Cadence Design Systems, Inc.

Good afternoon. My name is Erica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence second 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'll now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence. Please go ahead.

Thank you, Erica. And I would like to welcome everyone to our second quarter 2019 earnings conference call. I am joined today by Lip Bhutan, CEO, and John Wall, Senior Vice President and CFO. The webcast of this call is available through our website, cadence.com, and will be archived through September 13, 2019. A copy of today's prepared remarks will also be available on our website at the conclusion of today's call. Please note that the discussion today will contain forward-looking statements and that actual 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 and the earnings press release that we issued today. 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 July 22nd, 2019 for the quarter ended July 29th, excuse me, June 29th, 2019, related financial tables and the CFO commentary are all available on our website. Now I will turn the call over to Lipu.

Good afternoon, everyone. Thank you for joining us today. Cadence achieved strong operating results. for the second quarter of 2019, delivering 12% year-over-year revenue growth on broad-based strength across our product lines. Based on the strength of our business, we are raising our outlook for the year. John will provide more details shortly. While there's an ongoing global economic and geopolitical uncertainty, we remain confident about the multiple long-term trends that continue to drive strong design activity. Driven by trends such as artificial intelligence or AI, 5G, autonomous driving, and IoT, 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 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 estimate $30 billion over the next five years. The foundation of the strategy is design excellence, which is comprised of our core EDA and IP business. In addition, we are building upon our core competency in computational software to expand into two new areas. The first one is system innovation, where we are expanding into new system domains with products like Curity, our new 3D EM solver that was launched last quarter. Curity has received considerable customer interest with numerous evaluations underway. And second new area is pervasive intelligence, where we are beginning to apply AI and our algorithmic knowledge to our core business and specific verticals. Now let us turn to our quarterly highlights for our core business. Our innovation engine continued to deliver as we introduced four significant new products in the quarter. We grew revenue in digital and sign-off by double digit year over year. through both ongoing proliferation with market-shaping customers and adoption by new customers at advanced nodes. Samsung Austin R&D Center, a leader in high-performance design, has selected Cadence Digital Implementation Solution for a next-generation high-end mobile CPU core design. Cadence state-of-the-art Innoverse-based flow delivered the best quality of results for their design, enabled Samsung Austrian R&D Center to meet its advanced process node objectives. Innovium, a leading provider of innovative data center switching solutions, adopted Innoverse for its highly scalable Telenix Ethernet switch designs. There were more than 40 tape outs at 7 nanometer and below using our full digital flow in the first half of 2019. And Innoverse, our digital implementation solutions, has over 80 active customers for 7 nanometer and below designs, including 10 at 5 nanometer. Next, I want to discuss highlights of our system design and verification solutions, for which revenue grew 7% year-over-year. Our hardware-assisted verification products, which are an integrated part of our verification suite, had another good quarter. With the addition of Proteum X1, we also provide comprehensive solutions across IP, and SOC verification, hardware software regressions, system validation, and earlier software development. Palladium Z1, our flagship emulation platform, added six new customers and had nine repeat orders. Habana Lab, a leading AI processor startup, say that Palladium was instrumental for the development of Gaudi. the industry's first AI training processor that natively integrates Ethernet and RDMA, and for their Goya inferencing chip. Pungible, a pioneer in data-centric computing, uses a combination of Palladium-Z1 and Protium-S1 systems in the development of their DPU family of products. The DPU is a new type of microprocessor that will revolutionize the performance, reliability, and economics of data centers at all scales. We introduced the Proteum X1 enterprise prototyping platform, which is the first data center-optimized FPGA-based prototyping system, and provides multi megahertz speed for billion gate designs, accelerating earlier software development and hardware-software convergence. Customer reception of Proteum X1 has been very positive, with earlier adoption from some market-shaping customers, including NVIDIA. Proteum S1 and X1 also added three new customers and received received seven repeat orders. We also delivered the Smart Jasper Go former verification platform that delivers an average of 2x faster proofs out of box and 5x faster regression runs by leveraging new machine learning-enabled smart proof technology. STMicro has been able to significantly boost its verification productivity with smart Jasper Gold. Custom analog grew a strong 11% year over year. In the quarter, we introduced an important new product, Spectre X Simulator, which is next generation massively parallel circuit simulator designs to provide up to 10X performance gain while solving 5X larger design. And while maintaining the golden accuracy, customers expect from 25 years of Spectre industry leadership in analog, mixed signal, and RF applications. SpectreX was endorsed by MediaTek, Mennonox, Renesas, and SiliconWorks. Now let me make a few comments on the geopolitical situation. We have and will continue to comply with the United States Department of Commerce export control regulations. The situation is fluid and we will continue to closely monitoring it. While there is an ongoing uncertainty, thanks to our strategy, continual innovation and operational execution, we are well positioned to capture growth opportunities arise from the longer-term trends driving strong design activity. While we do not provide details about any specific customer, I do want to emphasize that we have a very broad, diversified, and global customer base. With that, I will now turn the call over to John to review the financial results and provide our updated outlook.