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 speakers' remarks, there will be a question and answer session.
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 Q2 2019 earnings conference call. I am joined today by Lip Bu Tan, 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 ks and Form 10 Q, including the company's future filings and the cautionary comments regarding forward looking statements in 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 22, 2019 for the quarter ended July 29th excuse me, June 29, 2019, related financial tables and the CFO commentary are all available on our website. Now, I will turn the call over to Lip Bu.
Good afternoon, everyone. Thank you for joining us today. Cadence achieved strong operating results for the Q2 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, 5 gs, 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 $10,000,000,000 to estimate $30,000,000,000 over the next 5 years. The foundation of the strategy is design excellent, 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 2 new areas.
The first one is system innovation, where we are expanding into new system domains with products like Clarity, 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 intelligent, 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 4 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 and D Center, a leader in high performance design has selected Cadence Digital Implementation Solution for our next generation high end mobile CPU core design. Cadence state of art Innovus based flow delivered the best quality of results for their design, enabled Samsung AUSTION R and D Center to meet its advanced process node objectives. Innovium, a leading provider of innovative data center switching solutions adopted Innovus for his 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 twenty nineteen.
And Innovus, 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 Protium X1, we also provide a comprehensive solutions across IP and SoC verification, hardware software regressions, system validation and earlier software development. Palladium Z1, our flagship emulation platform added 6 new customers and had 9 repeat orders.
Habana Lab, a leading AI processor startup, say that Palydium was instrumental for the development of Gaudi, the industry first AI training processor that natively integrate Ethernet and RDMA and for their Goya inferencing chip. Punchable, a pioneer in data centric computing, use 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 center at all scales. We introduced the Protium X1 enterprise prototyping platform, which is the 1st data center optimized FPGA based prototyping system and provide multi megahertz speed for 1,000,000,000 gate designs, accelerating earlier software development and hardware software convergence. Customer reception of Protium X1 has been very positive with earlier adoption from some market shipping customers, including NVIDIA.
Protium S1 and X1 also added 3 new customers and received 7 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 Go. 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, customer expect from 25 years of Spectre industry leadership in analog, Mixed Signal and RF Applications. Spectre X was endorsed by MediaTek, Menonox, Renesys 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, continued 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. Thanks Lip Bu and good afternoon everyone. I'm pleased with our results for Q2 and our updated outlook for fiscal
2019. Q2 was a little unusual due to the export limitations that were imposed during the quarter. The export limitations that took effect on May 16 and June 24 in respect to certain customers remain in place today. We're aware that this is a very fluid situation. So for the purpose of providing guidance for the second half of twenty nineteen, we've assumed that these current export limitations remain in effect for the remainder of the year.
Now let me walk you through the key results for Q2 beginning with the P and L. Total revenue was $580,000,000 Non GAAP operating margin was 33.6 percent. GAAP EPS was $0.38 and non GAAP EPS was $0.57 Next, turning to the balance sheet and cash flow. At the end of the quarter, cash totaled 633 $1,000,000 while the principal value of debt outstanding was $350,000,000 Operating cash flow for Q2 was $246,000,000 DSOs were 38 days and during Q2 we repurchased $75,000,000 of Cadence shares. Now I will provide our updated guidance.
For Q3, we expect the following results. Revenue in the range of $570,000,000 to $580,000,000 non GAAP operating margin of approximately 30%, GAAP EPS in the range of $0.32 to $0.34 and non GAAP EPS in the range of $0.50 to $0.52 Our updated guidance for fiscal 2019 is now as follows. Revenue in the range of $2,315,000,000 to $2,335,000,000 non GAAP operating margin in the range of 31% to 32%, GAAP EPS in the range of $1.44 to 1 $0.50 non GAAP EPS in the range of $2.11 to 2 $0.17 Operating cash flow in the range of $680,000,000 to $720,000,000 and for the year we continue to expect to use approximately 50% of free cash flow to repurchase Cadence stock. You will find guidance for additional items as well as further analysis in the CFO commentary available on our website. In summary, I am pleased with our execution so far this year.
We are living in uncertain times and I am proud of how we are adapting to a fluid environment. Our improved outlook speaks to the diversification of our customer base, the underlying strength of demand for our technology and solutions and the continued focus of our employees throughout the company on achieving our key financial metrics. I would like to thank our customers, partners and of course our employees. We look forward to updating you on our progress throughout the second half of twenty nineteen. And with that operator, we'll now take questions.
Your first question comes from Tom Diffely with D. A. Davidson.
