Cadence Design Systems, Inc.

Good afternoon. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2019 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. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Thank you. I will now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence. Please go ahead.

Thank you, Cheryl, and I would like to welcome everyone to our first quarter 2019 earnings conference call. I am joined by Lip Bhutan, CEO, and John Wall, Senior VP and CFO. The webcast of this call is available through our website, Cadence.com, and will be archived through June 14, 2019. A copy of today's prepared remarks will also be made available on our website at the conclusion of today's call. Please note that today's discussion will contain forward-looking statements and that after results may differ materially from those expectations. For information on the factors that could cause a difference in our results, please refer to our filings with the Securities and Exchange Commission. These include Cadence's most recent reports on Form 10-K and Form 10-Q, including the company's future filings and the cautionary comments regarding forward-looking statements in the earnings press release we issued today. And by the way, we just filed our first quarter Q a few minutes ago, so it's now available. In addition to financial results prepared in accordance with generally accepted accounting principles or GAAP, we will also present certain non-GAAP financial measures today. Cadence Management believes that in addition to using GAAP results in evaluating our business, it can also be useful to review results using certain non-GAAP financial measures. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results. The reconciliations are available at the investor relations section of cadence.com. Copies of today's press release dated April 22, 2019, for the quarter ended March 30, 2019, related financial tables and the CFO commentary are also available on our website. And now I'll turn the call over to Lipu.

Good afternoon, everyone, and thank you for joining us today. Claydon achieved excellent operating results for the first quarter of 2019, delivering 11% year-over-year revenue growth and 32% non-GAAP operating margin, with broad-based strength across our product lines. As a result, we are increasing our outlook for the year, and John will provide more details shortly. While there's some uncertainty in the overall macro environment, we are confident about the multiple trends that are continue to drive strong design activity. In addition to technology trends like AI and 5G, design activity is being fueled by workload specific computing, system companies building custom silicon new silicon startups, and digital transformation of industries, such as automotive, aerospace, medical, and other industrial applications. Our business is mission critical to silicon development, which is cornerstone of all design activity. As we have stated, our system design enablement or SDE strategy drives growth in our core EDA and IP business, broadens our reach in system companies and targeted verticals, and guides our expansion into newer adjacent areas. We executed well on this strategy, and today I want to highlight its next phase, which we're calling intelligent system design. The foundation of this strategy continues to be delivering design excellence via our core EDA and IP business. In addition, we are building upon our core competency in computational software to expand into two new areas. System innovation, where we are expanding into new system domains and pervasive intelligence where we will apply AI and our algorithm know-how to our core business and specific verticals. Our intelligent system design strategy will enable us to provide more capabilities and value to our customers while also expanding our current total addressable market from about $10 billion to estimated $30 billion over the next five years. To highlight some of our recent activities in the system innovation space, in Q1, we announced a strategic partnership with Greenhill Software, which opens new opportunities in the estimated more than $3 billion embedded system safety and security space. And earlier this month, we entered the system analysis market and estimated $4.5 billion total addressable market opportunity by introducing our first product, Curity 3D Solver, a next generation solution for electromagnetic field simulation. Clarity is a true 3D solver which delivers up to 10X faster simulation performance while virtually unlimited capacity without compromising accuracy. Clarity used state-of-the-art distributed multiprocessing technology, making it uniquely optimized for the cloud and on-premise distributed computing and has been endorsed by Teradyne and HiSilicon. Turning to our core business, our digital and sign-off business achieved 12% year-over-year revenue growth, driven by strong adoption by new customers and proliferation by existing customers at advanced nodes. Today, more than 107 nanometer designs have tape out using our digital solutions. And multiple five nanometer designs are underway using our solution as well. Our hardware assisted verification products, an important part of our verification suite, had another good quarter. Palladium Z1, our flagship emulation platform, added two new customers that are doing machine learning design, including Samba Nova systems. We also had 13 repeat orders, including three significant expansions, one of which was at Annapurna Labs, an Amazon company. Our Proteum S1 prototyping platform, which enables earlier software development, also added two new customers and received seven repeat orders. Palladium Cloud continued its steady momentum and now has more than 10 customers, several of which have made repeat orders. Our IP business also showed double-digit growth year over year. Tensilica continues to win sockets for machine learning, vision and audio applications, in the automotive, consumer and civilian segments, adding eight new customers in the quarter. In the design IP space, our new 112 gig long reach 30 IP was adopted by a marquee semiconductor company. And we launched the industry first complete silicon proven LP DDR5 silicon. As I had said earlier, our strategy broadened our reach in system companies and targeted verticals. One of our most successful targeted verticals is aerospace and defense, where we recently announced that we are working with Northrop Grumman, where our EDA IP solutions have supported a shortened product development cycle and advanced nodes tip-out. Lastly, I want to highlight the new Cadence Cloud Burst platform, the latest addition to our cloud portfolio, which extends our cloud leadership in EDA and provides customer with very compelling productivity, flexibility, and scalability benefits. Cloud Burst enables hybrid cloud environments and is ideal for serving peak demand. It provides fast and easy access to pre-install cadence design tools in either AWS or Azure cloud environments. It was used by Barefoot Networks to achieve a 10X productivity improvement running cadence, tempers, timings, sign-off solution. on their seven nanometer networking chips. With that, I want to turn over the call over to John to review the financial results and provide our updated outlook.

