Cadence Design Systems Inc (CDNS) — Q1 2018 Earnings Call Transcript

Thank you, Jessy, and I'd like to welcome everyone to our first quarter 2018 earnings conference call. I am joined by Lip-Bu Tan, CEO; and John Wall, Senior Vice President and CFO. A webcast of this call is available through our website, cadence.com, and will be archived through June 15, 2018. A copy of today's prepared remarks will also be available on our website at the conclusion of today's call. Please note that today's discussion 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 in the earnings press release 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 April 23, 2018 for the quarter ended March 31, 2018, related financial tables, and the CFO commentary are also available on our website. Finally note that our 10-Q will be filed later this week. Now I will turn the call over to Lip-Bu.

Good afternoon everyone. Thank you for joining us today. I am very pleased to report that Cadence achieved excellent operating results for the first quarter. Based on the strength of our Q1 business and continuing momentum, we are raising our guidance for the year. John will provide details in a moment. The data-driven economy is being propelled by key technology waves of mobile, cloud/datacenter, edge computing, automotive, and more significantly, machine learning. These technologies create massive amounts of data which need to be processed, analyzed, transmitted, and stored. This requires power-efficient processing, high bandwidth transmission, and high density storage, which in turn are driving an increase in design activity and broad-based demand for our innovative System Design Enablement solutions. Now I will review some of the highlights from Q1. Our System Design Enablement strategy enabled us to increase our footprint with system companies and tailor our solution for vertical market segments. One of these vertical segments is Aerospace and Defense, where in Q1, we expanded our business with large orders from these companies. Turning to products, our digital and signoff business continued its strong market momentum in Q1. We collaborated with Imec, an international research and innovation hub, on the industry-first three nanometer test chip tapeout using Cadence Innovus Implementation Systems and Genus Synthesis Solution. We continue to proliferate our digital solutions within market-shaping customers and we have brought in adoptions amongst other customers, including a major defense contractor that would use our digital flow for in-house chip design. Both a leading networking company and a top communication processor company adopted our digital flow for seven nanometer design, continuing our momentum at the most advanced process nodes. We achieved strong performance with our system design and verification solutions in Q1. The Cadence Verification Suite marked a strong quarter as the business grew over 20% year-over-year. Palladium added five new customers, and we booked 17 repeat orders. And Protium S1, targeting the prototyping market, continues to ramp as customers realized faster design bring-up due to common front-end with our Palladium Z1 platform. During the quarter, we added four new Protium customers and booked five repeat orders. Our hardware products nicely complement the software solutions in our Verification Suite; Xcelium for parallel simulation and JasperGold for formal verification. Thirteen additional customers adopted Xcelium in Q1. Our custom and analog design business continues to do extremely well, and we lead the market with our flagship Virtuoso product line. We introduced major enhancements to our Virtuoso custom IC design platform that improved electronic system and IC design productivity. A new set of innovative methodologies and technologies, including support for five nanometer nodes, lead to a modern 3X reduction in FinFET layout efforts. One of our automotive customers, Bosch, endorsed a new system, saying that their long-term collaboration with Cadence has led to crucial innovation in both electrical-aware and new electrical-driven layout design. Customers including defense contractors, analog semiconductor companies, and mobile chipmakers are adopting our Virtuoso System Design platform, especially for products using heterogeneous multi-die integration. Our IP business, with this refined strategy and augmented roadmap, is well-positioned to take advantage of continuing outsourcing trends. Momentum for our flagship DDR and PCIe products continues with significant wins, especially for seven nanometer designs. We announced a new Tensilica Vision Q6, our latest processor for embedded vision and on-device AI applications built on the new faster processor architecture. The Vision Q6 builds upon our highly successful Vision P6 that is used in many leading application processors, including the Kirin 970 SoC from HiSilicon. Finally, I want to talk about the culture we are building at Cadence that underlines all our success. We are committed to driving an innovative and inclusive culture that embraces the diversity of our global workforce. The strength of our culture is highlighted by the recognition we received from Fortune. We earned the number 38 spot on the list of Fortune's Top 100 Best Companies to Work For and are proud to make the list for the fourth year in a row. Our commitment to innovation can be seen in more than 20 significant new products that the Cadence team has developed in the past three years. We are also focused on supporting our global community, and have been recognized by Fortune as the Best Workplace for Giving Back. Since I joined the company, one of my top priorities has been building a culture that differentiates Cadence. We can be proud of how we have accomplished it. I am encouraged by the progress we are making, and we will continue to make our culture central to our business strategy. Before turning it over to John, let me quickly summarize my comments. We drove excellent results through consistent execution and broad-based proliferation and adoption of our solutions to meet the needs of the data-driven economy. We are raising our guidance for the year on the strength of our business. Our growing Aerospace and Defense business had a strong quarter. We continue to grow adoption of our digital flow for seven nanometer designs. And we introduced a major upgrade of our flagship Virtuoso product line for custom analog designs, and a new higher performance Tensilica processor for Vision and AI applications. With that, I would now turn the call over to John to review the financial results and provide our updated outlook.

