Cadence Design Systems Inc (NASDAQ:CDNS) Q3 2019 Earnings Conference Call - Final Transcript

Oct 21, 2019 • 05:00 pm ET

Previous

Cadence Design Systems Inc (NASDAQ:CDNS) Q3 2019 Earnings Conference Call - Final Transcript

Share
Close

Loading Event

Loading Transcript

Q & A
Operator
Operator

[Operator Instructions] And your first question comes from Adam Gonzalez with Bank of America. Your line is open.

Analyst
Adam Gonzalez

Yeah, Thanks for taking my question and congrats on the strong results. For the first one, I'd like to focus on the IP business. I know IP can be a little bit volatile from rev rec standpoint. But can you help us understand how sustainable this large boost you saw in Q3 is? Should we expect a little bit of a reversion in Q4? Does Q3 kind of represent an inflection? And if the latter, can you walk us through what the sustainable drivers are? Thanks.

Executive
John M. Wall

So Adam, yes. As Lip-Bu mentioned in his prepared remarks that Q3 was our best ever quarter for IP business with impressive revenue growth exceeding 20% year-over-year. I mean if I look back over the last four quarters, the trailing four quarters, we're also up 20% year-over-year on IP. But we always say that revenue for IP can be lumpy in any single quarter, half or even year. But we do believe that it's -- it's relatively sustainable over the long term.

Analyst
Adam Gonzalez

Got it, thanks. For my follow up, I guess can you just give us an early view on 2020 growth based on the bookings momentum that you're seeing today?

Executive
John M. Wall

Can you repeat the question?

Analyst
Adam Gonzalez

Just if you have an early view on what 2020 growth could be directionally, if not an absolute value just based on the momentum that you're seeing today for the overall business.

Executive
John M. Wall

Oh, we're not giving any guidance on 2020 right now. Like we say, it's, it can be -- it can be lumpy in any one quarter, half or even year. We'll provide that guidance at the end of the year.

Analyst
Adam Gonzalez

Got it. Thanks.

Operator
Operator

Your next question comes from Gary Mobley with Wells Fargo Securities. Your line is open.

Analyst
Gary Mobley

Hey guys, thanks for taking the question. And congrats on another strong quarter. I realize that you're probably going to be filing your 10-Q in about three hours or so, but can you give us a preview into what the remaining performance obligations were at the conclusion of the quarter?

Executive
John M. Wall

Yeah, I think it's, I think it's filed already. The contracted but unsatisfied performance obligations were approximately $3 billion at the end of Q3, including approximately $200 million of our IP Access arrangements. Those IP Access arrangements are non-cancelable commitments from customers, where product selection and quantities are determined by customers each quarter.

Analyst
Gary Mobley

Okay. So it's about $200 million sequentially, if I'm not mistaken. All right. I have multiple question on your Systems Analysis business, Lip-Bu you mentioned four wins for Clarity in your prepared remarks. In relation to those four wins in the early activity, in the 30 engagements that you have, how successful are you in your ability to separate these licensing deals from existing EDA customers? In other words, monetize them above and beyond your existing revenue run rate, existing customers. And can you share with us what