Thanks, Lipu, and good afternoon, everyone. Cadence achieved broad-based growth across all lines of our business during Q1, with demand for hardware and IP exceeding our original expectations. Revenue, operating margin, and cash from operations were all strong in Q1. And as hardware and IP have become a larger part of our overall business, our recurring revenue mix percentage is now in the high 80s. Now let's go through the key results for the first quarter, starting with the P&L. Total revenue was $577 million. Non-GAAP operating margin was 32%. GAAP EPS was 43%. and non-GAAP EPS was 54 cents. Turning to the balance sheet and cash flow, at quarter end, cash totaled $539 million, while the principal value of debt outstanding was $400 million. Operating cash flow for Q1 was $185 million. DSOs were 42 days, and during Q1, we repurchased $81 million of cadence shares. Now I will provide our updated guidance. For Q2, we expect the following results. Revenue in the range of $575 to $585 million, non-GAAP operating margin in the range of 31 to 32%, GAAP EPS in the range of 34 to 36 cents, and non-GAAP EPS in the range of 52 to 54 cents. Our updated guidance for fiscal 2019 is as follows. Revenue in the range of $2.305 to $2.335 billion. Non-GAAP operating margin of approximately 31%. GAAP EPS in the range of $1.39 to $1.47. Non-GAAP EPS in the range of $2.04 to $2.12. Operating cash flow in the range of $665 to $705 million. And for the year, we expect to use approximately 50% of free cash flow to repurchase Cadence stock. You will find guidance for additional items as well as further analysis in the CFO commentary available on our website. In summary, I'm pleased with our performance in Q1. we achieved strong operating results highlighted by 11% year-over-year revenue growth, 32% operating margin on a non-GAAP basis, and the generation of $185 million of operating cash in the quarter. And looking at our revised outlook for the year, I'm pleased to see improvements in operating income consistently flowing through to cash, as illustrated by the increase in our operating cash flow guidance for the year. We'd like to thank our customers

partners and of course our employees for a solid start to 2019 and we look forward to updating you in our progress throughout the year and with that operator we'll now take questions at this time i would like to remind everyone in order to ask a question please press star then the number one on your telephone keypad now we'll pause for a moment to compile the q a roster Your first question comes from Rich Valera of Needham & Company.

Interesting comments on your foray into the system analysis market. And obviously, you started there with, I guess, an electromagnetic-based solver. But there are obviously many solvers that you could potentially roll out there to have a complete portfolio for that market. So just wondering how aggressively you plan to go after that market. Will you go after... you know, the mechanical and static side of it, as well as sort of the more electronic-centric solvers. Just any sort of sense of your real aspirations in that market. Thanks.

Yeah, Rich Libo here. And we didn't hear the first portion of your question, but I guess it's about the 3D solver that we announced. And we are delighted. And, you know, this first product, Curlify, is a truly 3D solver. And it's a next generation solution that is for the electromagnetic field simulations. And this is our first entry to the system analysis. And clearly we have other product well in the working on development. We're excited because couple of things. One, clearly we look at our core competence, the core competency that we have in the computational software. And that's what our EDA background from. And then also our 3D, you know, some of our packaging technology that we have. That combination, that give us a very unique opportunity to really drive in a next generation disruptive. That's why we can claim up to, you know, 10 times the performance. And then this is very cloud-enabled. And then so that we can really provide a truly next generation uniquely optimized for cloud performance. and on-premise distributed computing so that we have something unique to offer. And then stay tuned, and we're going to have more product coming up. This is our first entry to the system analysis market.

