Cadence Design Systems, Inc.

Good afternoon. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cajun second quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Thank you. I will now turn the call over to Alan Lindstrom. Senior Group Director of Investor Relations for Cadence. Please go ahead.

Thank you, Mike, and I would like to welcome everyone to our second quarter 2020 earnings conference call. I am joined today by Lipu Tan, Chief Executive Officer, and John Wall, Senior Vice President and Chief Financial Officer. The webcast of this call is available through our website, cadence.com, and will be archived through September 11, 2020. 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 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 and evaluating our business, it can also be useful to review certain results using 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 measures. The reconciliations are available at the Investor Relations section of Cadence.com. Copies of today's press release dated July 20, 2020, for the quarter ended June 27, 2020. Related financial tables and the CFO commentary are also available on our website. Note that Cadence is continuing to adhere to social distancing practices, and therefore we are conducting today's earnings call from our respective remote locations. Apologies in advance if there are any glitches or handoffs that take a little longer than usual. And now I'll turn the call over to Lipu.

Good afternoon, everyone, and thank you for joining us today. I'm very pleased to report that in the environment of continual uncertainty, we achieved excellent financial results for the second quarter of 2020. We exceeded our financial outlook on all key metrics. as a team successfully navigate through challenges posed by the pandemic. In view of continuing strong broad-based demand for our innovative solutions, combined with a robust design environment, we are raising our financial outlook for the year. John will provide more details on our Q3 and annual financial outlook shortly. We are all going through unprecedented times, and I hope that you and your family are staying safe and healthy. In this environment, our top priority continues to be ensuring the safety and well-being of our employees, customers, and communities. Our employee base has adapted well to working from home, which appears to be the new normal. at least for the foreseeable future. Our R&D and customer deliverables are tracking well, and our sales and application engineering teams continue to engage effectively with our customers by increasing our investment in infrastructure and collaboration platforms in order to maintain high level of employee productivity. Fueled by the generational drivers such as 5G, AI, and hyperscale computing, the data-centric revolution is accelerating semiconductor demand and design activity. As a result, we are seeing widespread demand for our EDA software, IP, and hardware solutions. And our intelligent system design strategy has us very well positioned to benefit from these trends. Now let us look at some of our design excellence highlights for the quarter. We deepen our partnership with Renesys to accelerate their innovation to a wide-ranging expansion of our EDA and hardware solutions. Our new digital full-floor with the innovative iSpecial technology continues its momentum with 10 new full-flow wins during the quarter. We expanded our partnership with Micron to a broader proliferation of our EDA solutions, including the deployment of our digital full-flow for the development of their next-generation products. Cadence collaborated with TSMC and Microsoft to ensure customers to accelerate design, timing sign-off using cadence sign-off solutions in TSMC technology on Microsoft Azure. Our cadence verification suite delivers the best verification throughput and has several wins across mobile, networking, and medical verticals. We deepen our relationships with the leading medical technology company as they expanded usage of our verification suite, digital, and custom analog solutions. Our Exelium simulator has been steadily proliferating with multiple migrations from competitive simulators underway. We have another outstanding hardware quarter with the compelling value proposition of the integrated Z1 and X1 combinations being increasingly attractive to customers. The Palladium Z1 emulator with its unique custom chip-based architecture continue to win new customers and significantly expanded capacity at existing key customers. Our Proteum X1 prototyping platform has ramped strongly based on the differentiated ability to provide very fast bring-up time and high performance. The growth of analog, mixed signal, and RF designs is driving the need for high performance and accurate circuit simulations. Our massively parallel SpectreX circuit simulator continues proofreading at multiple customers like Skyworks and won several competitive displacements, including at a market-shipping hyperscaler. Q2 was an especially strong quarter for our IP business, as it again delivered double-digit revenue growth. Our refined strategy of focusing on star IP at the most advanced nodes continue to pay off. Robust demand continues for high-speed SIRDI and DDR IP. And Tensirica has particular strength in hi-fi through wireless studio and vision application, as well as strong loyalties. Our system innovation sector executes very well, delivering double-digit revenue growth. Several market shipping customers across multiple verticals have successfully used our 2.5D and 3D IC advanced packaging solutions on production design. Integration of AWR and integrant is progressing well, with the teams working on developing a comprehensive high-frequency RF platform. Business momentum was strong, and AWR added six new customers in Q2. The new system analysis tools continue to gain momentum, with over 125 engagements underway, multiple new wins, and expansions at several existing customers. New Clarity customers included a market-shaping hyperscaler and new Celsius customers include a SUSE tax. Now, I would like to take a moment and talk about inequality and racial intolerance. These significant societal issues have led to heartbreaking events over the past few months are very close to my heart. At Cadence, embracing diversity and fostering Inclusion are key tenants of our culture. We believe that by being open to different views and perspectives, we learn from one another, and together we become stronger as one team. We have several related initiatives underway, including training, pay equity, community donations, recruiting, and career advancement support. among others. We are committed to treating each other with respect and dignity and are proud to take stand against racism, prejudice, intolerance and violence. Now I will turn it over to John.