the us there but the and guide been with revenue not raised from takes understand job because have John did the absolute for i.e. in the good to low-end on some where am full-year there kind basis below building in when June sort afternoon, then guys. end was puts of the quarter you you're included COVID of also kind number, range, well. and and revenue high you’ve street impact at full

John Wall

usually for at guidance clarify. little I QX, I normal, I maybe the conservative at 'XX our but and to when It's great to but sites hard hardware when week think fill of June, the a if like but then we the access, get deliver more If that fair revenue. we'll Thanks I to our slipped for question. April revenue, QX conservative last guess July products for of look and to and bit being customer of it's COVID to deliver QX thanks how of opportunity look access a deliver the it's hardware for have than we for as don't product QX weeks we predict when sit to our impact and our it first the it's some revenue. question becomes is on view in hardware

In they're revenue. both XXXX cases

customers, in the delivery customer deliveries confidence early if of So the don’t drive and and and those have we year I health and particularly we to than our try said access access, sites. for partners too QX QX do our you in time we don’t safety I that and we to physical in our prioritizing we're control don’t want our have if have more terms can't employees making physical to of we When for revenue.

June timing but for terms of can and behind It's it's QX of more the had predictable quarter just the revenue predictable revenue. labs deliver a a suppose determined like it's it's we predictable year, labs can we of having so in are by On get our haven’t is because IP own moment. not the is to just stream very in delivery our July and of said IP and at a then it's paradox but is the where sights revenue like physical side the generally IP I labs. demand bit from how we access in terms to issues. IP done already of much our We're the because current cadence little for that's access our what less I the in versus

John Pitzer

kind you trying better understand the quarters out to you worse, That's look several crisis through help global industry financial some or and thought of sort financial back figure are how sort of helpful which point, there for a maybe using through as next and the through when are the better semi starting can out accounting the I the going we're performance look differences but me think lot here overall of play might then I of and that. significant an the a Cadence's at change are but for heightened global crisis, volatility

and where revenue a what is financial understand out from baseline or incremental because why of given or just But back think the R&D enough enough puts sort I a shallow got in at cutting than just pretty customers during for we're more takes it COVID, half are a that and global of is that didn't lot you're global year what magnitude you really be financial predictable but see bad and are things into out that there the business of hyperscale there? we and economic that kind you a also is the a didn't saw crisis, June situation of expecting that trough the I the really the the were it's shouldn't of impact back the how drivers trough assumption exist year go sort like as offsets of you the that of crisis right sort least exist playing China now guess

John Wall

will safety well through of time and and then and unprecedented impact a I this of think of will I little think the that and in harder the term really really then all a going bit and and and economy I different especially benefit hyperscale related first in all most also the being the protect and and think so area of think related so under different across I and the Yeah be clearly region in products. is consumer of some of product and virus first of important clearly area our ranged us saying and economy and employee semiconductor in we're a be term the to is for area Clearly customer think all and more unemployment I challenging. it's automotive sector videoconference ecommerce the area

so some in are area across think Board, the all clearly I hyperscale play budget with by area part so shaping the the R&D it's clearly and and in we really are and various various high I And think tie think we they good benefit in a now I then I customer I we news on side we can exciting computing that lot more mean at it the the is it and see quarter infrastructure think so took then we and especially of look continue quarter. to benefit and market and

China. quarter be in little more Some a may bit

higher, ratable areas Some the especially really position the very our do model very resiliency think of maybe that in business strong and very and and well diverse are geographically to I we customer base overall that. our also Cadence but backlog put the

John Pitzer

help Chinese customers the China about shift us that? your handicap the you upon semiconductor US foundries of risk up was would think idea actually trust just and you ahead that was US it customers, a strength questions to given some seems am the the there earlier would I sense that to and might the albeit the as certain And make relative but relations Chinese follow-on, height there that and and the rhetoric, is curious in licenses risk couple nicely has a just or are buying make how China ambitions that it a how around just to been to

