Alan Lindstrom - Senior Group Director-Investor Relations Lip-Bu Tan - President, Chief Executive Officer & Director Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President

Mitch Steves - RBC Capital Markets LLC Gary Mobley - The Benchmark Co. LLC Rich F. Valera - Needham & Co. LLC Jay Vleeschhouwer - Griffin Securities, Inc. Monika Garg - Pacific Crest Securities Sterling Auty - JPMorgan Securities LLC Thomas Robert Diffely - D. A. Davidson & Co. Krish Sankar - Bank of America Merrill Lynch

Good afternoon. My name is Nicole and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Design Systems Second 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. Thank you. Alan Lindstrom, Senior Group Director of Investor Relations, you may begin your conference. Alan Lindstrom - Senior Group Director-Investor Relations: Thank you, Nicole, and welcome everyone to our second 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 September 16, 2016. A copy of today's prepared remarks will be available on our website at the conclusion of today's call. Before we start, I want to call your attention to our CFO commentary, which was included in the 8-K filing today and is available on our Investor Relations website at cadence.com. The CFO commentary should be referenced with both today's conference call remarks and the earnings press release issued today. 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 comments 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 July 25, 2016 for the quarter ended July 2, 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 - President, Chief Executive Officer & Director: Good afternoon, everyone, and thank you for joining us today. Cadence continues to gain momentum through innovation, execution and relentless focus on helping our customers succeed. We delivered good operating results for Q2. Revenue was $453 million, up 9% year-over-year. Non-GAAP operating margin was 25%. Non-GAAP EPS was $0.29 and operating cash flow was $80 million. Let us start with the environment. As they have been for some time now, semiconductor business conditions remain challenging as we remain mindful of the consolidation activity in the semiconductor industry. While we do not expect a material impact on our business in 2016, consolidations will present both challenges and opportunities for us over the next few years. But at this point, it is too early to estimate any potential impact in the future. In any event, I want to emphasize the growing opportunity we have with systems companies. A key aspect of our System Design Enablement strategy is to increase our system customer base and participate in new verticals. Q2 was a strong quarter for us from digital implementation to PCB and across newer verticals including automotive, mil/aero and medical. In fact, three of our five largest software contracts were with system customers. Cadence signed a comprehensive agreement with Canon which includes VIP. Business was also good with our semiconductor customer base, one example being a comprehensive, multiple-year agreement with SK hynix. Looking at our Q2 business highlights. I would begin with System Design and Verification. Palladium Z1 continued its strong momentum and we had another record quarter for hardware revenue. Nine new systems and semiconductor companies embraced Palladium Z1 enterprise-class capabilities including Realtek, Imagination Technology (sic) [Technologies] and SocioNet. We also completed the acquisition of Rocketick Technologies and integration is underway. Rocketick brings revolutionary multi-core technology that will provide industry-leading simulation performance using massive parallelism on standard x86-based multicore servers. And revenue for our formal solution which include JasperGold grew nearly 20% year-over-year to a new high for us. Turning now to our System Interconnect and Analysis business, which includes tools for both an IC packaging design and system analysis. This quarter, we introduced our next-generation Allegro and OrCAD product families. These new releases are our most significant in over 10 years and these are flexible board designs now commonly used in automotive, consumer electronics, mobile and writable applications. Revenue for our security analysis tools grew 11% year over year. Also, an exciting virtual reality company adopted our PCB solution. Next, let us move on to our Digital and Signoff Product Group. Our Digital Signoff flow continued to gain momentum with market-shaping customers. In addition, we significantly expanded our business with Northrop Grumman, which adopted Cadence's full digital flow including Innovus, Genus to support their future SoC design requirements. And Cypress Semiconductor adopted our full digital flow for automotive design. Stratus, our High-Level Synthesis Solution, which enables system design through a high level of abstraction had its best booking quarter so far. We continued to invest in strong ecosystem support. Cadence delivered design kits for 10-nanometer implementation of ARM Cortex-A73 and Mali-G71 cores, which were designed with Cadence Digital and Signoff tools. Cadence and ARM also delivered the industry's first end-to-end hosted design solution for IoT design. Intel Custom Foundry certified our implementation and signoff tools for its 10-nanometer FinFET process. And SMIC and Cadence released a 28-nanometer low-power reference flow. Now let us turn to IP, which is strategic business for us and it's important component for our System Design Enablement strategy. Under the leadership of Pieter Vorenkamp, who joined us in April, we are continuing to refine our strategy to focus on sustainable and scalable growth. Tensilica had its best booking quarter ever with the completion of a major renewal with a leading semiconductor company. This customer significantly increased both the scope and size of its relationship with us. Targeting artificial intelligence and machine