Yes, good afternoon. I was wondering if there's any way you could do more of a quantification of the impacts from the different export controls in China right now, kind of the relative size of that or the impact to earnings or anything more you can give would be great?
So Tom, we wanted to provide clarity in relation to second half guidance and expectations without speculating on what may or may not happen with regard to current export limitations. While we don't provide details on what that speculation might be. We don't we do want to emphasize that we have a very broad diversified and global customer base.
Okay. But no way to size in case it does come back to give us a sense of what the upside potentially could be to your guidance?
It's very hard to say. We don't want to speculate.
Okay. And then moving on, maybe you could talk about the margins in the quarter versus the guided margins about 10% lower. Is it just mix or is it more good on there?
Yes, certainly, Q2 was a there was more profitable mix in revenue. We were happy with the performance in functional verification. We continue to expect modest growth for 2019 even considering the impact of those export limitations. We expect gross margins, of course, like if Q2 was a little unusual due to the export limitations, we'd expect the gross margins for the second half to return to more typical levels. We're investing in opportunities to expand our business with market shaping customers and investing in TAM expansion opportunities.
So that's why the op margin is for the second half is forecast that's approximately 30%.
Okay. And then finally, when you look at the growth in intelligent system design over the next several years, does that meaningfully change the model for either a margin or cost structure point of view versus traditional EDA?
Well, we're not guiding out beyond 2019. Everything we know is included in our guidance for 2019. We take a longer term view over things and again, wouldn't focus on any 1 quarter. I tend to like compare current results against our current midpoint of guidance against 2016. And I think I would expect the model to Your next
Your next question comes from John Pitzer with Credit Suisse.
Yeah. Good afternoon, guys. Thanks for letting me ask the question. John, just a follow-up on the gross margin. I want to make sure I understand.
What was unusual about the June quarter? I thought I heard you say from the last question, it had to do with the export tariffs, but then you're saying that the gross margins return back to normal in the back half of the year despite the fact that it looks like you're still excluding some business related to the tariff issues?
Well, Q2 was a little unusual in that the export limitations took effect on May 16 and again on June 24 in respect to certain customers and like you say those remain in place today. And then, I mean, we had a few things in terms of hardware results. Hardware is a little bit more profitable than we expected. Services revenue was a little bit more profitable than we expected. And just generally, like I said, I wouldn't it was great, it was a profitable quarter for Q2, but I wouldn't extrapolate that into any kind of future guidance that we expect non GAAP gross margin to return to more typical levels in the second half of the year.
That's helpful. And then maybe as kind of a follow-up for the blue. Clearly, China is going to continue to be a long term strategic customer for you. I'm just kind of curious, given the heightened tension U. S.-China trade, is there any concern that we should have that China might try to do EDA on their own?
Or are the barriers to that business just so high, it would be difficult for them to kind of generate domestic sources for what you provided? Any sort of longer term color on that would be very helpful.
Sure. So I think clearly they have a number of China based EDA companies offering a few point to solutions. And clearly, we're not going to speculate in the broader hypothesis, but clearly, we focus on to be the best partner for our customer and globally include China.
Thank you.
Your next question comes from Gary Mobley with Wells Fargo Securities.
Hey guys, thanks for taking my question. Can you hear me all right?
Yes.
Yes. All right, good.
John, I want to ask you a question about your fiscal year 2020 outlook. I know you're not going to say anything with respect to revenue growth or margins or anything at all relating to 2020. But as you enter your budget meeting, whatever that is, are you still going to use the guiding principle of the rule of 40 in terms of looking at the revenue growth, some of the revenue growth in operating margin?
Yes, Gary. Certainly, I mean, the model we have, we expect to apply consistently and rule of 40 has been something we've looked at across the different business groups. But with that, we're guiding for 2019 now and not guiding beyond.
Understood. And with respect to your market shaping customer, I presume that you're still in the investment mode with this customer. Is it fair to assume that you haven't been able to recognize any revenue from the relationship at this point? And if that's the case, when would you expect you to bring the product to full fruition and be able to recognize revenue?
Yes. So I think, Gary, we mentioned quite a few market shaping customers. There's quite a few important ones. They are the leader in the industry. And I think I assume that you refer to this marquee U.
S. American company. Clearly, we have a breakthrough and wide ranging win with this U. S.-based semiconductor company, where we have a breakthrough and wide ranging win. We are in the early stage of partnership.
We are now very heavily engaging with them across the product line, the breadth of our engagement. So we're excited about it, but we continue to stay on close and focus.
Got you. Okay. Thank you for taking the questions. Sure.