Lip-Bu Tan

doing question. support assume would so and we think then that everything we good Overall to globally our restrictions a for I then examining customer good to a design have and new remains careful will for meanwhile mentioned in comply the the business it's and that export remain can say Yeah China innovating we all that John and their would us I all earlier, of I situation. like we and think are in we I quite

billion very so and manage that way can model we partnering it's felt with the the deeply with success upon can $X.X the whole because a again them We trust is year have and ratable and drive of that and way best together. that backlog with we much reaffirm and then their we then really to customers better by

John Wall

is here. that like And that, in I our is revenue to recurring to John just of would XX% add this about to John XX% nature.

revenue would and or but kind time that of the occur based revenue additional forward IP buying our there maybe any hardware evidence that on no pull is any in was increase and So QX. wouldn’t of

Operator

question next Wells Fargo Mobley Security. comes from ahead. Gary go Your with Please

Gary Mobley

it their what merchandise who own traditionally Is to control of license much diversify taking deal out I wanted Hey than growth. orients strong a are average then you new thinking of materially than as well class versus question the designs would my about you driver 'XX and well. see to sizes deleting as congratulations faster of year-over-year mix and grow versus the to IC guys, and and and e-customers. thanks OEMs system for results revenue on continue time growth different about John's to backlog their asking start measures what's question about are this customer how follow-up your 'XX to XX% base just your question system that if taking different you

Lip-Bu Tan

think I question. Gary Okay. good

then So then let the or for machine generational learning semiconductor whole the touch up computing this are the so time is high the they system the in first can me think technology others then on and deploying hyperscale overall also silicon or of mature size detail start sort on about level. the the and John company,, disability give either the diving area all the infrastructure whole other excited and part deal into deploying XG drivers are big we AI and and more is I and you the whole

it down So as far more benefit slow think quarter to so count fuel dependent we and clearly then from all would strong us. because all than the activity on very we continues so in packaging to I not all backdrop be we well see at doesn't quarter and will business it design for the also and likable so

Gary Mobley

question. follow-up a had I

John Wall

but into very, we've is think of we there into of between 'XX, now in incredible diversified backlog. of we backlog. the were visibility I very and where and way got visibility worth adding now just XXXX. second our We're back 'XX billion biggest Gary $X.X that where We difference are the a half lot have we what

Gary Mobley

were in And you the we down change gave believe extra points the impact two XXX last fiscal acquisitions? doesn't to acquisitions that contribution I week basis still year last, but of some year same you week mentioned the you the fiscal expecting. week the XX% the the presume Okay. from were and 'XX adding for time in are and looking see the growth guidance, extra our closed in you I that this

John Wall

So of $XX worth we completed and million of recording we're AWR is acquisitions in $XX million. and expecting about million $XX combination Gary it's revenue two in the XXXX from early to extra about QX. additional the week year Integrand, about The the

So yeah any the year. for less $XX more now. right expecting I'm or not million to that than year the

Operator

from go next from Joe Your comes Vruwink Baird. Please question ahead.

Joe Vruwink

everyone. Hello Great.

the allegro case traditional average with the to a it is how is may contract share adding Just value simulation customers? of maybe full versus possible like your things virtuoso say much digital this of to of or say our product wallet the be with discussion some new offerings, customer product in the and workflows, regards measure to flow increasing with

John Wall

difficult slightly bifurcate. to It's

Joe Vruwink

Okay.

clarity maybe million no and maybe is guidance a it's So uplift Celsius but helpful provide. other that between to find sort other opportunity to like that, than can you of than no on sense $XXX simulation

John Wall

certainly too it's welcome I tell to early think by now, very our it's customers. but right

products there's very value with difficult Our arrangement an being the the very provided provided to product multiple one others but where in customers. we customers are of products versus it's bifurcate happy to

Lip-Bu Tan

The a lot basically this acquisitions of to clearly two thing on our more with of customer. us solution in more I'll that term give add comprehensive provide only is key of opportunity some to

Joe Vruwink

your or closer control is Okay. that the that and that are be guidance outlook that the revenue of the factor to half reflection year revenue other for or the Great. margin as second well? a may in this particular into are level, be you I the anticipate just view OpEx really the On the mix items back some more believe your operating costs to year, there is maybe for implied XX% of half

John Wall

in is first revenue purchase two One that drivers of the impacts lot more the second year. half revenue the Joe. half of we there lost purchase accounting, some year of accounting so of There's real the than the M&A the deferred the the a

skew acquisitions we can the brought year. towards second So some on profitability the half in of the the of start at year the

XX.X a slightly know deliveries guess backend happen over then for I margin originally can QX, the and out assuming I XX we're was now like impact to profile loaded QX mean fall that but XX. And is I and year. I would other more it something because and have in XX.X would some work the normally into you we're probably thinking guiding

Joe Vruwink

you. Thank helpful. that's Great, Okay.