Thanks, Lip-Bu, and good afternoon everyone. I am very pleased to report we exceeded all of our key operating metrics in Q1. As a result of strong execution across our business, we are increasing our outlook for fiscal 2018. Before we get into Q1 results, I would like to remind you that Cadence has now adopted the new revenue accounting standard known as ASC Topic 606 for fiscal 2018. These new rules, as we often refer to them, are now GAAP to Cadence. The numbers I present for our first quarter are based on these new rules unless otherwise stated. Please also keep in mind that the numbers for 2018 under the new rules are not directly comparable to those of 2017, which were reported under ASC Topic 605, or, for ease of reference, the old rules. Cadence used the modified retrospective transition method on the adoption of the new rules. Under this transition method, rather than recast prior periods, we are required to report our 2018 results. So, alongside our new GAAP rules, we will also provide you today our first quarter results for 2018 as reported under the old rules. These results under the old rules are directly comparable to 2017. Having covered that, let's go through the key results for the first quarter starting with the P&L. As reported under the new rules, total revenue was $517 million. Non-GAAP operating margin was 27.8%. GAAP EPS was $0.26, and non-GAAP EPS was $0.40. Under the old rules, for direct comparison against our Q1 2017 results, total revenue was $525 million. Non-GAAP operating margin was 29.5%. GAAP EPS was $0.30, and non-GAAP EPS was $0.44. Please note that approximately $0.04 of the year-over-year improvement in our non-GAAP EPS is directly attributable to the reduction in our effective tax rates resulting from the recent U.S. Tax Cuts and Jobs Act. Please also note that $6 million of the $8 million difference in revenue for Q1 between new rules and old rules is attributable to changes in revenue recognition for IP. Now turning to the balance sheet and cash flow, cash and short-term investments were $752 million at quarter-end, of which approximately 30% was on-shore. Debt outstanding at quarter-end was $695 million. Operating cash flow was $158 million. During Q1, we used $50 million for share repurchases and $40 million to pay down borrowings under our revolving credit facility. As reported, the DSOs were 41 days. Under the old rules, DSOs were 38 days. I will now provide our updated guidance. On the heels of strong execution in our first quarter and continuing momentum for our business, we are raising our outlook for the year. We now expect revenue growth of approximately 8% for 2018 on an apples-to-apples basis under the old rules. For Q2, we expect the following results: revenue in the range of $510 million to $520 million, non-GAAP operating margin in the range of 27% to 28%, GAAP EPS in the range of $0.20 to $0.22, non-GAAP EPS in the range of $0.39 to $0.41, and DSOs of approximately 40 days. Our updated guidance for fiscal 2018 is: revenue in the range of $2.055 billion to $2.085 billion, non-GAAP operating margin in the range of 27% to 28%, GAAP EPS in the range of $0.86 to $0.94, non-GAAP EPS in the range of $1.57 to $1.65. We are increasing operating cash flow to a range of $510 million to $550 million, an increase of $25 million at the midpoint. And we expect to continue to repurchase Cadence common stock at the rate of $50 million per quarter during 2018. Please note that we expect revenue under the old rules will be approximately $30 million higher than under the new rules, with $20 million of that difference attributable to changes in revenue recognition for IP. There is no impact to our cash flows, or to how we operate our business. As a result, our implied 2018 guidance at the midpoint under the new rules or under the old rules is now revenue of approximately $2.1 billion, representing growth of 8% compared to the previous estimate of 7%, non-GAAP operating margin of approximately 28.6%, GAAP EPS of $1.01, and non-GAAP EPS of $1.70. This quarter, I especially urge you to read through our CFO commentary, which was included with our 8-K filing today, and is available on our website. There you will find additional information and comparisons and reconciliations for the new and old revenue accounting rules. And you can see how all of our lines of business perform throughout the first quarter of 2018. Verification had a particularly strong quarter with great momentum across the entire verification suites. We continue to see strength across all lines of our core software business, and our IT business is performing in line with my expectation that it will prove to be the fastest-growing part of our business for 2018 on an apples-to-apples basis. To sum up today's call, I want to highlight that I am pleased with our performance across all lines of business. I would like to thank the extended Cadence team for their financial discipline and for their drive and passion to make our customers successful. Our projections are adjusted to an 8% growth for the year. The hard work is starting to pay off. With that, Operator, we will now take questions.