Great. Thank you for that. And if I could just circle back to your last earnings call where you referenced a major win with a marquee semiconductor customer and mentioned that you were pretty aggressively ramping up your AE hiring to support this customer. So given that, you've kind of given us some hint on the expense side for that customer. Is there anything you're willing to say about your revenue expectations, like when you might expect to generate incremental revenue from this customer, whether it be this year, next year, or any color at all you could give on that? Thank you.

Yeah, I think we're excited about this marquee U.S. semiconductor company. As I mentioned in the last earning call, it's a breakthrough and wide-ranging win for And we are very excited. It's the early days of partnering with this customer to expand the breadth of our engagement. It's across all of our different tools. And we are excited about it. And clearly, everything we know is already built into our guidance for the year. But overall, clearly, to support a very important customer, we have to build out our AE and R&D support and to really proliferate across their requirements.

Understood. Okay. Thank you, Lipu.

Thank you.

Your next question comes from John Pitzer of Credit Suisse.

Yeah, guys. Thanks for letting me ask the question. Lipu, maybe first to you. In your prepared comments, you did talk about some pockets of uncertainty out there in the environment, which makes sense given the what some of your traditional semi-customers are putting up. I'm just kind of curious, to the extent that you guys continue to do better than expected and beat and raise, what do you think it is about your business that's allowing you to buck these trends? Is this just your ability to address non-traditional customers? Is it the new large win that's offsetting this? Maybe you can just help us give us a sense as to why you seem to be bucking some of the uncertainty trends out there.

Yeah, John, it's a very good question. So let me just talk about this uncertainty. I think we all know from the marketplace, geopolitical, and also some of the slowdown in some segment of the industry like automotive and others. But we're excited on a couple of drivers, and especially AI and 5G and autonomous driving and also the industrial edge. That's something that I'm very passionate about. And because we are moving into, I call it, the big data environment, it's all about data and data analytics. So in a way, it's driving a lot of new requirements for the semiconductor. So one I mentioned about the workload-specific, or you call it domain-specific process computing. General purpose, CPU, GPU, that's a good place for them. But right now, the workload has changed significantly. So the, you know, we call it the workload specific, more application related. And that also driving not just the computing, and also the, you know, clearly a lot of more exciting about the memory. There are some new innovation on memory. There's a new innovation of storage. And some of you heard about the NVMe controller, you know, the disaggregation of the storage. And because the massive, massive data That needs to disaggregate the storage and network. And also the other part is the high-speed connectivity that's able to scale and the connectivity speed that's required in the hyperscale. So all this is going to be driving a very strong design activity, and we are in the middle of it. We are well-positioned to capture that. And that's why I think from our point of view, the design activity is increased substantially. We are excited about supporting some of our customers to really embark on some of these opportunities.

That's helpful. And then, John, just maybe the follow-up on the op margin guidance, both for the fiscal second quarter and the full fiscal year. It's a slight downtick from what you just put up in the fiscal first quarter. Is that nothing more than the expense? of onboarding the new large North American customer. Can you talk about some of the other puts and takes that might have op margins going down throughout the fiscal year on what's going to be rising revenue?

Sure, John. Great question. I mean, for the year, looking at the year, our annual merit increase is going to affect in July. So that impacts the second half of the year. And, of course, over the course of the year, We're investing in R&D and field resources to support proliferation of our solutions with market-shaping customers. And I say customers plural. It's not all for one customer.

Perfect. Thanks, guys. Appreciate it.

Thank you.

Our next question comes from Mitch Steeves of RBC Capital Markets.

Thank you for taking my question. I have two. So the first one is kind of on the operating margin long-term target. I know you guys historically have talked to 30%, but you guys are above that for three quarters in a row. And I'm wondering if you guys may provide some sort of high-level commentary on where you think that could go in three to five years. And secondly, I noticed that getting a prepared commentary, you guys are now breaking out China as a separate geography, and it seems like the numbers there have a lot more volatility, meaning that it used to be kind of 8% of revenue, but then it was 13%. in December. Now it's back down to 10. So you could talk about a little bit why you guys are disclosing China now as a separate geography.