Operator

comes next D.A. Your ahead. Davidson. question with Tom from Diffely Please go

Tom Diffely

Yes. Good afternoon.

with supply-chain front John actual the access So difficulties? seeing conservatism how of talked your what manufacturing emulation? bit seeing you outlook you I'm on you in customers quarter second little about are to Are but curious a provides

John Wall

No. Not right now.

sourcing can physical we've naturally half deliver inventory some some second the physical of customer of source we have assuming is suppliers. have a be we revenue uncertainty, the think ample revenue and will I'm the suppliers. group for with to predicting with down We been closely have year. QX working to good product. whether The and That's to because able really issue all have into We we have of we to sites strategic our have the second got that and that where fall access uncertainty

Tom Diffely

you That about the acceleration sense Lip-Bu cloud? talking and am seen I this then your customers have to already crisis through makes curious

Lip-Bu Tan

the call We're that So on. in of leadership our clearly one delighted it's compelling we I we and clearly currently that all areas productivity, extending focus way multiple offering benefits. flexibility the customers we provide scalability providing think and of with

mentioned make we mark we think so XXX that. that so And we continue progress on I and customer to pass

Tom Diffely

bigger Okay. on on side Is or design that the the emulation side? tool

Lip-Bu Tan

we offering provided. products I depend the different of multiple think the cost will product on

Operator

comes go Gonzalez with from Adam America Bank next Your of Securities. ahead. Please question

Adam Gonzalez

competitive made substitutes terms is Just strong products? in they and China flow Can the wanted full of of ability being complete, region sales a comments talk that about able up my far how follow peers in behind and how domestic to of on of on the to some China the are provide you your growing. suite Thanks.

Lip-Bu Tan

underestimate so and now from about of provider the China this and from we we their on team with clearly in our clearly of and because think make and China, only government years can but advanced progress a closely. Shanghai I small so recruitment funding tool of providing Synopsys a close of Beijing, don’t provide they from most far lot couple nodes, In us tip and XX-XX the solution other their we're driving to eye view point behind and full that monitoring get Yeah that Cadence able we side. continue and that not and is very stimulating flow and we also sure clearly we point a

Adam Gonzalez

is been quarters. the segment. just function the expect if or percentage trends sales of off in comps Great. the you of over a timing segment I that tougher but that's of three is acceleration gave, saw near-term growth digital follow-up year-over-year the Any IC you in the in is around design turn surrounding my on that I sign it is the four a to sales the do know deceleration bookings, there's last thanks. don’t that of

John Wall

were I export by lapping and last QX in we have thing limitations the QX Adam So is QX point impacted not we're out one year, comps China. currently for tough this because certainly and year QX would very

Adam Gonzalez

last one I in can if And question. sneak

might customer have really You facilities. home reflects scenarios talked a few just from based and long hardware put more think, to it the in you access cloud long or to customers people there QX were be products these have consumption how that place to model? a currently their is switch If these enough work about outlook how you chance and of different a orders

John Wall

too I but customers QX new QX I to had in XX I particular to think it's had strength We think were now as solid tell. say. including and right Japan bookings tell much Cadence a in don’t too with that's I early happy think can that we in really we quarter we customers think but early quite it's several larger

Operator

Jackson with go Please Ader comes ahead. JPMorgan. Your next from question

Jackson Ader

my Thanks for question. taking

I have The that or on working deals? as challenges would software people difficulties the your getting would I from impact just what moving about just around expect customers for there revenue across the pieces home. line everybody you’ve for more think deals the been had first larger logistically a lot deals execution getting internally that is is moving expect realized about of maybe on some site I that or on finish but maybe

So whether am on I seen you’ve curious to any that hear impacts side?