Your next question comes from Jay Vleeschhouwer with Griffin Securities.
Thanks. Good evening. Lipo, let me ask you a competitive question regarding Mentor. That is it's becoming recently apparent that since the acquisition 2.5 years ago, They've been doing quite well with revenues well beyond what they last reported in 2016. And particularly in the areas for which they were always the market leader, including physical verification, PCB and it looks more recently also in hardware.
The question is, have you encountered that before and have you had to make competitive adjustments, let's say, to the fact that Mentor is in fact doing so much better than they were pre acquisition? A couple of follow ups.
Yes, Jig. First of all, we respect Mentor tremendously. And right now part of Siemens is a very big $100,000,000,000 company. So we don't take them lightly. And meanwhile, we respect them and a lot.
And then clearly, there are some products are competing with us. I think you mentioned earlier the hardware modification emulation side and of course they are callable products. So I think clearly we continue to respect them, but we effectively competing with them and so we treat them business as usual.
All right. You've grown your headcount pretty substantially year to date and also in Q1. Could you talk specifically about how well you've been able to bring on applications engineers? We talked about this that for at least the last half year going back to last fall, you've had a significant increase in open reqs for your AEs, particularly domestically. We're now looking for AEs well beyond the number that either Synopsys or Mentor are looking for.
So I imagine you've been able to onboard some, but can you talk about how you're doing in terms of bringing those kind of people on? And then lastly for John, you've talked for the last number of years about deal quality, price optimization and so forth. When you think about your base of customer contracts in cohort terms or aging of the cohort of the contracts, How do you think you've done so far in terms of optimizing the base of contracts or how much is left to be done in terms of outstanding contracts that at renewal you can optimize?
Yes. So, Jade, let me answer the first question and then John will answer the second question. So on the HITCO and we pretty much is pretty much on plan in terms of what we're going to bring on board In terms of the talent and also the FAE and engineering talent, we continue to bring in. And John and I, we are very thoughtfully try to bring in the talent with our executive team to really drive focus on customer success. And so clearly, we have a lot of multiple market shipping customer.
We are proliferating and we need the FAE to support the customer success and that's something that we're very focused on that. In terms of the AE resources increase, clearly not just domestically, also internationally to support our customer. So I think all in all, I think it's pretty much on plan and we continue to drive that. And then the as we always say, only when we see the green light from the customer in term of commitment, in term of proliferation with us, then we add AE and engineering talent to support it.
Yes. And Jay, in respect to your questions about deal quality and optimizing pricing, I mean, we're very disciplined and value driven. And we believe the best way to derive value for our products is to collaborate deeply with customers and deliver innovative and clearly differentiated solutions. And as Lebout highlighted, we're investing in opportunities to expand our business with market shaping customers and we're investing in TAM expansion opportunities that result from our intelligence system design strategy. I mean, in the end, it's all about innovation, which means attracting, retaining and
Your next question comes from Sterling Auty with JPMorgan.
Yes, thanks. Hi, guys. I want to start off by circling back to the export control and the quantification. I understand you don't want to speculate on what might come back in, but is there a way to look backwards and just give us some quantification of how much contribution we've gotten from these customers in the past?
I guess starting I mean
So let me start first. I think John, first of all, I think Sterling, we're clearly complying the regulation and limit some of our relationship with some of the any customer that may be on that entity list. And clearly, we review all the product portfolio to determine which are the product and related support subject to the limitations. So I think this is something that we really focus on what are the maintenance and support we can provide and we want to the best customer and we want to do the best we can. But meanwhile, very important is to comply with the regulation.
Yes. We're not going to speculate on if and when either the regulations may change. Our ability to service those customers under the existing regulations may change. But our updated guidance for fiscal 2019 assumes no change either positive or negative to current export limitations. But we would want to highlight that and emphasize that we have a very broad diversified and global customer base.
Okay.
And then on the margin guidance for the back half of the year, you talked about the gross margins, but is there anything else that would kind of dictate why the operating margin would be I mean, the setup in operating margins has been kind of down for the Q3 or even the second half since the beginning. And usually that's kind of counterintuitive when we think about when your FICA rolls off and some other timing of investments. We've usually thought about you guys like most enterprise software as being more profitable in the back half than the front half. So just looking at the margin guide for next quarter, other than gross margins, is there anything else that we can look to describe why the operating margins would be down sequentially?
Of course, Sterling. Yes. And like you said, like you pointed out, most of it is that's the expectation of a reversion to mean kind of for the gross margins. But on the op margin side, we're investing in opportunities with market shipping customers and in our time expansion opportunities. We also have the annual pay increases for employees are effective in July here at Cadence.