Good afternoon everyone. Thanks for taking my question, and congrats on a good start to the year. I wanted to start off the question about capital allocation. You mentioned that you raised your cash flow outlook for the year. You have 10 percentage points more of your cash in the U.S. now versus at the end of the year. I'm just curious why you are not getting more aggressive on your share buyback? And with respect to capital allocation, how would you characterize the M&A environment out there with respect to valuation expectations from some of the targets and whatnot?

That's a good question, Gary. I will take the first part, and then I will ask Lip-Bu to take the second part on M&A. But the board and management at Cadence are laser-focused on creating shareholder value. And as you know, we regularly review capital structure and capital allocation to balance investment needs, risk, liquidity, and capital returns. Also, as we said in the last call, in the first half of this year, we plan to review our overall tax position in light of the new Tax Act, including our options for the use of repatriated cash. So that's all in focus right now.

Yes, on the M&A front, Gary, I think the board and the management are laser-focused on creating shareholder value, taking a strategic-driven and disciplined approach. Our M&A philosophy has always been very disciplined; we have to tie it into our EDA's System Design Enablement strategy and also focus on customers with differentiating technology products, attracting the best managerial and technical talent, and being able to provide a compelling return on investment for acquisitions. We have clear accountability for all key acquisitions. So that's been our discipline for doing that. We are going to continue to remain laser-focused on our internal development and using M&A to supplement our organic growth.

Okay. A question about the mix between system companies and merchant IC companies. I know you probably get asked this question a lot, and I don't know if you have an exact figure you can state from your Q1 results, but what do you estimate your mix between system companies and merchant IC companies was for the first quarter? And I guess even more specific, what would you estimate your non-IC design revenue contribution in Q1?

So Gary, I can tell you that we haven't drilled into the mix for Q1, but the last time we measured the mix, it was around 40% system companies. I know that it hasn't changed in a while, but that's because we have seen growth from both the systems business and also our semiconductor business.

Gary, if I can add that our system and IC business are doing well, and we put more focus on our IP supporting the IC customers. Meanwhile, we will approach the System Design Enablement to tailor some of our IP solutions to meet the needs of customers in the system side, driving success, especially in the PCB and the System Integrity Analysis side. We are starting to really pursue the automotive segment, and we have seen great success in this quarter and last quarter. We also received multiple large orders from several defense contractors and aerospace companies this quarter. We are thrilled with our progress in these vertical markets.

Okay. Thank you for that. I will turn the floor over to somebody else. Thanks.

Hi, thanks for taking my question. The first on the IP; though you said just looking at the ASC606, IP is kind of down $10 million year-over-year, could you maybe give us an idea how much of it is just due to accounting ASC606, and what would it have been without the impact?

Hi, Monika, thank you for your question. In the first quarter of 2017, as part of our transition to the new revenue accounting standards, we recognized an additional quarter of royalties that contributed approximately $5 million to IP revenue during that period. So, please consider that when assessing growth. Additionally, the recognition of IP revenue was significantly influenced by the transition to the 606 revenue standard; $6 million of the $8 million variance between the 605 and 606 revenue for the first quarter was attributed to IP. Therefore, in a direct comparison, IP actually saw an increase year-over-year. I want to emphasize that I still anticipate it will be the fastest-growing segment of our business in 2018, even though our 10-K report notes that the acquisitions we made in 2017 are not projected to generate substantial revenue this year.