learning, we released the new Tensilica Vision P6 processor. In another exciting application, a leading virtual reality headset used multiple Tensilica cores. In Design IP, we have made significant progress on 7-nanometer products and signed our first major 7-nanometer contract. In summary, Cadence once again delivered good results in challenging environment. Business with system companies was strong across vertical segments including automotive, mil/aero, medical and mobile. Strong, broad-based demand for the new Palladium Z1 contributed to our best hardware revenue quarter ever. The innovative next-generation Allegro and OrCAD product family strengthened PCB and IC packaging design and analysis. And Digital and Signoff solutions have momentum with our market-shaping customers. And we are growing our business with both systems and semiconductor company. Now, I would turn the call to Geoff to review the financial results and provide our outlook. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Thanks, Lip-Bu, and good afternoon, everyone. For Q2, our innovative new products and strong execution contributed to good results in a challenging environment. Total revenue was $453 million, up 9% year-over-year including record hardware revenue. Non-GAAP operating margin was 25%, in line with our expectations. GAAP net income per share was $0.17. Non-GAAP net income per share was $0.29, up 7% over the year-ago quarter. Operating cash flow was $80 million and we repurchased 100 million (sic) [10.0 million] shares of stock for $240 million, which represents over 3% of shares outstanding. Now let's turn to our outlook. There are no changes to our fiscal 2016 outlook for the midpoint for bookings, revenue, operating margin, EPS or cash flows, while we have narrowed the ranges on bookings, revenue and EPS. We expect bookings in a range of $2.02 billion to $2.08 billion, which equates to 8% growth at the midpoint. Revenue in a range of $1.80 billion to $1.83 billion, which would be a 7% growth at the midpoint; non-GAAP operating margins of approximately 26%. GAAP EPS in a range of $0.70 to $0.76 and non-GAAP EPS of $1.17 to $1.23; and operating cash flow in a range of $380 million to $420 million. For Q3, we expect revenue in a range of $440 million to $450 million. Non-GAAP operating margin of approximately 25%, GAAP EPS in a range of $0.17 to $0.19 and non-GAAP EPS in a range of $0.27 to $0.29. Approximately 90% of revenue is expected to come from beginning backlog. You'll find guidance for additional items in the CFO commentary. Finally, note while we are maintaining our full-year revenue guidance, we do not – we do expect revenue to decline from Q2 to Q3 due to timing of certain hardware transactions. We expect Q4 revenue to ramp to a midpoint in the neighborhood of $470 million. So, with that, operator, we'll now take questions.

Your first question comes from the line of Mitch Steven (sic) [Steves] from RBC Capital Markets. Your line is open. Mitch Steves - RBC Capital Markets LLC: Hey, guys. Thanks for taking my question. Just real quickly on the hardware platform, just given that was – we saw material revenue for the quarter was the highest ever, can you give us an idea of how much was up year-over-year or the incremental dollars you saw for the product line on a year-over-year basis? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah, we don't give that kind of detailed guidance on our individual business segment. What we have said is that we expect hardware revenue to be up year-over-year at better margins with, obviously, that driven by the Z1 product. Mitch Steves - RBC Capital Markets LLC: Got it. And then secondly, if I were to think about the sub-segments within the remaining EDA tool piece, is there any segment that's growing faster than others or a piece that you believe you can potentially gain share at this point? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, I think – this is Lip-Bu. I think across the board, I think that all product have been – are moving nicely. Just to highlight in the digital front, we continue to get momentum with our market-shaping customers and I highlighted a couple of key like a mil/aero, Northrop Grumman and then Cypress and a few others. And clearly, we continue to drive the advanced node and also with our Ecosystem panel like ARM and also TSMC, Intel Custom Foundry and SMIC across the board. And then on the custom/analog side, in April, we announced the next generation of the Virtuoso platform and in Environment Suite; that consists of Explorer, Assembler, Compliance and really driving a holistic flow and then in term of suite, we can really provide and then for the customer within the platform. And then meanwhile, we really double, triple down on the advanced node, the 10-nanometer, 7-nanometer applications. So I think overall, looks healthy. And then on the IP side, I think we mentioned earlier, we kind of refine our strategy under the leadership of very capable Pieter Vorenkamp and I'm very pleased with what we has done. He's very strong in execution and very strong in term of delivering to customer and he pay a lot of attention to the customer and (17:06) and he's very, very strong in analog RF area and more than 100 patent file or pending patent. So I think he is a very strong technical and he brought in a very strong team come together; so stay tuned. Mitch Steves - RBC Capital Markets LLC: Got it. Thank you. And just one really small one. For the buyback, is there any change there just given you guys have been buying back about $240 million a quarter? And that's my last one. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah. So, we've been buying $240 million a quarter and we bought 10 million shares in Q2, I may have said 100 million. So we bought 10 million shares in Q2. We plan, as always, to complete our buyback and believe we have substantial liquidity to do that. Mitch Steves - RBC Capital Markets LLC: Thank you very much. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Gary Mobley from Benchmark. Your line is open. Gary Mobley - The Benchmark Co. LLC: Hi, everyone. Good afternoon. And congrats on a strong quarter. Want to start with the big news from last week that is ARM Holdings being acquired by SoftBank. Given that ARM seemingly is going to be run autonomously as, of course, has been the case for decades now, it would seemingly have little impact on your business. But maybe if you can give any insight as to how Cadence's relationship with ARM may change if at all, whether there might be any change in the marketplace in terms of trust factor or how valuation expectations for some of your M&A targets may have changed in light of the large valuation multiple ARM received? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, it's a good question. This certainly is a very exciting development in our industry. And then ARM is a very strategic partner for us. We're looking forward to continued relationship and then expand from there. And so stay tuned and we're really excited about it. Gary Mobley - The Benchmark Co. LLC: Okay. All right. And I have a follow-up question relating to the extended – expected – the extension and the expected contract life now up to 2.6 years as you expected to end, presumably, this year 2016 and that's up a bit from your prior expectations. Is there one large contract that is driving that up? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah, so generally, we always focus on deal quality and maximizing deal quality. We don't focus on contract term and it will vary and it has varied and will to continue to vary from quarter to quarter. Generally, larger companies prefer longer terms; smaller companies prefer smaller terms. We've said for the year, we expect to be at closer to 2.6, which is within our original 2.4 to 2.6 range. So we're kind of in the neighborhood we expected to be when we started the year. Gary Mobley - The Benchmark Co. LLC: Okay. Hoping you can give me an update on and your perspective on the IP business? If not mistaken, you were all along expecting the IP business to be flattish in 2016, just – if I'm not mistaken, that was primarily a function of the consolidation taking place in the industry, but are you any more optimistic on that business, or I guess more pessimistic conversely, on the business? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, first of all, we didn't say that. But I think overall, the IP is a very strategic – very important to us, especially in our whole vision of System Design Enablement, is a very key component of that. And we grew from 0% to over 10% revenue and now the new leadership of Pieter Vorenkamp, since he joined in April, we are delighted and for him to refine the strategy and then reviewing what we have and then make sure that we can really drive the future of sustainable and scalable growth for us. Saying that, clearly we continue to drive success in our IP business. Tensilica, as I mentioned in my script, had the best booking quarter ever, with the completion of a major renewal with a leading semiconductor company. And we also focused on the artificial intelligence, machine learning with our new Tensilica Vision processor and we also have leading virtual reality headset using multiple Tensilica closed wire and that's on the Tensilica side. On the Design IP mentioned earlier, we made significant progress in the 7-nanometer development and we signed our first major 7-nanometer contract. In term of the VIP side, I mentioned that Canon, we signed a comprehensive agreement with Canon including VIP. So overall, I think we continue to drive success in our IP business. I'll give Pieter a little bit time to fine tune his strategy and then when we are ready, we will introduce you our strategy going forward. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: And as we go through this transition, we are expecting more modest results in the IP business this year. Gary Mobley - The Benchmark Co. LLC: Okay. That's it from me. Congrats again. Thanks. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Rich Valera from Needham & Company. Your line is open. Rich F. Valera - Needham & Co. LLC: Thank you, good afternoon. I was wondering if you could give any color on how things are going with the consolidations that you've seen so far, how you think you're faring in those and if you think you're maybe being able to gain some share. And then relatedly, how have you seen the pricing around those and the ones that you've done so far. I mean, we've heard some chatter that there's perhaps some fairly aggressive pricing as the various EDA vendors compete to gain or retain share, particularly in the digital side? So any comments there would be helpful. Thank you. Lip-Bu Tan - President, Chief Executive Officer & Director: Sure, Rich. Thanks so much for the question. Clearly, the whole semiconductor consolidation will continue even though it's not the same magnitude as 2015, that over $100 billion consolidation on the semi sector that is relevant to us because they are customer. And we expect this year will be slower, but to be a very active year. And in saying that, I think consolidation, usually the consolidator want to drive efficiency and then drive more productivity and then more synergy going there. As we mentioned earlier, we don't expect any material impact to us in 2016. But in the longer term, there are some opportunity and challenges for us in the next couple of years. So, answer your question, I think clearly the consolidation, it will happen, it will continue. But I think the consolidating company will be stronger and also drive more efficiency and they pay a lot of more attention to productivity. And then from – in term of the pricing point of view, as you know, EDA is a very competitive business, sector-to-sector, product-to-product. From Cadence point of view, we continue to be very disciplined and then drive value. And I think the best way to continue the success is collaborating deeply with our customer and then developing, innovating. I always strongly believe the best product wins. And so, but meanwhile we have to drive value and be disciplined on that. And that's kind of – I will put – I will stop there. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: And I think just a few data points, our booking range at $2.02 billion to $2.08 billion still has the same midpoint and our revenue range of $1.80 billion to $1.83 billion still has the same midpoint. So, you're seeing no impact in 2016. Lip-Bu Tan - President, Chief Executive Officer & Director: So, fair enough, that's actually a good segue to my next question, Geoff. I mean since – you did tweak up your duration slightly and I mean if you're just sort of picking the midpoint previously up there from 2.5 to 2.6, that be a 4% and I know there's the small numbers here; so you could say it's rounding. But it would imply that you actually have a slightly lower bookings run rate on sort of a time-weighted basis. Is there anything to that or are we just talking kind of rounding here? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah. I think it's just noise or rounding right within the scheme of things. Our bookings that – we've been quite happy with our bookings this year and we haven't changed the midpoint and the range has been tightened. So we're quite happy with what we're seeing. Rich F. Valera - Needham & Co. LLC: Great. And just one final one, Geoff, any update on the status of the search for your replacement? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Lip-Bu will take that one. Rich F. Valera - Needham & Co. LLC: Okay, thanks. Lip-Bu Tan - President, Chief Executive Officer & Director: I think – let me touch on that. We are in the middle of the comprehensive and thoughtful search. A lot of interest in this position, as you can imagine. We (26:08) and it's a very strong platform that people like to be here and we'd like to know when we have something to tell you. And then meanwhile, Geoff is committed to stay until March 2017. Rich F. Valera - Needham & Co. LLC: Well, I'm glad to hear that. Thank you, gentlemen. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from Jay Vleeschhouwer from Griffin Securities. Your line is open. Jay Vleeschhouwer - Griffin Securities, Inc.: Thank you. Good evening. A couple first for Geoff and then I'll turn to Lip-Bu for a couple of product questions. So, Geoff, for you first, geographic question, it looked as though your – according to the 10-Q out tonight, your Americas revenue was down sequentially from Q1, albeit up year-over-year. Was that mostly just some timing of contracts perhaps related to IT or maybe hardware or whatever you can describe? And then secondly, on the other hand, your Japan business was up for the second quarter in a row year-over-year. And so we've been perennially asking about a possible bottoming in Japan. And so the question there is, is this it? And then a follow-up for you, Geoff, on emulation; then for Lip-Bu. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah, I mean, obviously, we don't guide individual geographic segments of our business anyhow, but you did get parts of our business, both the hardware and IT business, which are more variable parts of our business and how they turned out in North America and Japan is exactly how you describe it. I don't think I have more relevant comments on that. Jay Vleeschhouwer - Griffin Securities, Inc.: Okay. On emulation, according to the Q, your cost of hardware was up just over $10 million year over year. When we combine that with your comments about record revenue for hardware, it would seem to suggest that your emulation absolute cost of revenues might have gone down sequentially even with record revenue, which would of course have led to a good sequential increase in emulation margin, perhaps a few hundred basis points and perhaps even more so year-over-year. So, does that sound about right that you had at least a several hundred basis point improvement in profitability in emulation and is that at all sustainable? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Without obviously commenting on your specific numbers because we can't do that, Z1 was the majority of sales in Q2 and margins on the Z1 are better than the prior XP, so – and having a record quarter, all good stuff. Jay Vleeschhouwer - Griffin Securities, Inc.: Okay. So, Lip-Bu, a question on Digital and Signoff, the percentage of revenue from that segment actually went down a little bit sequentially and year over year. But the specific question I'd like you to address is, if you could comment on the expansion and deployment of Tempus, Voltus, Genus and certainly for Innovus that you've been seeing. In other words, you've commented on previous calls about having had several dozen, at least, customers adopt 10% Voltus and so forth. But what isn't entirely clear is if you could comment on what's been going on after initial acceptance, is if broader deployment and expansion beyond perhaps initial design projects for those new products? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, good question and thank you for asking. Clearly, our Digital and Signoff flow, as you know, we have Innovus for place-and-route and Genus for synthesis and then Tempus for Signoff, Voltus for Power. And so I think these are all very new product coming up last year; even some of them are later part of last year. So, clearly from engagement from customer, we are delighted with the progress we make with the market-shaping customer. They are the leader in the IP industry. They are a very big important customer for us. And so I think first of all, they start to evaluate our tool and then secondly, put some projects and see whether it works. The next thing is a couple of adoptions and to make sure that is stable and can be count on, on the most advanced node, then they're starting to proliferate across the product group. So we are in the various stage of that proliferation. And you know now it's a baseball season and then clearly in the second and third and fourth inning, this is the most critical period coming up right now is a lot of customer look at the tool, the entire flow cannot correlate for the production and that's why we are in, in this in multiple (30:59). And so stay tuned, we are going to continue to drive that. The main reason from the Q3 – Q2 to Q1 because Q1, we have one important order with a foundry and this is a one-off type and clearly part of the proliferation, you will be continue in Q3, Q4 and the beginning of next year. So I think this is a critical period and we continue to highlight to you some of the success we have. Like Cyprus, we announced a full flow that we are extremely excited about the Northrop Grumman and this is the mil/aero side and then using our full digital flow and then for their future SoC design; this is really, really exciting for us and then we're going to continue over time to tell you some of the success we have. But so far, I'm pleased with the progress we made. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: And we expect good growth in 2016 overall against 2015 for the Digital business for us. Jay Vleeschhouwer - Griffin Securities, Inc.: Okay. And then lastly if I may for Lip-Bu, referring to automotive, which was of course a major subject at DAC last month, you talked about it earlier. And at DAC last month, it was a very interesting presentation by NXP and they showed some interesting demos of technology that would seem to play to your strengths in custom in terms of automotive telematics and so forth. So the question is really for you, what, so to say, is going on under the hood for Cadence with respect to automotive? What have you really done in terms of organization, investments, resources, particularly the drive, the needs in IC and IP and at the systems level for automotive? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, it's a very good question. And automotive is a very important vertical market we go after in our whole System Design Enablement and this is a very important strategy we have and then we have a very nice complete portfolio beside the digital front, the analog/mixed-signal is critical in some of the application for automotive. We have a lot of success in that. And then the other part is the IP. Tensilica really play very well in the whole ADAS, autopiloting related area and then we have multiple engagement in that. It's very critical in some of the whole machine learning, deep learning and artificial intelligence and application to the whole automotive driving related area and of course on the IP front, we also have our audio. Audio, we have a lot of success in that. And then the other part very important for us is the PCB. Clearly, we just announced our new generation of Allegro and OrCAD and also through our acquisition, Sigrity, that we grew 11% year-to-year. And then clearly that will provide the signal integrity, the power analysis for the automotive applications. So, I think all in all, we have many important. And then the other part is also I think on the verification front, that we also incorporate some of the function safety requirement into the – our tool and offering a solution and that is very welcome by the automotive, either Tier 1 or the direct automotive companies that see a lot of value from Cadence side. Jay Vleeschhouwer - Griffin Securities, Inc.: Thanks very much. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Monika Garg from Pacific Crest Securities. Your line is open. Monika Garg - Pacific Crest Securities: Hi. Thanks for taking my question. First on the IP side. First half of 2016 is actually lower than first half of 2015. Could you provide some details? Is there some change of strategy? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah. I think first of all, let me chip in firstly and then Geoff can address the numbers. I think clearly as I mentioned earlier, we just have a new leader and he is reviewing our business and then refining our strategy. Important is in our first phase is grow from 0% to 10% of our revenue. Now, we're going to be driving some of the metrics that we're looking for in terms of sustainable, scalable, profitable operations. And then clearly, in term of the (35:45), Tensilica is a great opportunity; we're going to double down on that. And then the design IP, clearly we are really focused on the most advanced node 7-nanometer, 10-nanometer and then the VIP continued to drive differentiating verification IP and then together with our Verification Suite to tie in with the customer support on driving the productivity. We see the trend of outsourcing more and more coming to the IP. So we strongly believe the IP strategy is the right one, but it's important to somehow find a way to really sustainable and then driving efficiency. We have more than 1,000 people employees in this area and we're going to really drive to become a profitable center for us also. So I think all in all, we want to really drive, this year maybe moderate growth, but then going forward, will be a stronger growth volume for us. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: And then so all through the mix, it's down as a proportion of our overall mix; that's because of the strength of a lot of the rest of our businesses. It's actually up (sic) [down] for the first half of the year versus the first half of the year last year. But we do expect more modest results this year versus last year, as we said. Monika Garg - Pacific Crest Securities: Okay. Then Geoff, on the emulation side, margins are going to be up year-over-year. But as a company, operating margin guidance is modestly lower year-over-year. Are you just being conservative or otherwise why are we not able to see any operating margin leverage this year? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Whenever we guide, we always put everything we know into the guidance that we know at that point in time. When we guided this year, we clearly guided at a midpoint that was lower than our actual achievement last year and that's what we knew at the time. We continue, I think, to execute well and we'll see how it plays out. Monika Garg - Pacific Crest Securities: Got it. Thanks. Just the last one on the emulation side, you've seen very strong growth. How fast do you think this market is growing and how big you think this market could be? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah. Monika, maybe I will broaden a little bit of your question. Clearly we see a tremendous opportunity in the whole verification and it's the fastest growing challenge for our customer. As you know, whatever they design, they need to be verify and what design is really working. And we have four engines within that verification and we try to really drive, tighten that relationship together. And first of all, we have the JasperGold, this is a function verification, it's a very critical piece of the verification – formal verification and growing at about 20% year-to-year and we are very excited about it. Then we have the Incisive Simulation through our acquisition on the Rocketick and that is a very revolutionary technology with a very massive parallelism multi-call on the standard – the x86-based server and that gives us a tremendous performance into the simulation side and we are doing the integration to make it really, really strong offering to our customer. Then the hardware emulation and not just emulation; right now, we are starting to drive, we are already driving and the simulation side and that we also have the Protium, that is the prototyping and we are really driving some of the next-generation development coming up. So I think all four are going to tie in and drive this whole verification that is where the bottleneck for our system company and also customer and also our semiconductor customer and really can holistically tie in together. And so this is something that we are working on, stay tuned. And then on the Hybrid side, this is the most successful launch of Cadence emulation and then we are going to continue driving the next generation, better throughput and more scalable, in fact it's already quite scalable to 9.2 billion gates and over 2,000 plus concurrent user and we're going to continue driving the excellent in term of scalability and then driving the power down continuously. And so I think we are going to be an important platform and then we're going to also find a lot of new use model and data for simulation and then also tie-in with our prototyping, Protium next-generation coming up are going to be a very compelling verification offering to our customers. Monika Garg - Pacific Crest Securities: That's all from me. Thanks. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Sterling Auty from JPMorgan. Your line is open. Sterling Auty - JPMorgan Securities LLC: Thanks. Hi guys, wanted to talk a little bit about the comment that you made around the guidance for the September quarter, specifically on the hardware emulation. I think you mentioned some timing of deals. I was just curious if it's deal closure timing that you're referring to or is it lead times on the manufacturing of emulation devices that's going to impact the hardware and if you'd be so willing to possible give us – are you expecting that emulation area revenue to be up, down or flat sequentially? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yes. So the timing here isn't about closure. It's just about timing of customer demand and when the customers want the product. And so it will decline, hardware will decline from Q2 to Q3, as we said. I think importantly, we're retaining the full-year guidance, right, and by the way, Q1 and Q2 were record quarters, right, for us in hardware. So some timing between quarters, it's going to rotate. We're retaining the full year and that leads to Q4 at a $470 million midpoint. Sterling Auty - JPMorgan Securities LLC: And are these deals that are actually – whether they're follow-on deals or just timing of shipments or if it's large orders from same customers or is it new customer discussions that you're still – you're just anticipating when you think you'll close those deals? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: Yeah. So it's large customers and these are large deals. As you probably are aware, the price of Z1 is quite large and they're frequently buying more than one system from us. So it's just the timing of when they want the product. Sterling Auty - JPMorgan Securities LLC: Okay. And then you've made a number of comments around the IP business and the change in leadership, et cetera. But I guess what I'm curious is how long you think the turnaround takes. So in other words, when do we kind of hit trough revenue or trough declines, or I don't want to say growth, but you get the idea, when do we hit the bottom when we start to see acceleration in that part of the business? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, Sterling. This is Lip-Bu. It's not a turnaround. It's just refining our strategy. And Pieter came from a very strong background on execution, customer satisfaction. And if you recall, he is the Senior VP of Operation Engineering, working very close with the foundry partners to drive the really silicon-proven IP. Basically we are very quickly ramping the revenue on the more than 10% revenue and then right now, we really want to really drive quality, really drive customer satisfaction and then really prioritize what really makes a difference in term of Tensilica, in term of design IP and really find the differentiations and therefore can satisfy the customer. And then it's not subject to some of this one-off type of thing, more not proliferating and then to our leading customer and then helping them to really drive differentiating product. So I think to kind of consider, we highlight those that are differentiating like Tensilica, even in the DIP side, we highlight 7-nanometer process node, signed with the first company to contract, VIP with Canon, more system company, more leading-edge customer. And so we really drive more into the quality of the customer, driving more quality of the product offering IP. And so give Pieter little bit of time; he just completed his visiting with officers and then he fine tuned the strategy present to our team and then to our Board and then stay tuned, he will come out with our strategy going forward. Sterling Auty - JPMorgan Securities LLC: Great. And then last question around R&D spending. I think R&D expenses were up a shade under 15% year-over-year; so growing faster than revenue. I think that probably ties to some of the commentary you made about the investments you're making there to help gain market share, especially in some of these larger digital customers that you wanted. I guess my question is when do we see the peak of those investments and start to see more leverage coming out of the R&D line? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: So, couple of things, you're right. This is largely the investment we're making in innovative products across our product lines. One more thing that's clearly playing in is just the timing of shutdowns this year versus last year. Last year was in Q2. This year, our summer shutdown will be largely in Q3. So, you've seen a little bit of timing impact there. And again, for us to get return on these investments, of course it's proliferation and innovation continuing, so stay tuned. Sterling Auty - JPMorgan Securities LLC: Got it. Thank you guys. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your next question comes from the line of Tom Diffely from D. A. Davidson. Your line is open. Thomas Robert Diffely - D. A. Davidson & Co.: Yeah, good afternoon. So, Geoff staying on the operating expenses, what drove or what's behind the roughly 30% increase in the G&A this quarter? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: I think it's largely the same thing. It's the timing of the shutdown. Last year, it was in Q2; this year, it's in Q3. Thomas Robert Diffely - D. A. Davidson & Co.: Okay. It just seemed like the combined – several quarters in a row, it's kind of a step function higher this year. Was that what you just posted? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: We do make investments in our technical sales organization also, that's an important part of our strategy with our customers. Thomas Robert Diffely - D. A. Davidson & Co.: Okay. And then when you look at your guidance for the GAAP earnings this year, it's down 4%, 5% this quarter versus last quarter. What is the delta there between the GAAP and non-GAAP difference? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: So, the biggest delta between GAAP and non-GAAP, we're going to always have three things that are going to be a delta between GAAP and non-GAAP. First is stock compensation; second is amortization of intangibles related to M&A; and third is, we use a standard non-GAAP tax rate while our real tax rates fluctuate. So those are the three things that always makes the difference up. Thomas Robert Diffely - D. A. Davidson & Co.: Okay. So what was the – which one of those changed then this quarter when you brought down the GAAP number and kept the non-GAAP as is? Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: So I think our tax rate is at what – yeah, so there's a couple things. Obviously, the Rocketick acquisition, but I think the more prominent thing is the changes in our expectations of a GAAP profitability and therefore the GAAP tax rate. Thomas Robert Diffely - D. A. Davidson & Co.: Okay. And then Lip-Bu, last few quarters, you've been talking a lot about success with the systems customers. How big is that business for you today and how big do you think it gets over time? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, good question. And we are very excited about this System Design Enablement strategy that we have and I highlight three of our five largest software contract this quarter, have been with the system companies. And so we continue to drive success here in mil/aero, success in the automotive side and then the mobile and medical-related. So I think all in all, we are excited about this whole and then we have a really good portfolio of product that system happening appreciate that. Now clearly the mixed-signal analog digital, the packaging, the IP portfolio and the whole system analysis and this is really, really welcome from them. In term of the percentage of revenue, sometimes it's very hard to calculate because some of the system company also have the semiconductor and we are growing from the 40% upwards. And so we continue to drive that. And even though with all this consolidation, we are really, really excited about this whole system opportunity for us and we are heavily engaging with some of this vertical and the new vertical that we are embarking on. Earlier that question on automotive, we are really excited about it and I'm very, very big believer in the whole VR, AR, is a tremendous opportunity. We have couple of successes either in PCB or the Tensilica IT front and then there is a whole suite of new changes in the whole hyperscale Web services, the cloud data center, (49:31) to work on the programmable, different workload on the more I/O, more memory-related, that's another opportunity for us. So we are excited about some of this vertical and we are with this customer are really excited about our portfolio that we can offer. Thomas Robert Diffely - D. A. Davidson & Co.: Great. All right. Thank you. Lip-Bu Tan - President, Chief Executive Officer & Director: Thank you.