So that kicks in for the second half of the year. And that's what's taken us to an expectation of 30% for the second half.
All right, perfect. Thank you.
Your next question comes from Rich Valera with Needham and Company.
Thank you. Lip Bu, you referenced geopolitical tension in your prepared remarks, which I think most would agree has increased probably over the last quarter or so. And notwithstanding the fact that your business remains obviously very healthy, have you seen any change in any customer buying patterns or demand due to this increased tension or any perhaps unexpected customer attrition?
Yes. So far, we don't see that. But clearly, when the process prolong and then clearly we'll see some impact. But clearly right now so far we don't see any impact. And then we have a very broad based customer as John mentioned and we're happy in serving those customers.
Got it. And then, so custom analog was particularly strong this quarter. I think 11% was the growth rate you provided. Is there anything you can point to sort of justify why that was, I think, sort of above trend? And should we think of this as somewhat anomalous?
Or do we think that this business might be growing at a faster rate than it has historically?
Yes. We are very delighted with that 11% growth with the big base we have. And then clearly, it reflects our the leading products that we have and the tools that we have and the customer really counting on us to delivering the design. And then meanwhile, a lot of applications that I mentioned earlier in the 5 gs and some of the IoT and autonomous driving and they are all mixed signal. And so that is really strong combination of our strength in the analog and now very strong portfolio that we have in digital and they make it very compelling to grow that the mixed signal RF area.
And as always, we'd encourage you not to focus on any 1 quarter, but you kind of have to look at the results over a longer period. And certainly, I wouldn't focus on if you're picking 1 quarter, I wouldn't extrapolate Q2 given the unusual nature of the impact of export limitations imposed during the quarter.
Got it. And then just to follow-up on the Q2 gross margin, just a little confused, it sounds like you're suggesting that the export limitations bumped up the gross margins and just trying to understand why that would be. Did you ship less hardware than you expected to and that helped your mix? Or just if there is any color you can provide on why the export restrictions would actually help gross margin?
Certainly, it's not just export restrictions. Essentially, it's a combination of events in the quarter. Like you say, the quarter was a little bit unusual in that respect. But hardware is a little bit more profitable than we originally anticipated. Services revenue was a little bit more profitable than we originally anticipated.
And then just Q2 was unusual in itself given the export limitations imposed during the quarter. That's what I'm saying. I wouldn't focus on I wouldn't focus on extrapolating Q2, but focus on any 1 quarter, but you look at the year really.
Got it. Okay. Thank you.
Your next question is from Mitch Steves with RBC Capital Markets.
Hey, guys. Thanks for taking my question. So if I look at your China revenue growth, you guys are up 20%, 21% sequentially. In your prepared remarks, you don't really say that you couldn't ship. So when you say that there is an anomaly in Q2, was that the actual negative in the quarter?
Or did it actually not impact the revenue line?
So you see China is up yes, of course, yes. Yes, China was up it was up it was 12% of our revenue in Q2 in comparison to 10% in Q1. But of course, that's down from 13% in Q4. And the nature of hardware and IP is a bit lumpy in nature anyway. But like I said, we wouldn't read into any 1 quarter.
But yes, our forecast for the second half of the year assumes that the export limitations that are in place today remain in effect for the rest of the year.
Sure. Yes. So it's just to clarify that. So I realize that you're assuming a neutral environment as of today, but was it a negative for Q2 results?
Yes. I think our results would have been higher if there were no limitations.
Okay, perfect. Thank you.
Your next question is from Gal Munda with Berenberg Capital.
Hey, guys. Thanks Just to follow-up on that China argument. So it's up to 12% of our revenue today versus a year ago 8%. It was kind of trending between 8% 10% except for the Q4, which probably was hardware heavy. Can you just talk a bit more about the overall growth there?
Is it the big players that are driving it? Or is it a lot of the smaller players that are basically trying to ramp up their semi space? Where are you seeing demand if we kind of ignore the trade restrictions for revenue mix
over the past China revenue mix over the past 5 quarters has ranged from a low of 8% in Q2 2018 to a high of 13% in Q4 2018. While I'm not inclined to attribute motivation, our China business has been strong over the past several quarters. But for now, our ability to deliver products and services to certain customers that are on the BIS entity list is limited. So we would expect the percentage of revenue in China to be lower for the second half of fiscal twenty nineteen than the first half.
