Cadence Design Systems, Inc.

Good afternoon. My name is Brianna and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence second quarter 2024 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 Richard Gu, Vice President of Investor Relations for Cadence. Please go ahead.

Thank you, operator. I'd like to welcome everyone to our second quarter of 2024 Earnings Conference Call. I'm joined today by Anur Devgn, President and Chief Executive Officer, and John Waugh, Senior Vice President and Chief Financial Officer. The webcast of this call and a copy of today's prepared remarks will be available on our website, cadence.com. Today's discussion will contain forward-looking statements, including our outlook on future business and operating results. Due to risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. For information on factors that could cause actual results to differ, please refer to our SEC filings. including our most recent forms 10-K and 10-Q, CFO commentary, and today's earnings release. All forward-looking statements during this call are based on estimates and information available to us as of today, and we disclaim any obligation to update them. In addition, we'll present certain non-GAAP measures which should not be considered in isolation from or as a substitute for GAAP results. Reconciliation of GAAP to non-GAAP measures are included in today's earnings release. For the Q&A session today, we will ask that you observe a limit of one question and one follow-up. Now, I'll turn the call over to Anirudh.

Thank you, Richard. Good afternoon, everyone, and thank you for joining us today. Cadence delivered strong financial results for the second quarter of 2024 with broad-based momentum across our product portfolio. Bookings was stronger than expected, leading to a healthy backlog and underscoring the robust demand for our innovative technologies. We exceeded our outlook on all key metrics and are updating our revenue guidance for the year to over 13% year-over-year growth. John will provide more details on both our Q2 results and updated outlook for the year. Generational trends such as hyperscale computing, 5G, and autonomous driving, all underpinned by the AI super cycle, are driving strong design activity across multiple verticals, particularly in data center and automotive. Along with increasing chip complexity and system companies building their own silicon, these trends are creating tremendous tailwinds for our differentiated solutions. We are steadfastly executing to our intelligent system design strategy, extending our leadership in core EDA while steadily expanding our footprint in the new system design and analysis area. Customers are ramping up their R&D spend in AI-driven automation. Our Cadence.ai portfolio offering unparalleled quality of results and productivity benefits continues to gain momentum with orders more than tripling over the last year. Our solutions are enabling the massive AI infrastructure build out across the semi and system space. Additionally, we continue embedding AI in our EDA, SDA, and digital biology solutions. In Q2, our long-term development partner, NVIDIA, broadly deployed Palladium Z3 to deliver to its next-generation AI product roadmap, further solidifying Cadence's leadership in the industry. A marquee hyperscaler meaningfully expanded its partnership with Cadence in Q2 through a broad proliferation of our Cadence.ai EDA, SDA, and hardware portfolio. The growing Foundry ecosystem is driving increased design activity and creating significant opportunities for our industry-leading products. And in Q2, we expanded our collaboration with several leading Foundry partners. We announced that Cadence.ai digital and analog tools were optimized for Samsung's advanced node SF2 gate all-around process. driving enhanced quality of results and accelerating node migration. We extended our long-standing collaboration with TSMC through a very comprehensive and innovative technology advancement, ranging from 3D IC to design IP and photonics and providing optimized digital and analog full flows for TSMC's latest N2 process technologies. Our Integrity 3D-IC platform is the industry's leading unified design, analysis, and sign-off platform for multi-chiplet architectures. Integrity has been certified for all of TSMC's latest 3D fabric offerings and now has enabled several new features like hierarchical 3D-IC design. We also announced that Integrity has been enabled for all of Samsung Foundry's multi-die integration offerings, accelerating the design and assembly of stacked chiplets. Additionally, we released a complete Intel Foundry EMIB Advanced Packaging Reference Flow that is optimized to work seamlessly with Intel 18A technology. We are also collaborating with multiple foundries to optimize our industry-leading IP cores for AI, HPC, mobile, and automotive applications for the advanced process technology so as to ensure seamless integration into customer designs. We saw strong momentum in our IP business with a delivering 25% year-over-year growth in Q2. As we executed to our profitable and scalable growth strategy, AI use cases HPC and heterogeneous integration were the primary drivers fueling the demand for our HBM, PCIE, GDDR, 112 Gigs, 30s, and UCIE products. We expanded our system IP portfolio with the addition of Cadence Janus network on a chip solution that manages high-speed communications effectively with minimum latency. enabling customers to achieve their PPA targets faster and with lower risk. Emulation and prototyping have become mission-critical elements of chip design and software bringer flows. Following the launch of our market-leading Z3 and X3 platforms, there is robust demand for these best-in-class systems, particularly by AI, hyperscale, and automotive companies. and we continue to ramp up our production capacity accordingly. Verisium, our AI-driven verification platform, continued seeing rapid customer adoption with several market-shaping customers, including Qualcomm, successfully using Verisium SimAI for coverage maximization and achieving up to a 20x reduction in verification workload time. Our system design and analysis business continued its strong momentum in Q2, delivering 20% year-over-year revenue growth. As chiplet-based architectures gained traction, our industry-leading integrated 3D IC platform had increased adoption and expansion from large deployments at 5G, hyperscale, memory, and consumer customers. Our AI-enabled Allegro X design platform is being rapidly adopted and driving competitive displacement as multiple aerospace and defense hyperscalers and EV customers take advantage of the platform's productivity and next-generation capabilities. Allegro X's in-design analysis capabilities are also driving a pull-through of our multi-physics analysis solutions. In Q2, a leading EV auto company forged a strategic partnership with Cadence, making a significant investment across the breadth of our multiphysics portfolio. With the close of Beta CAE in Q2, we now offer a comprehensive multiphysics platform covering electromagnetics, electrothermal, CFD, and structural analysis solutions. Our digital IC and custom businesses delivered another solid quarter. Proliferation of our digital full flow at the most advanced nodes continued, with close to 40 full flow wins over the last 12 months, especially at hyperscalers. With over 400 tape outs, customers are increasingly relying on Cadence Cerebras, the leading AI tool in the industry. as it continues to deliver amazing PPA and productivity benefits. For example, Cadence Cerebras has been delivering up to a 10% PPA gain for a global marquee systems company and is now deployed as part of the default flow for their latest designs at the most advanced nodes. Samsung Foundry leveraged Cadence Cerebras in both DTCO and implementation to achieve more than a 10% leakage power reduction on their SF2 gate all-around platform. SocioNext utilized Certus closure and Tempus sign-off to reduce timing closure time by 73% and double productivity while reducing memory cost by 90%. Our AI-driven Virtuoso Studio is the leading automated solution for analog and RF designs. And its new AI features allow much more efficient migration from one process node to another. Virtuoso Studio added 35 new logos in Q2, led by top hyperscalers, aerospace and defense, and automotive customers. In summary, I'm pleased with our Q2 results and the continuing momentum of our business. The AI-driven automation era offers massive opportunities, and the co-optimization of our comprehensive EDA and SDA portfolio with accelerated computing and AI orchestration uniquely positions us to provide disruptive solutions to multiple markets. Now I will turn it over to John to provide more details on the Q2 results and our updated 2024 outlook.