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 fourth quarter 2021 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. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Per the company, please limit your questions to one primary question and one follow-up question. 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, Jamaria. I would like to welcome everyone to our fourth quarter and fiscal year 2021 earnings conference call. I am joined today by Anirudh Devgan, President and 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 March 18, 2022. 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 the factors that could cause a difference in our results, please refer to our filings with the Security 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 please note that our 2021 Form 10-K was filed about 1.30 today, Pacific time. You should not rely on our forward-looking statements as predictions of future events. All such statements are based on estimates and information available to us at this time and Cadence disclaims any obligation to update any forward-looking statements except as required by law. 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 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 reconciliations of non-GAAP financial measures with their most direct comparable GAAP financial results in today's earnings press release. Copies of today's press release dated February 22nd, 2022 for the quarter and fiscal year ended January 1st, 2022. Related financial tables and the CFO commentary are also available on our website. For the Q&A session today, we'd also 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. Now we'll turn the call over to Anirudh.

Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that Cadence delivered outstanding financial results for 2021. As we exceeded our original growth target, achieving 11% revenue growth, 37% non-GAAP operating margin, and operating cash flow of over $1 billion. Generational trends such as 5G, hyperscale computing, and AI ML are propelling the digital transformation of multiple end markets and fueling a golden era for semiconductors and electronic systems. With robust design activity providing a strong tailwind, we expect our innovative solutions to continue driving broadband business momentum in 2021 and 2022, accelerating revenue growth and profitability. John will provide more details in a moment. Our intelligent system design strategy triples our total available market, and our compelling portfolio of chip, package, board, and system design solutions, leveraging our computational software expertise uniquely positions us to capture a wide range of exciting opportunities. During the year, we significantly expanded our core EDA and IP solutions footprint and market shaping customers. As new customers accelerated their adoption of our expanding systems portfolio. We deepened our partnerships with leading foundry, IP and cloud service providers and launched key strategic initiatives. Earlier today, we announced an exciting strategic partnership with Dassault Systems that brings together Cadence Allegro and Dassault's 3D experience platforms to provide virtual twin experiences for optimizing the entire value chain for electromechanical system modeling, design, simulation, and product lifecycle management. Central to our strategy is a relentless commitment to innovation. And in 2021, we introduced 13 significant differentiated products across our business groups. That will be key to our future growth. Now let's talk about some of the product highlights for both Q4 and 2021. Our digital and sign-off business had another strong year with 10% revenue growth. Deployment of our digital full flow, delivering industry-leading quality of results at the most advanced nodes, continued to accelerate as more than 45 additional customers adopted it during the year. In 2021, we strengthened our relationship with Oppo, a leading mobile phone manufacturer in China, with our digital full flow and an expansion of our system design and analysis product. We expanded our relationship with SocioNext. We used our digital full flow delivering the best quality of results to successfully tape out several advanced node automotive and hyperscaler designs. Our transformative cadence cerebral solution incorporates sophisticated ML technologies to explore the entire design space and intelligently optimize the digital full flow in an automated manner. Several leading customers are increasingly deploying Cadence Cerebras in production design and getting exceptional power, performance, area, and productivity benefits, including a market-shaping U.S. automotive company that reduced the power consumption of critical 5-nanometer SOC AI blocks by nearly 10% in just two weeks. Additionally, a premier Asia Pacific system company reduced power of their four nanometer design by 10% with one tenth the effort of manual optimization. And then applied the Cadence Cerebrus trained ML model to other designs, further improving their power and productivity. And Cadence Cerebrus enabled a marquee US semiconductor company to tap out their next generation SOC with a 5X productivity improvement on several critical blocks. Rapidly escalating system verification and software bring up challenges continue to drive heavy demand for our verification full flow solutions, delivering industry-leading verification throughput. Our verification business grew 20% year over year, fueled by a record year for hardware. Our next generation Palladium Z2 and Proteum X2 platforms provide best-in-class solutions to address system verification and software bring-up challenges of complex multi-billion gate design. Demand for these platforms that were launched earlier last year has greatly exceeded our expectations as customers quickly embraced their superior performance, capacity, and debug capabilities. The compelling value offered by the common front-end compiler led to more than half of our customers purchasing both Palladium as well as Proteum platforms during the year. Our hardware family added over 30 new customers and over 100 repeat orders during the year. with particular strengths seen in hyperscaler, mobile, and networking verticals. Our verification software products, which include the Excellium Logic Simulator and Jasper Format Verification Platform, continue to proliferate, with Jasper having an exceptional year, adding 40 new customers with particular strengths in compute and hyperscaler. Today's complex memory and mixed signal high frequency design underscore the need for high performance and very accurate circuit simulation. Our Spectre platform has been longstanding leader in simulation tech solutions for analog and RF design. And now with the recent addition of Spectre FX, our next generation fast byte simulator for memory and large SLC design, We provide the industry's most advanced comprehensive cross-domain circuit simulation platform. Several leading customers have already deployed SpectreFX on their production designs, such as SK Hynix has successfully evaluated and deployed the SpectreFX simulation solution to improve their design methodology and productivity in DRAM verification, and Micron adapted adopted SpectreFX simulator as it gave very compelling fast spy simulation performance for accurate verification of the DRAM and flash design. In 2021, our IP business grew in multiple vertical markets, including mobile, 5G, hyperscaler, and automotive. Our leadership DDR and PCIe IP portfolio continue to proliferate at the 5 nanometer and lower process nodes. And our design IP portfolio had several wins at top customers, including a significant expansion at a marquee U.S. semiconductor company. Our Tensilica DSP portfolio continued expanding its footprint in audio, imaging, computer vision, and ML applications. And during the year, we introduced the Tensilica AI platform delivering scalable and energy-efficient on-device to edge AI processes. Rising system complexity for advanced 5G, automotive, and HPC applications is driving the need for a seamless platform solution across design, simulation, and analysis. Our system design and analysis business that is driving our expansion beyond EDA continued its strong momentum delivering 18% year-to-year growth. There is rapidly growing demand for sophisticated multi-die integration packaging solutions, and our revolutionary Integrity 3D-IC solution, providing tightly integrated system planning, implementation, and analysis technologies, has been gaining strong customer traction. Our Integrity 3D-IC platform was recognized at TSMC's OIP Ecosystem Forum by winning Partner of the Year Award for joint development of 3D fabric design solutions, as well as winning a Customer Choice Award for 3D IC design. Last year, we furthered our system analysis strategy of building out a disruptive, comprehensive, multi-physics platform by expanding into CFD domain through the acquisitions of Nameka and Pointwise. The integration has gone well, and we have added nearly 100 new logos, including competitive wins across multiple end markets, notably in aerospace and defense. We expanded our collaboration with Schneider Electric, a leader in digital transformation of energy management and industrial automation. as they standardize on Allegro X platform for PCB design, as well as adopting our clarity solution for system analysis. In Q4, we significantly strengthened our partnership with ADI with a wide-ranging expansion of our EDA products, along with deployment of our system design and analysis solutions, which will enable them to develop more complete end-to-end solutions for their customers. And butterfly networks leverage our Clarity 3D solver for advanced mobile ultrasound design. Lastly, usage of our Cadence cloud portfolio continued to scale, with over 250 customers using our solutions in the cloud. Cadence cloud-ready products are enabling our customers to realize meaningful scalability, performance, and productivity benefits. through the availability of several flexible use models. Now I will turn it over to John to provide more details on the Q4 results and our 2022 outlook.