Okay. That makes sense. Thank you. And then just as a follow-up, if I think about and without thinking about particular number, but just for margin outlook in the future, Recently, we've had this bump in gross margin helping and the mix helping. But going forward, would you expect the gross margin to start contributing to the operating margin improvement as well?
Or do you think it's mostly based on the continued operating leverage for the business?
Yes, I'd expect non GAAP gross margin to return to more typical levels in the second half of the year. And then the reason we expect operating margin to be 30% is because we're investing in new employees as we invest in opportunities to expand our business with market shaping customers and the TAM expansion opportunities we have and also because the annual pay increases for employees were effective in July. That's impacting our Q3 and Q4 op margin. But I wouldn't I expect gross margin to return to more typical levels in the second half of the year.
John, if you look maybe a year or 2 ahead and not asking for the guidance, but just kind of trend wise, is there a potential in gross margin to contribute to operating margin improvement in the future? Is it mostly going to be from operating leverage?
Again, everything we know is in our guidance for 2019, and we're not guiding beyond 2019.
Thank you. Thanks
guys. Your next question comes from Jason Celino with KeyBanc Capital Markets.
Hey, guys. Can you hear me okay?
Yes, I can hear.
Yes, just a quick one for me. So I appreciate your comments around kind of the investing in your market shaping customers and your TAM expansion opportunities. But as you think about these investments over the next second half and longer term, is there one area that you feel is going to be more investments near term and then one area that's going to be more investments long term? Or is it going to be kind of equal?
We assess that I mean, we assess that regularly as part of our normal review of annual operating expenses. But and really back to Gary's comment earlier in terms of rule of 40, our approach is to invest in the areas where we think we have the highest revenue growth. I'm not saying 40% is the right number because actually we're not guiding beyond 2019. But essentially, the whole premise on rule of 40 is you add your operating margin to revenue growth. So basically, the where we have areas of more revenue growth, we'll invest a little bit heavier there.
Where we have less revenue growth opportunities, we'll look for more profitability.
Okay. Thank you.
Your final question comes from Krish Sankar with Cowen.
Yes. Hi. Thanks for taking my question. I have 2 of them for either Lip Bu or John. Number 1 is on your IT business, especially with your hyperscale customers.
Are you guys doing any more customized projects? Or is it all mostly done behind us at this point? And then the second question is, on the PCB business, have you seen any incremental design activity in PCB over the last few months? And if so, do you think is that just a short term blip or do you think there's something else interesting in the horizon longer term on PCB? Thank you.
So Chris, let me address these two topics and then John will add some color. First of all, IP is a very lumpy business. And clearly, if you look at the first half is a double digit growth for us and we like that. And then secondly, we just announced our Tensilica Q7. We are excited about that whole double vision and an AI performance for automotive, AR, VR, mobile and surveillance applications.
And so we just have product release on that. And we have a couple of design wins in the data center mobile and automotive application. And then the other part we like a lot is this 30, high speed 30, 112 gigabytes 30 at 7 nanometer and we have very strong customer demands and then we're working very intensely with them. So overall, we like the IP business and we call it the design we call it the design excellent include EDA and IP that is the our strategy. In terms of the PCB in our interconnect side also a very good solid business.
And clearly, the whole system interconnect and system analysis side and we have double digit growth in that area. And so clearly the whole system analysis that will increase 4,500,000,000 TEM market and then our Clarity 3 d solver very well received by customer. We have numerous evaluations and a strong customer engagement and interest. So all in all, I think we are pretty solid on that.
Yes. And I would just add that IP, as Lip Bu says, can be lumpy in any single quarter. But looking at the first half for IP, we had double digit growth there and we're happy with that. But and with regard to system interconnect, it was a strong quarter for our PCB IC packaging and Sigurdi analysis products. And again, as Lip Bu said, we had double digit growth there.
So we're very pleased with the results there.
Thanks, Lip Bu. Thanks, John.
Thank you. Thanks.
There are no further questions at this time. Mr. Lip Bu, your closing remarks please.
Yes. Thank you all for joining us this afternoon. Next phase of our strategy intelligent system design brings new opportunities in the design excellent system innovation and pervasive intelligent and an expanded total addressable market. Of course, Cadence will complying with all export regulation and will continue to access and adapt to the situation. In summary, we are capitalizing on the multiple technology waves and further proliferating our solutions with a broader base of our customers.
In closing, I would like to thanks all our shareholders, customers and partners, Board of Directors and our hardworking employees for their continued support.
Thank you for participating in today's Cadence Q2 2019 earnings conference call. This concludes today's call. You may now disconnect.