Hi, Mitch. I'll take the second part of that question first, if you don't mind. I mean, in terms of calling out China separately, yes, you'll see that in our revenue by geography table in the CFO commentary and in our 10Q. Generally, any lumpiness in the percentage of revenue is probably caused by our IP and hardware businesses. Our IP and hardware revenue is generally more lumpy than the rest of our business. And then in relation to your first question, we're not really ready to put out a long-term target right now. We're always looking at how to improve operating performance. And you mentioned, like, over the next three years, why we're not giving guidance over the next three years. If you take a look over a longer time period and compare our current guidance for 2019 with, say, our 2016 results, you'll get a perspective on how we've been able to scale the business in recent years.

Yeah, just to add to what John's talking about on the China side, you know, if you look at historical 2016, about 8%, and then, you know, 2017, about 9%. and then last year it's about under 10%, and this year it's 10%. So overall, we have done well in China, and clearly China is very committed to build the domestic semiconductor industry, and they're making great progress, and we are very well positioned to support not just China, I mean globally in Asia and other places, and we want to be the trusted partner for them.

Operator?

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

Thank you. Good evening. Let's do a technology question first for you regarding what you call now your intelligent system design strategy. And the question is, over the last number of years, perhaps the most important thing you've done, particularly in digital, is to pursue your parallel architecture with a common data model across the portfolio. And that's obviously helped you on the digital tool side. The question is with respect to the new intelligent system design target, how extensible or leverageable is that platform or architecture of the last number of years for that new strategy or is there some additional rework or new technology you have to insert into the portfolio to pursue that. And in any case, in the meantime, what additional opportunity do you have to further integrate the tools? For example, we've read some work you're doing to better integrate Anovis with Genus. Is that something you could comment on as well?

Yeah, good question, Jay. Let me try to answer your question. So I think that intelligence system design, it break down into three pieces. One is the design excellent, and that is our core EDA and IP. So we are very laser focused on make sure that our foundation are solid. We are the best of two in every category, and that's what we inspire to do. And so that, you know, we are delighted on the digital and the sign-off sector. We grew in the last quarter 12%. Clearly you know, we will continue to succeed in the new customers. And then right now in some of the big, you know, the proliferation on some of our current customers are in the most advanced node, you know, seven to five, we are moving on three nanometer. And so I think we're excited about continue to drive that. And then we move on to the system innovation that is moving to the system domains. And as I mentioned earlier, it really using our You know, and we went through a soul searching. We found that our core competency and the computational software and the digital implementation that we have, and it can be scaled into the system level. And that's why we're excited, I think, to embark on that into, you know, this, I call it the first mover, is basically is the embedded, you know, the system safety and security space with Green Shields. We're very delighted in that strategic partnership with that, so that we're starting to move into that space. And that's about $3 billion market that we're excited about. The next thing that we're looking at is the whole, you know, we call it the system analysis space. And that's about $4.5 billion. And it's about time to have some innovation solution they're able to provide that provide a cloud-enabled solution and it's scalable, and then using our strength to apply, because if you recall, we also have the PCB business, and also the 3D technology, so that we can really apply that into this 3D solver, and that is just a beginning on the EM electromagnetic field simulations area. And then stay tuned. We have continued the development and investing in this space, and it's a big market, $4.5 billion, and customers love it. And so far, the initial feedback from our potential customers, and we highlight two that endorse our approach, and then they see the benefit of the performance, and we're excited about it. And then finally, we're going to use that to the pervasive intelligence using the AI and machine learning, and then basically we're going to apply into, we call it the inside and outside. And our insight basically using AI machine learning to drive performance improvement, productivity, and performance improvement across all our product line in terms of EDA tools. And we already see significant improvement on that. And then finally, we're also working with our leading customer and using AI to optimize their flow and methodology so that the customer can really drive the performance by machine learning, deep learning, and other application, and that's kind of our approach.

Lastly, geographically, there's been some interesting trends in Japan, which for years, as you know, was quite weak and lost share in terms of total EDA. But for you, you've now seen a few quarters in a row of sequential improvement in Japan and year-over-year improvement in Japan on both a quarterly and trailing 12 basis. The question, therefore, is are you beginning to redirect or grow your investments in Japan to sustain that growth, either with sales or AE or anything else?