And then Monika, to add on, clearly this IP business and trends are continuing. We have some of the most differentiating IP under this refined strategy and focus on the most advanced nodes. Some of the Tensilica, we highlighted the new Q6, and also the nusemi acquisition for high-speed connections. We have a great portfolio to drive success for our system and semiconductor customers.

Thanks for the details. Lip-Bu, then as a follow-up, you talked in your comments about the Tensilica processor for vision; could you provide details on interest you are seeing from customers regarding this product?

Yes, we just announced it recently, and so far, the response from customers is very positive. This is based upon the success of the Vision P6, which is broadly adopted for application processors. Meanwhile, this new version is higher performance, and we are diligently building up our software capability to aggregate and enhance these capabilities, providing an overall solution for embedded vision and on-device AI applications that we hope will see broad adoption.

All right. Just the last one, after the muted performance in emulation last year, given a very strong performance in '16, Q1 seems very strong in functional verification. Could you provide more details? Thank you.

Sure. As I highlighted, we are very pleased with our System Verification suite, which grew 20% year-over-year. Our hardware business, as John highlighted, had a strong backlog from last year, and Q1 was also very strong for both Palladium and Protium. We had five new customers and 17 repeat orders for Palladium. For Protium, we are also very pleased with four new Protium S1 customers and five repeat orders. In Xcelium, we do recall that the integration of Rocket Tag and Incisive was effective, and we are delighted that we had 30 new customers adopting it this quarter. Overall, I think verification is critical for our complex designs. We offer an entire suite that includes both hardware and software to provide our customers the most compelling solutions.

Thank you so much.

Thank you. Good evening. John, I have a couple of questions for you before we finish up with Lip-Bu regarding the end market. Were there any unusual increases in upfront or perpetual revenues this quarter, aside from hardware, which did very well? It seems like you may have had a record quarter for emulation, but you mentioned Aerospace and Defense multiple times. Historically in EDA, Aerospace and Defense have preferred upfront licenses unless that has changed. Could you provide some commentary on any increase from upfront licensing in the quarter?

Jay, I will take the first part of your question. I was certainly pleased with the performance of all our lines of business in Q1. Approximately 90% of our revenues recognized over time, and that was no different for Q1. So there was nothing unusual. With our ratable model, the strong Q1 has a bigger impact on the entire year, and you'll see the strength in Q1 carry through into strong guidance for the year. We continue to see strength in our custom IC and digital software business, so I'll pass it off to Lip-Bu.

Yes, so I think, Jay, a couple of points. I highlighted our collaboration with Imec where we announced the three nanometer quadruple patterning test shipment successfully. We are very pleased with that. Our volume business is in the 14 and 16 nanometer range from a customer perspective, but we are moving very rapidly into the seven and five nanometer range. There is a lot of design activity and IP engagement in these advanced nodes. In every new process node, there is an opportunity for us to help our customers win in the marketplace, so we are excited about what lies ahead. Our tools, distribution, and processing capabilities, alongside machine learning, are enhancing our advantage in those areas.

Just to finish off with John, could you talk about your philosophy on pricing, specifically as part of your management principles, which you call 'Deal Quality Metrics'? Are you looking at pricing, or let's be more specific, suboptimal pricing in the case of any specific customers more than at the account level, or do you think of pricing more broadly in terms of how you might apply price increases or less discounting?

Hi, Jay. Yes, we are very disciplined in value-driven pricing at Cadence, but it is a competitive business and pricing can vary from sector to sector and product to product. We believe the best way to drive value is through collaboration with customers to deliver innovative and clearly differentiated solutions that can make our customers successful.

Thanks for taking my question. Can you just talk about the division and guidance for the year from last quarter to this quarter? What are the specific parts of the business that you think are stronger now compared to three months ago?

Hi, Farhan. This is John. Yes, strength in the quarter was broad-based. Functional verification had a particularly strong quarter with great momentum across the entire Verification Suite as Lip-Bu mentioned earlier. We continue to see strength as well in our custom IC and digital software business. Our IP business is performing in line with our expectations, and it is going to be the fastest-growing part of Cadence on an apples-to-apples basis for this year. So, it's a pretty broad base.

