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 third 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, sir.

Thank you, operator. I would like to welcome everyone to our third quarter of 2024 earnings conference call. I'm joined today by Anirudh Devgn, President and Chief Executive Officer, and John Wall, 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 four 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, all financial measures discussed on this call are non-GAAP unless otherwise specified. The non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Reconciliations of GAAP to non-GAAP measures are included in today's earnings release. For the Q&A session today, we would 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 exceptional results for the third quarter of 2024 with broad-based strength across our product portfolio. We are on track for a strong second half and we are pleased to raise our full-year EPS outlook. John will provide more details on our financials in a moment. Generational trends such as hyperscale computing, autonomous driving, and 5G, all accelerated by the AI super cycle, continue to fuel strong design activity across multiple verticals, especially in data center and automotive. Our cutting-edge chip-to-system platforms empower customers to drive unprecedented innovation as they race to develop next-gen AI and agentic AI products while navigating escalating design complexities. We continue steadily executing to our intelligent system design strategy that triples our TAM opportunity while significantly expanding our portfolio across core EDA, IP, and system design and analysis. I'm excited about AI's incredible promise and how rapidly it is becoming an integral part of the design workflow, with customers steadily increasing their investments in AI-driven automation. Our Cadence.ai portfolio, powered by GenAI agents, AI-driven optimization, and big data analytics JEDI platform saw sales nearly triple over the last year as it continued delivering unparalleled quality of results and productivity benefits. We continue partnering with NVIDIA to accelerate AI innovation and are using their latest NEMO and NIM microservices to build customized GenAI application delivering enhanced optimization and productivity. In Q3, we deepened our partnership with Arm through a broad expansion of our IP, hardware, and AI-driven design and environment solutions to help deliver Arm's next-generation AI technologies and advanced Arm compute subsystems across multiple markets. We expanded our long-standing partnership with TSMC with AI-optimized design flows certified for TSMC's N3 and N2P technologies. We are also collaborating on innovative solutions for next-generation technologies like TSMC A16 and 3D blocks that are paving the way for the AI factories of tomorrow. Demand for our industry-leading Integrity 3D IC solution that enables system-level PPA optimization continues to grow, with accelerating adoption by hyperscalers, OSAT, and foundries. We introduced the industry's first autorouter for both die-to-die and die-to-substrate connectivity, and that was showcased at TSMC's 3D Fabric Alliance Workshop. High-speed, multilayer PCB designs require increasing levels of miniaturization, advanced simulation, and AI-driven automation. Allegro X, with its tight integration with our analysis technology and expanded collaboration platform, is ramping strongly and drove over 40% of our PCB sales this year. The transition to ORCAD X, our new mainstream PCB solution, accelerated in Q3, with a third of our ORCAD customers converting to this new cloud-enabled solution. Cadence OnCloud is a key go-to-market platform to reach the long tail of smaller system customers and is seeing strong traction with over 400 customers, tens of thousands of online users, and orders doubling over the past year. We recently launched the Cadence OnCloud marketplace and announced Cadence online support through OnCloud. which uses GenAI technology to provide insightful, contextual, and accurate answers to customer queries. As the digital transformation in aerospace and defense accelerates, we saw continued strength in this vertical as the U.S. Air Force and Army expanded their commitment to Cadence's solution spanning from chips to boards to systems. Our hardware-accurate digital twins been successfully used by north of grumman in taping out several asics helping accelerate schedule by over two years in q3 we substantially grew our footprint at several marquee hyperscalers through a broad proliferation of our best-in-class hardware systems ip and software portfolio Our system design and analysis business continued to outpace the market, delivering impressive results with over 40% year-over-year revenue growth in Q3. We are pleased with the strong growth of our multiphysics portfolio that couples our expertise in physics-based modeling with AI-driven optimization to deliver superior results to customers. Clarity and Celsius Both grew strongly with competitive wins, while our newly acquired beta CAE products that round out our system analysis portfolio outperformed our expectations as we signed large deals with major EV companies. Our AI-driven optimality solution was adopted by several leading customers and Volta's Insight AI were used by a top hyperscaler to successfully achieve an 80% airdrop reduction in their designs. Our IP business continued its strong momentum in Q3, delivering over 50% year-over-year revenue growth as we executed to our profitable and scalable growth strategy. Increasing complexity of interconnect protocols along with the growing outsourcing trend and new foundry opportunities, are providing strong tailwinds to our IP business. AI, HPC, and chiplet use cases were the primary drivers for the adoption of our differentiated HBM, PCIe, UCIe, DDR, and high-speed SERDI solutions in design ranging from 7 nanometer down to the most advanced gate all around nodes. Our AI-assisted Tensilica audio DSP scored multiple design wins with marquee global customers across HPC, mobile, and automotive use cases. Our core EDA business comprised of our custom digital and functional verification businesses delivered 9% year-over-year revenue growth in Q3. Our new groundbreaking hardware systems offering industry's leading performance, capacity, and scalability experienced strong demand, especially at AI, hyperscale, and automotive companies. Verisium, our AI-driven verification platform, continued seeing rapid customer adoption. with several leading customers successfully using Verisium SIM AI for highly efficient coverage maximization. Proliferation of our digital full flow at the most advanced nodes accelerated, with over 30 new full flow logos added over the past year. With nearly 450 tape outs, customers are increasingly deploying Cadence Cerebrus AI solution as it continues to deliver unparalleled PPA and productivity benefits on a broad spectrum of designs. Our AI-driven Virtuoso Studio leverages the capabilities of our flagship Virtuoso platform while seamlessly integrating with other Cadence cutting-edge technologies to drive significant productivity benefits for analog, RF, and mixed signal designers. With this Gen AI-driven automated design migration and new layout placement and routing technologies, customers are rapidly adopting Virtuoso Studio, and it won 30 new logos in Q3. In summary, I'm pleased with our Q3 results and the continuing momentum of our business. The AI-driven automation era offers massive opportunities, and the co-optimization of our comprehensive EDA, SDA, and IP portfolio with accelerated compute and AI orchestration uniquely positions us to provide disruptive solutions to multiple verticals. Now, I will turn it over to John to provide more details on the Q3 results and our updated 2024 outlook.