Cadence Design Systems, Inc.

Good afternoon. My name is Jamaria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence second quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, 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. 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, Jamyra. I would like to welcome everyone to our second quarter 2021 earnings conference call. I am joined today by Lip Bhutan, Chief Executive Officer, Anirudh Devgn, President, 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 17, 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. Due to known and unknown risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. For information on those 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, and the cautionary comments regarding forward-looking statements in today's earnings press release. And by the way, our second quarter 10-Q was filed about 4.15 Eastern time today, so it's out there. You should not rely on our forward-looking statements as predictions of future events. All such statements are based on estimates and information available at this time, 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 in isolation from or as a substitute for GAAP results. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and may not be comparable to similarly titled measures from other companies. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures with their most direct comparable financial results, GAAP financial results, in today's earnings press release. Copies of today's press release dated July 26, 2021, for the quarter ended July 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, and you may re-queue if you would like to ask additional questions and time permits. Now I will turn the call over to Lipu.

Good afternoon, everyone, and thank you for joining us today. Cadence delivered outstanding financial results for the second quarter as broad-based customer demand for our innovative solutions grew stronger than expected revenue growth, profitability, and cash flow. We are significantly raising our financial outlook for the year, highlighted by a $40 million increase in revenue guidance or 10% year-over-year revenue growth. John will provide the details in a moment for both our Q2 results and the updated outlook for the year. Before I get into more details about the quarter, I would like to talk about CEO transition news that we announced earlier this afternoon. We announced Anirudh Deskan, our president, would take over as CEO on December 15, 2021, and our transition to the role of executive chairman at that time. It has been a privilege to serve as the CEO of Cadence for the past 12 plus years. Over that period, I'm very pleased that we instilled a sustainable culture center on leapfrog innovation and customer delight, forged very close partnership with our customers and partners, and built an extremely talented Cadence team of over 9,000 employees. Kaden is now firmly established not just as a top end-to-end EDA provider of choice, but a company that is well on its way in expanding beyond EDA by executing our exciting ISD strategy that tripled our TAM to $30 billion. The Board and I are very excited that Anirudh will become CEO in December. and we cannot think of anyone more uniquely qualified to lead Cadence to even higher heights. He's a proven leader with bold strategic vision, a relentless focus on innovation and execution, and passion for driving customer success. Over the past four years since he became president, Anirudh and I have jointly led the company And the Board and I think this is the right time to execute the next phase of our succession plan and hand over the baton to him. You can expect to see a lot of continuity going forward as we view this transition as more of a formalization of our current responsibilities. As Executive Chairman, I will focus more on new market opportunities, key strategic initiatives, and deepening our relationship with customers and partners and on maximizing shareholder value. And now let me move on to the business highlights. Generation trends such as 5G, hyperscaler, and autonomous vehicles underpin AI, machine learning, and data analytics are accelerating the digital transformation across multiple industries. with semiconductors at its foundation, these trends are driving strong design activity across a growing spectrum of semi and system companies. And we are very well positioned for this to be a sustainable long-term growth driver for us. Delighting customers and accelerating growth require a relentless commitment to innovation. With the launch of the four new products, we have now introduced eight significant innovative products so far this year across all the business groups and will contribute to future growth. We continue to expand our business with market-shaping customers. And our differentiated solution led to a broad-based expansion of our partnership with Samsung, including proliferation of our digital full-flow. It was an outstanding quarter for our digital and sign-off business, with revenue growing 16% year-over-year. Our digital full-flow delivering industry-leading quality of results at the most advanced note, adding 13 new customers that included key competitive displacements by expanding significantly at several market shipping customers. Noteworthy among them were a large US data infrastructure company, further expansion of a marquee US aerospace and defense firm, a major Asia-Pacific hyperscaler, and an exciting AI startup. We have been steadily incorporating cutting-edge AI ML technology into our solutions. And we significantly advance that with last week's introduction of new Cerebus Intelligent Chip Explorer. Cerebus' unique reinforcement learning model increased effectiveness with each use and enables to 20% TPA improvement, and 10x productivity gain. Syribus was endorsed by Samsung and Renesys. And several customers have realized meaningful benefits across multiple process nodes and applications. It was also a great quarter for our verification business with 23% year-over-year revenue growth. Our verification suite comprising of best-in-class engines and delivering the best verification throughput saw continual strong customer adoption and expansion at several leading customers. Circular demand for our hardware continue unabated, leading to best Q2 ever for our Palladium and Protium platforms. There is a robust customer interest in the new Z2 and X2 systems, with sales ramping nicely. Our sales of Z1 and X1 remain strong. Our hardware family had 15 new orders and over 65 repeat orders in the quarter, with the three largest transactions being with hyperscalers, and included our largest 2TM transaction to date, which was for Neo X2. Strong momentum continued for our system design and analysis segment, with 20% year-over-year revenue growth. We expanded our system footprint with multiple verticals, including aerospace and defense, 5G wireless and communications. Growing system complexity for high-frequency applications is driving the needs for an integrated platform solution across system design, simulation, and analysis. As we continue building our system portfolio, we are pleased to see earlier indication of customer increasingly choosing a broader set of our solution across these domains. For instance, in Q2, a large US data infrastructure company make a significant commitment to our PCB, IC packaging, RF, and system analysis solutions. We introduced our next generation PCB and IC packaging design platform, Allegro X, that provides a unified engineering platform incorporating innovative machine learning techniques and delivering up to four-time improvement in overall design team productivity. AWR and Integra have a record quarter, and the integration of our recent Numeca and Pointwise acquisitions is progressing well. We have added several hundred system customers as we enhance our go-to-market and channel organization to help accelerate our business. Next, I want to make a few macro level comments. We continue to monitor the ongoing semiconductor supply chain situation. As I reported last quarter, so far we are not seeing any slowdown in design activity across our customer base. Unfortunately, the COVID-19 pandemic continues to evolve in our unpredictable manner. in an unpredictable manner, with overall progress being threatened by new variants. 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. Now I will turn it over to Anurag to say a few words.