Yeah, good question. I think Japan is an important market for us. A couple of areas, Japan is very strong. And, you know, I just named a few. You know, automotive, they are very, very strong. And also I mentioned earlier the edge to industrial IoT. you know, the microcontroller, and there's a lot of controller collecting data, and then a couple of key players in Japan that we are really excited to team up with them, and also the whole video, civilian, consumer-related area, and that AI machine learning can really play a role in it. And so I think, you know, it's a very important market, and then they are recovering very nicely, and then right now we're engaging heavily with a couple of key customers, that we want to be the trusted partner going forward. Thanks, Lukul. Thank you.

Your next question comes from Sterling Ardy of JPMorgan.

Hey, guys. This is Jackson Ader on for Sterling tonight. A couple of questions from our side. The first would be, so looking at the outperformance here in the quarter, It seems like it's coming from the two areas that you called out were IP and hardware, which are typically the two more volatile areas for revenue. So what is giving you the confidence then to raise the full year guide above just this quarter's upside? Was there something in time-based licenses that came in ahead of what you thought, or is the pipeline building better than what you thought?

Yeah, I think, Jason, let me start first, and then John will fill in. You know, first of all, I kind of highlight that, you know, it's a very broad-based, you know, strength across our product lines. And even though we highlight the hardware, we highlight the IP, we also highlight the digital growth, 12%. And then the other part is also very exciting for us, is the custom analog system connect area, and also the nice growth, about 8%. And then we are excited about, that's why we are investing in this whole system analysis as part of this analog custom interconnect system level. And that area has been doing well. And so I think overall, I would have to say that it's across the board, and then also some of the newly developed products, and that we already built into our guidance for the year.

Hi, Jackson. This is John. Yes, we had a very pleasing Q1 performance for IP. But, of course, IP is lumpy and probably benefits against a better compare against Q1 2018. On the hardware side, if you recall, our functional verification revenue grew in the high teens in 2018. And the last time we spoke to you, we were expecting functional verification revenue in 2019 to be approximately flat year over year. With Q1 now behind us and with better visibility into the hardware pipeline, We're now expecting modest growth in our functional verification segment, despite the difficult compare. We saw a pickup in demand in Q1 for our hardware products, and we expect that to continue into Q2.

Okay, great. That's helpful. Follow-up question is kind of a two-parter. So the first being you've mentioned, Libu, the $30 billion TAM over the next few years, right, an expansion from the $10 billion. that you've seen kind of in the past, what would you say you currently, I guess, address of the incremental 20? And then secondly, obviously part of this is going to be the Clarity 3D solver that was announced a couple of weeks ago. What do you see as the main or who, I guess, would you see as the main competitors for this Clarity 3D solver? Thank you.

Yeah, good question. And we're excited about this TEM expansion. That's one of the very important focus for Cadence. And so that's why we have this strategy on the, you know, we call it the intelligent system design. And, you know, first of all, I think clearly our foundation continues to grow in terms of design excellence. All our EDA tools continue to drive the growth with the semiconductor company and also system company to try differentiation. And then second part we starting to address, begin to address is that system innovation. And so, you know, clearly the opportunity in front of us is this whole embedded system safety and security, our partnership with the Green Hill is very important part of our strategy. And then now we're starting to move into the system analysis space, so an embedded space about 3 billion, and then the market analysis is about, clearly is system analysis about 4.5 billion, and then so I think overall we continue to marching forward, stay tuned, and then we're gonna be, over time we're gonna be highlight to you some of the success we have, and then clearly on the competition side, You know, on the system analysis, you know, there are a couple of them I think you're quite well known. They have the more legacy solutions. But the customer over time require increase on the system complexity and also shift less approach. I mean, they're doing more simulation and then larger design, and that will require a solution that need more capacity and also higher performance. And that really play into our strength. in terms of algorithm expertise and the massive distributing multiprocessing capability. And so I think those are the things that really we find a unique opportunity, a unique qualification we have to play in this market.

All right. Thank you.

Thank you.

Again, to ask a question, please press star 1 on your telephone keypad. The next question comes from Jason Salino of KeyBank.

Hey, guys. Thanks for taking my question. Can you hear me all right? Yeah, very well. Yeah, so, you know, good raise to the full year. You know, first half of 2019, guidance assumes kind of 11.7% growth and then decelerates kind of to the 6.7% for the second half. I appreciate your comments on kind of the updated hardware outlook. But, you know, how conservative is guidance still for 2019?