John Wall

inversion. XX with So following talk Jackson little we business our We changed we a our company. and have at there also think back happens for the close team a close very looked data our Lip recession clients, stay that to contacts lucky yield I and toward in year, close customers, with ability months to the August, recessions within Bu I curve suggested mean and data looked when we customer-driven inversion end the but got hasn't to very, always often a management a very yield bit and of was X curve at we I previous last the

the as our and to year, business end So do. at in strategic to year close possible try business we of as much managed early last account we made the and

Jackson Ader

delayed or be IP their question in that can the delivery? may is Would any that Then are maybe time? be possible effects year activity trickle-down get follow-up people if hardware on, tools the in there it able either later from the to change

John Wall

delivery basically in business. problem just closing The the and our to think contractually challenge be in any our we cadence labs getting facility the into and be case, we've getting delivering to delivery strong to. to Demand IP don’t continues on able the completing to the the with complete facility access signed to access to executing business. is So deliveries own had being up the I really customers in our that deliver hardware it's IP -- already case and

Operator

Roy question next Ruben comes Please with Your Benchmark. ahead. go from

Ruben Roy

in if had my some to on China, potentially tighter restrictions? thanks? chatter on taking for to recent restrictions you've restrictions. firms not the rules or or new around Thanks lot and the near-term you dynamics product those you wondering in us but hardware of refresh are your I I there Obviously Chinese for export I'm specifically, of wondering if subject of been subject high-technology Are swath think could on a into was current experts tightening questions. products you’ve potentially what portions potentially and if lineup my sorts understand your heard of broader for some and can remind product a memory companies product I rules just weeks IP China some to anything has all John but shipments questions

John Wall

products of US Most our are origin.

export by impacted they're So the limitations.

and to Our is ability to the products certain deliver list services limited. customers entry

have expect right assume like would China origin. most say those did will of be we now therefore we I just that technology the change revenue in to if of US purposes So is our nothing extra higher for didn't our but because we limitations, our we assumptions guidance,

export across limitations those board. We are by impacted the

Ruben Roy

Okay.

Okay and work. but back sort you year? your about slowing in how on for your the are you QX assumptions potential on then a high-end assumptions the and of to expenses to of any the Obviously operating when about quick follow-up you static embedded the John or up to How things normalize think on obviously getting do guidance margins? assumptions, guidance assumptions expect you the sort own normalize embedded coming clear kept in have of thinking those

John Wall

I the although Bu after effectively to Yeah contractual the process it's complete interview the and sure. we to until because commitment process getting and hire about adding are Lip and the careful onboarding dollars I continuing hire we that more slowed commitments difficult we're we're hire customers, typically hiring to continuing investment from whole from see customers. very but but had

of second IP second associated first revenue expecting second first cost and the if also products those half the So shift into half unexpected sold hardware in of into in the the into XX.X% from fall with the skewed our QX falls by like guidance impact half, first Originally, from will an now year QX margin in hardware I goods half of half. some those course the there XX more was the second with of hardware really. half, with half XX.X% of is because margin towards that's followed -- XX

Operator

comes question ahead. KeyBanc. from Please Celino Jason next Your go with

Jason Celino

questions. my taking for Thanks

kind other impacted those in In from those able first to terms to of saw North place? segments were you restrictions coronavirus types workforce. operations obviously and your What apply Europe global of in were once of in America learnings put China you

Lip-Bu Tan

an and we big to thing I as cases one thought turned as out learned do some across and is quarter products bigger products it worse products a I our been So was do benefit royalty platforms. there I diversification and for think as impact better in impact revenue because our last and some I would've some thought it

orders there's The because customer. a lead we the site I the of the time to already quarter in other we was hardware by terms that learned complete thing that China part hardware is guess in the in latter on and were orders hardware able being of demoed

revenue. the the we didn't cycle site revenue to we to additional customer the have delivery sites open. Whereas to got to hardware haven't take for physical we complete So on be to the have wait if customer, able any for

