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.