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Cadence Design Systems' (CDNS) CEO Lip-Bu Tan on Q1 2016 Results - Earnings Call Transcript

Q1 2016 Results Earnings Conference Call

April 25, 2016, 05:00 PM ET

Executives

Alan Lindstrom - Senior Group Director, IR

Lip-Bu Tan - President and CEO

Geoff Ribar - Senior Vice President and CFO

Analysts

Krish Sankar - Banc of America

Gary Mobley - Benchmark

Rich Valera - Needham & Company

Jay Vleeschhouwer - Griffin Securities

Monika Garg - Pacific Crest Securities

Sterling Auty - JPMorgan

Tom Diffely - DA Davidson

Suji De Silva - Topeka Capital

Operator

Good afternoon. My name is Shannon and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Design Systems First Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]

Thank you. I will now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence Design Systems. Please go ahead.

Alan Lindstrom

Thank you, Shannon, and welcome everyone to our first quarter 2016 earnings conference call. With me today, are Lip-Bu Tan, President and CEO; and Geoff Ribar, Senior Vice President and CFO.

The webcast of this call can be accessed through our website, cadence.com and will be archived through June 17th, 2016. A copy of today's prepared remarks will also be available on our website at the conclusion of today's call.

Before I start, I want to call your attention to our CFO commentary which was included in our 8-K filing today and is available on our Investor Relations' website at cadence.com. The CFO commentary should be referenced in conjunction with both today's conference call remarks and the earnings press release issued today.

Next, please note that today's discussion will contain forward-looking statements and that our 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 statements regarding forward-looking statements in the earnings press release issued today.

In addition to the 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 measure 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, which can be found in the quarterly earnings section of the Investor Relations portion of our website.

Additionally, a copy of today's press release, dated April 25th, 2016, for the quarter ended April 2md, 2016, and related financial tables can also be found in the Investor Relations portion of our website.

Now, I'll turn the call over to Lip-Bu.

Lip-Bu Tan

Good afternoon, everyone, and thank you for joining us today. Cadence delivered good operating results for Q1. Revenue was $448 million, up 9% year-over-year. Non-GAAP operating margin was 26%. Non-GAAP EPS was $0.28 and operating cash flow was $83 million.

Looking at the environment, conditions have not changed significantly since last quarter. Semiconductor business conditions remain challenging and we remain mindful of the ongoing consolidation in our semiconductor customer base. While we do not expect a material impact on our business in 2016, consolidation could pose a challenge to industry growth over the next few years.