QX had the now. to our to revenue our see and We're that guidance. normally be therefore that in some impact was we QX QX we're taking expecting you QX fall that the So in would we learning into that expecting

Jason Celino

in North standpoint, engagement that what is mirrors customer America customers from standpoint progress a China Europe? from saw or anything there or differs you So else versus

Lip-Bu Tan

so. don't think I

industry and assume that we flexible today closely an client I will customers and change. and and those very operate our like of a we allows in very, assume think are and company we that's computer that times in with effective very, operates be we us resilient, always from different technology in we where the the always predict we very we're never but be working relationship industry to tomorrow can agile very so

also are we think diverse. I very

to all XX very customers. the We countries close have very, people XX across in sites

to don’t navigate able been. very to I we're So have how with We're change. I effective easily. teams with with delighted able know change the move am

Operator

Company. Krish with Your go Sankar comes Please from last Cowen & question ahead.

Krish Sankar

all colors you China the datacenter, helpful. outperformance in it for it question. be I would mainly Within say couple for of is had versus IP I IP any mobile, out sales. thanks it a was for was Yeah them more it hi. John auto, taking figure was on trying the John. Thanks could the of the just China. my on color can on to was some the

John Wall

the which was delayed on terms IP, were that. IP we with It but IP think but part certainly in was color we don't further I side, of in give and of strong any QX very

Krish Sankar

the of it obviously subcontractors, the you Got now? emulation subcons some in that right geography prototyping and then is specific hardware and by assembled with tested

John Wall

very So hardware in the have we of seconds yeah but most source Americas, close our with made with is suppliers. suppliers in relationships the our US

inventory. We also think don't any I ample have have we issues. supply-chain

Krish Sankar

customer And your then about do economy if of customers, just look a an so the if smaller half payment not but you worry at look potential you the the some issue if goes final recession? you or question, spectrum, second it's across into them in issues whole guessing for I'm

John Wall

customers of those a generate we've XX point. our natural revenue in we to from tail we're and that longer very of deterioration past anticipating our credit the very XX% guidance in the That's and they're some in a times good particularly said customers XX% our top many strong position. customers In thankfully

we naturally about the who the like would we a who's credit sheets in have longer concerned them in balance strongest there deterioration. but of Many the world, some tail be

there end that customers our deterioration that the haven't currently QX much long if the in order and credit second customer's critically or to haven't business impact got our than we're customers great anticipating cause anything. of I I a could deteriorate anticipated -- and depression more So phase in improvement longer don't natural and we and some remains of built credit but anticipation tail the now than in we shelter place for the in for half,

what's of share I But we credit you assumptions. deterioration We can't and may if the have in through only can assumed end this be last all. predict future. with the some our that's that June there

Krish Sankar

or… determination credit that quantify you can But

John Wall

impact variable you be like it's say you It's payments more only consideration. slower revenue because our XX%'s slight become you could that X% -- have to may timing variable because

credit you very there's that's collect revenue bit typical recurring a So cause if quarter. worthy, credit we a everyone can deterioration, every little recognize have revenue. you because is wait assume that even have of but If a cash until you to any to delay and pool,

Operator

back are questions. closing There I'll Lip Bu further remarks. turn for the no call to

Lip-Bu Tan

for you us this Thank all joining afternoon.

our very impressed is innovation I'm pervasive expanded Our our and addressable intelligence continue system and in market. very design design to dedication shown opportunities paying In innovating the total and strategy delighting all commitment as and time benefit new uncertainty, employees of system this excellence, we by nicely out with from customers. intelligence

our stronger and on give with together I that and and Board collectively workers thanks we our convinced come front this fight unfortunate of day. this others in behalf the and line extremely employees working all heartfelt want tirelessly And as Directors, courageous out a company, healthcare to brave all situation lastly We're will others community. of and on they're I'm our a and as this the on frontline wonderful Have to pandemic. of

Operator

for you earnings Cadence can in the and quarter XXXX today's concludes participating first Thank now conference you disconnect. call. call This

Cadence Design Systems (CDNS) 20 Apr 202020 Q1 Earnings call transcript