Sorry, I meant for the year, not just for the quarter.

Similarly, it's pretty broad-based across the year. We expect to see growth in all of our businesses this year.

Got it. And then in emulation, Mentor Graphics recently claimed that they have taken leadership and market position in emulation. Can you talk about the competitive dynamics within the emulation market? And how are we in terms of the product introduction cycle?

Yes. So Farhan, this is Lip-Bu. We are very pleased with our hardware business performance in both Z1 and Protium S1 for verification, which is critical for design verification. Our software and hardware complement each other, providing a comprehensive suite for our customers. We have made great progress, achieving 20% growth year-over-year, and respect our competitors while continuing to compete effectively in the marketplace.

Got it. And then one last question on the OpEx linearity throughout the year. Can you talk about how we should model OpEx for the year?

Right. With the transition to the new revenue rules, if you are using the 606 numbers, you would expect the commission expense to be more flat throughout the year. So, I think that will probably give you a more stable expense profile throughout the year.

Got it. Thank you. That's all I have.

Okay, thank you.

Yes, thank you. I would just like to follow-up on the emulation question. It seems like there's been a pretty dramatic turnaround, you know, the whole category of verification was down about 5% year-over-year last year, I believe you said in your last call, and presumably hardware was down meaningfully more than that. Given the relative stability of software, could you explain what has accounted for that turnaround year-to-year? Was it simply difficult comparisons in '17 off the strong '16 performance, or is there something else you could point to?

Yes, this is Lip-Bu, Rich, and thanks for the question. Hardware is a very lumpy business. Last year had a soft start but we finished very strongly in Q4, and that momentum carried us into Q1. Our hardware, Palladium Z1 and Protium, both have seen notable customer additions — five new customers for Palladium and 17 repeat customers, along with four new Protium customers and five repeat orders. Overall, I believe it's not just about hardware; our software, Xcelium, also saw 30 new customers this quarter. The entire verification suite is performing strongly and I am very pleased with our performance.

Got it. You specifically in Q4 called out very strong bookings for the hardware business, and that certainly translates into a nice Q1. Anything you would say specifically about bookings? You mentioned new customers and repeat customers, but would you say that you had another strong bookings quarter for the hardware business in Q1?

Again, we don't typically talk about bookings on a quarterly basis. Hardware is an important component of our portfolio. We view it as the complete verification suite, which we believe has been disciplined in terms of value-driven pricing to ensure we appropriately capture the value that the hardware provides.

Great. One more if I could on digital; I don't know if you said specifically how fast digital grew, it looks like it was a double-digit number, but did you say that specific number, John?

No, it was 9%.

I'm sorry, 9%. Okay. So yes, I know that was double-digit last year. Would you be willing to hazard a guess whether you think that might be a double-digit growth business again this year, or are you not willing to go there at this point?

No, we are generally not going to guide or comment on individual product line growth rates for 2018, other than to say we thought IP would likely be the fastest-growing group.

Yes, if I can add, we are excited about our digital flow. A couple of very successful clients have adopted our solutions, including a leading networking company and a top provider of communication processors for seven nanometer designs. Last quarter we also highlighted a premium hyper-scale customer moving into seven nanometer, using our entire suite. Overall, we continue to expand our footprint, so stay tuned.

Got it. Thanks very much, and very nice quarter, gentlemen. Thanks.

Thank you.

Thank you.

Yes, good afternoon. Another question on the IP front. It sounds like the 606 has about a $10 million impact on IP this year. I'm wondering, does that reverse next year, or are there additional one-timers in the coming years that would impact that as well?

So, last quarter, we talked about that our expectation for the difference in total revenue between the two sets of rules was $40 million. We thought in 2019 that would drop to about $25 million, but now we think it's $30 million for similar proportions in the out years. In terms of IP, we think 20 of the 30 million is IP this year, but haven't drilled into the impact in 2019. I can only say that we expect the impact between 606 and 605 to be slightly smaller than we thought last quarter.

Okay. You said the same ratio roughly holds in for the year...

I think so, yes.

Okay, and the same ratio of IP as a percentage?