Your last question comes from the line of Krish Sankar from Bank of America. Your line is open. Krish Sankar - Bank of America Merrill Lynch: Yeah. Hi. Thanks for taking my question. I had a couple of them, one, Lip-Bu, if you maintain a current traction or momentum in emulation, do you think exiting calendar 2016, you could be number one? Or do you think it's going to take a longer time? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, the whole hardware emulation, we are excited about it. We clearly have a very strong leadership team. They have very strong technical team that I'm very, very pleased with. And Palladium Z1 is the best launch we have, been the more successful one for us. And then also we have more use model, I mentioned earlier, and this is a very scalable platform. And if you do design, hardware emulation, the scalability and accuracy is critical. And so this is something that customer will buy and if that's the best one. And then so I think all in all, we like this. And as you know, Q1 and Q2 is a record quarter for us. And then Q3 a little bit because of timing, but overall as a whole year, is a very strong growth percentage growth for us. We are excited about it and then stay tuned. I mean we're going to be driving not just simulation, we're going to drive simulation and we're going to drive prototyping, whole suite of product and then tie into the whole verification I just talked about providing the total throughput solution to our whole verification suite offerings to our customer. So I think this is something that we believe is a double-digit growth for us and then we love it. Geoffrey G. Ribar - Chief Financial Officer & Senior Vice President: And again we think based on all of the market things that we see and all the market studies we see that we are number one and have generally been number one over the past quite a number of years. Krish Sankar - Bank of America Merrill Lynch: Got you. All right. And then in your core EDA business, stripping out emulation and systems and IP, I'm just curious how is the bookings trending year-to-date versus last year? I know you guys really give annual booking guidance and update it. But I'm just kind of curious on how it's trending year-to-date on the core EDA side. Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah, I think overall we like what we have and in term of the product offering, digital, clearly we drive a lot of innovation, massive parallelism and then the customer love it. Right now, a small proliferation and execution focus. Analog, the custom/analog is the de facto standard for that gate and we don't sit still. We continue to drive the advanced node. We have a whole new suite of new development I mentioned earlier to drive performance and then drive acceptance and then compliance and then in the new suite that we're offering and then we also have a focus on the mixed signal so we can help our customer in terms of mixed signal offering power, low-power offering. And then now we also have the PCB and with the system analysis and then with the IP, with a really focus on the differentiating IP that we're going to offer, I think we have a very good portfolio and a lot of customer really, really impressed what we come out with. Stay tuned, we'll continue that culture of innovation, it don't stop here and we're going to double down and triple down on that. And I strongly believe the best product win. Our job is basically providing the best tool for our customer to design and increase the productivity and the time to market and that's our job. Krish Sankar - Bank of America Merrill Lynch: Got it. And then the final question, did you guys say what the percentage of revenue from systems was? Lip-Bu Tan - President, Chief Executive Officer & Director: Yeah. I mentioned earlier 40% and north of that, we continue to drive success there. Krish Sankar - Bank of America Merrill Lynch: Got it. Thank you.

There are no further questions at this time. I will turn the call back over to Cadence's President and CEO, Lip-Bu Tan for closing remarks. Lip-Bu Tan - President, Chief Executive Officer & Director: In closing, we are continuing to innovate and deliver design, enabling the solutions to our customers and we're looking forward to continuing to execute on our strategy and create value for our shareholders. So I want to thank all our hardworking employees, worldwide and shareholders, customers and partners for their continued support that make this possible. Thank you all for joining us this afternoon. Thank you.

This concludes today's conference. You may now disconnect.