Hi, Jason. This is John. I mean, everything we know is in our guidance. You're right. The first half does look kind of flat compared to the second half. And that's mainly because of functional verification, which includes both software and hardware products. But... that's quite lumpy and our visibility into demand for Q2 looks good. Q4 is a very tough compare though.

Okay. Okay. And then as far as the IP revenue for the quarter, I mean, you guys did post, you know, a strong quarter. I mean, how should we think about IP as a whole growth wise for the full year?

Well, we're very pleased with our IP results in Q1 and, But IP in Q1 benefits from a relatively easy compare versus Q1 2018. We're not guiding the individual product groups, but we're very pleased with our IP results for the first quarter.

Yeah, a couple of things we're kind of positive about is Tensilica, the proliferation adoption for the machine learning, vision, audio, and also automotive consumer surveillance. We add eight new customers. On the design IP side, you know, clearly, you know, we have the 112-gig long reach 30 IP, and this is a must-have for the hyperscale infrastructure. And we are just at the beginning of it, and we are delighted Marquis Semiconductor Company adopted. And then more to come, and stay tuned, and we'll have more updates for you. Okay, thanks. Yeah, that answers all my questions. Great, thank you.

Your last question comes from Gail Munda of Birkenberg.

Hi, guys. Thanks for taking my question. The first one is just, John, maybe to clarify in terms of the guidance, one thing that has kind of changed is the recognized revenue that's kind of estimated to come over time, that rateable revenue. You're saying that it's been you guys since 85% to 90% versus previous around 90%. Is the main delta there in the hardware products is the way that you've seen Q2 demand kind of turn out? Is that the reason for that?

Yes, Gal. Our upfront revenue comes predominantly from two main sources, IP and the hardware part of our functional verification group. The expectation for better functional verification growth leads directly to that revision of our outlook for the recurring revenue mix. We're now expecting hiatus for 2019.

And then the second question is just linked to your cloud offering. You know, in the past, your customers kind of like to mix and match different parts of the process. And when you move to the cloud, especially when you start doing design in the cloud, my question is can tools still be matched as easily as previously? premise, and if not, does that mean that potentially tools can be more sticky, or do you not expect any change in the workflows, the way they're being managed in terms of vendors?

So Cadence Cloud does not change our business model. It just offers our customers another way to optimize their investment in Cadence tools. We're not really expecting any difference in how our customers use our tools.

And in some way, we try to drive, you know, the performance and productivity for our customers by moving to the cloud so that you can address the peak load. And also you can parallel distribute to the unlimited server that the cloud infrastructure provide. And that is a tremendous value to our customers.

Perfect. And just as a follow-up on that, would you say that when you're seeing the adoption of the cloud in the future, would you expect the majority of it coming for customers but at burst capacity, like you mentioned, from existing customers that potentially will invest less in their own infrastructure? Or do you think that the new customer, the systems companies, or even the startups will account for a larger portion of that adoption in the future?

Yeah, it really depends on the customers. And then, you know, they can use a hybrid, you know, using their on-premise. And then when they address a peak load with the cloud, or they want to, from scratch, as some of the startups, they want to be all cloud, we're also open to that. So I think there's a lot of different models, and then we basically want to make it available to our customer, whatever they choose, and make sure that it's secure, and make sure that it can drive performance and productivity for them. That is our main driver for using the cloud, and then basically we are supporting them, and they have an option, either customer-managed, or using the cadence manage or the palladium cloud.

Okay, thank you so much.

Thank you.

Thanks.

I will now turn the call over to Litbutan for closing remarks.

Thank you all for joining us this afternoon. In summary, our business is mission critical to silicon development, which is a cornerstone of all design activity. Through our strategy, we are capitalizing on multiple technology waves and further proliferating our solution with a broader base of customers. Next phase of our strategy, intelligent system design, brings new opportunities in the design excellence, system innovation, and pervasive intelligence, and an expanded total addressable market. In closing, I would like to thank all our shareholders, customers and partners, board of directors, and our hardworking employees for their continued support.

Thank you for participating in today's Cadence First Quarter 2019 Earnings Conference Call. This concludes today's call. You may now disconnect.