That's a good guess.

Okay. So I guess, when you look at the new refined IP strategy in the market, are you growing in line with double-digit market growth, or are you going slower or faster right now?

We are not going to get specific in that.

Yes, clearly, this refined strategy and augmented roadmap emphasizes scalable and profitable focus. We focus on the most advanced nodes, customer success, and key IP like Tensilica and nusemi for ultra-high speed. We will continue to build on those differentiating IPs and focus on quality.

Okay. And then just looking at the broader IC market, what is the penetration of outsourced or merchant IP, and what percentage is still done in-house? Where do you think that percentage goes over time?

I think as I mentioned, the outsourcing trend continues. From our customer's perspective, unless they really need to differentiate their product offering, they are looking for reliable, trusted, high-quality outsourced IP. Over time, there's a lot of room for growth, and we are excited, as John mentioned, that this will contribute to higher percentages of growth for our product line. We're excited about this IP, especially as it applies to key areas, like high-speed data center and automotive.

Okay. So, at this point, do you think we're at the halfway point in the outsourcing trend?

Yes, I can't pinpoint that, but all I can say is that, using baseball terminology, we're still in the early rounds.

Okay, all right. Thank you.

Thank you.

Hey, guys. Thanks. I just want to follow up on the line of questions regarding IP. I apologize if you said earlier; I'm bouncing between calls, but I get lots of questions around the autonomous driving and artificial intelligence, etc. What is the core IP that you've built at this point, and what kind of demand traction are you seeing for those elements within the IP franchise?

Yes. First of all, we are focusing on high-speed connectivity, either USB or PCIe for data storage requirements, using Tensilica to support AI and autonomous driving developments. We provide tools and IP to help customers design complex EDAs and support their autonomous driving requirements. Last quarter, we highlighted how a major automotive maker adopted key IP from us. Additionally, we are addressing the AI sector in vision, audio, and on-device AI applications, and there is significant growth potential here.

And on those types of opportunities, has anything changed in terms of the mix of contract structure you are getting, in terms of upfront versus annual subscription or perpetual payment for those capabilities?

No, not much has changed; their design requirements remain fairly standard. Clearly, there is a lot of opportunity, and in hardware and software development, we're excited about the integration of architectures involving silicon photonics, quantum computing, and AI — all driving semiconductor growth.

That's great. One last question; we talk about digital and the growth there, but not much on the analog side where you've been dominant through the years. Have you seen anything change in the competitive landscape in the analog franchise?

Not a lot. We've continued to triple down on our leadership, and our recent enhancements to Virtuoso customized new platform have been significant. It allows us to address processes down to five nanometers with our leading foundry partners. Coupled with innovative methodologies, we've driven over a threefold increase in productivity. We've received considerable positive feedback, especially from customers like Bosch, and defense contractors, analog semiconductor companies, and mobile chipmakers are adopting our new Virtuoso tools.

Great, thank you.

Thank you.

Hey guys, thanks for taking my questions. I wanted to touch really quick on the systems side. So I know you can't disclose customers, but is there any way you could give us some information on how they spend? When a systems company spends to create their own chip, do they spend any differently than a standard semiconductor customer?

In general, it's pretty similar. They all aim to design their silicon or systems, and we maintain a unique position with our tools, IP, and PCB system simulation capabilities. For system companies, time to market is critical; they aim to be first movers in the market. They focus on quality and appreciate the value we provide. Our goal is to enable their complex chip and system designs, and we have successfully partnered with companies for collaborative integrations.

Got it. Additionally, a couple of years ago, you discussed systems increasing as a revenue percentage, but it sounds like that's stayed the same. What factors contributed to that being consistent versus the expectation of growth?

We haven't updated the analysis on the mix for Q1, but as of the end of last year, the mix was still around 40% for system companies. Both the systems and semiconductor segments are showing good growth.

Okay, perfect. Thank you.

In closing, through continuous innovation and execution, we are well-positioned with our System Design Enablement strategy to further proliferate our solution with a broad base of customers. We are proud of the innovative and inclusive culture that we are building at Cadence. I would like to take this opportunity to thank all our shareholders, customers, partners, Board of Directors, and hardworking global employees for their continued support. Thank you all for joining us this afternoon.