Cadence Design Systems, Inc.

Good afternoon. My name is Livia and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remote, there will 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. I will now turn the call over to Alan Lindstrom, Senior Group Director of Investor Relations for Cadence. Please go ahead.

Thank you, Olivia. I would like to welcome everyone to our first quarter 2021 earnings conference call. I am joined today by Lipu Tan, Chief Executive Officer, Anirudh Devgn, President, and John Wall, Senior Vice President and Chief Financial Officer. A webcast of this call is available through our website, cadence.com, and will be archived through June 18, 2021. A copy of today's prepared remarks will also be available on our website at the conclusion of the call today. Please note that the discussion today will contain forward-looking statements. Forward-looking statements include but are not limited to statements about our business outlook, product development, business strategy, and plans, industry, and regulatory trends, market size, opportunities, and positioning. These statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied in today's discussion. 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, which was just filed, and then also including the company's future filings and the cautionary comments regarding forward-looking statements in the earnings press release that was issued today. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements we make on this call are based on estimates and information available to us at the time of this discussion, and cadence disclaims any obligation to update any forward-looking statements except as required by law. 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. These non-GAAP financial measures should not be considered an isolation from or as a substitute for financial information prepared in accordance with a GAAP. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable GAAP financial results. A reconciliation between each non-GAAP financial measure and its nearest GAAP equivalent may be found in our earnings press release following the financial statements. Copies of today's press release dated April 26, 2021, for the quarter and year ended April 3, 2021, related financial tables and the CFO commentary are also available on our website. For the Q&A session today, we would ask that you observe a limit of one question and one follow-up. You may re-queue if you would like to ask additional questions and time permits. And now I will turn the call over to Lipu.

Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that Cadence had a great start of the year, delivering outstanding financial results for the first quarter, with broad-based demand for our innovative solutions, driving strong revenue growth, profitability, and cash flow. John will provide the details in a moment, as well as our updated outlook. Generation trends by 5G, hyperscale computing, autonomous driving, and industrial IoT continue to propel the need for innovation in compute, memory, networking, and storage from the edge to the cloud. With massive amounts of new data being generated every day, AI, ML, and data analytics are helping transforming the data to intelligence, providing actionable insights, and accelerating digital transformation of several industries. These trends are continuing to drive strong semiconductor demand and design activity across a broad spectrum of end markets. And our intelligent system design strategy ideally positions us to capture these exciting opportunities. Now, let me talk about the Q1 highlights, starting off with Core EDA and IP in the design excellent layer of our ISD strategy. We had ongoing strength in aerospace and defense, and we significantly expanded our collaboration with a marquee aerospace defense systems company that included the proliferation of our digital full flow, as well as our functional and custom simulation solutions. Our digital sign-off business had a strong revenue quarter, with multiple market shipping customers successfully dipping out at 5 nanometer and below process nodes using our digital full flow. Increasing design complexity continues driving the circular trend for hardware-assisted verification. And Q1 was a standout quarter for our palladium simulation and protium prototyping platforms. Significant expansions as well as multiple new wins, contributed to Q1 being our best hardware revenue quarter ever. Additionally, we announced our new Palladium Z2 and Protium X2 platforms, delivering 2x capacity and 1.5x higher performance than our current leading Z1 and X1 systems. These next generation systems enable the highest throughput hardware debug and pre-Silicon software validation for multi-billion gate SoC designs and were endorsed by NVIDIA, AMD, and ARM. Our IT business also deliver double digit year-over-year revenue growth. There was strong demand for our high-speed 30 IP by market-shaping customers for their next-generation data center and networking environments, as well as continual strength in our memory interface IP business. And Celica continued to expand its footprint in true wireless stereo, and Bluetooth headsets, and our Vision P6 and Hi-Fi products were refrigerated in the wearable and smart speakers and markets. It was another exciting quarter for system design and analysis segment, delivering over 30% year-over-year revenue growth. Early this month, we acquired Pointwise, a leader in mesh generation for computational fluid dynamics. The addition of Pointwise technologies and experience team further broadened our system analysis portfolio, complements our recent acquired Numeca CFD technology and our organic multi-physics products. Coinwise provides highly innovative mesh and grid generation technology to enable high-fidelity CFD analysis. And its solutions are being used by several marquee customers, especially in the aerospace segment. We want to congratulate our Numeca team for the role their product played in the design of the Emirates Team New Zealand racing boat that won American Cup for New Zealand for the fourth. The winning team used a simulator based on the Numeca Phi Marine CFD software for their computational fluid dynamic modeling. And thanks to the unprecedented accuracy and Really some of their simulators were about to accurately test new ideas and concepts long before the first boat ever touched the water. We introduced SecurityX, our next generation signal and power integrity solution, with endorsements from Samsung, MediaTek, and Renesas. This solution leveraged new simulation engines and massively parallel architecture to deliver over 10%, up to 10% performance and capacity gain for system-level simulation of the most demanding hyperscaler, 5G, automotive, and aerospace applications. and Qualcomm expanded their usage of our flagship Virtuoso and AWR products for advanced RFIC design and clarity for system analysis. Let me conclude with a few comments on some macro level topics. We continue to monitor the semiconductor supply chain situation, and so far, we are not seeing any slowdown in design activity across our customer base. Next, in regarding the evolving state of the COVID-19 pandemic, while some countries are edging towards normalcy, there is a growing concern with the escalating number of cases in certain regions, especially in India. As always, the health and safety of our employees, customers, and partners is paramount, and we will continue doing what is in their best interest while working closely with local regulatory agencies. Lastly, in the past year has brought to light many social justice challenges, including the recent acts of violent against Asian Americans. I strongly believe that we have an obligation as individuals and as a company to take a stand against racism and set an example for inclusiveness and understanding. At Cadence, we are committed to listening with empathy, be inclusive of different points of view, and as a result, ensure that our diversity enhance our experience and our innovative spirit. Now I will turn it over to John to go over the Q1 results and present our Q2 and updated 2021 outlook.