CDNS - Earnings call transcript Q2 2020 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Mike and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence Second Quarter 2020 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. you. Thank instructions] [Operator turn of over Investor now Senior Alan Group Director Relations the will to call Lindstrom, I for Cadence. ahead. go Please

Alan Lindstrom

Thank copy archived at forward-looking through the by prepared June The this today’s cadence.com of through Senior and Lip-Bu may A available Vice like website today’s webcast will statements will would Chief XXXX. our call. Executive second will of conference results actual the differ And be and also John contain everyone be that website Tan, I discussion our Mike. Wall, today that remarks and call. from today XX, our earnings materially quarter available expectations. Chief of and to joined call Please on note conclusion am those President is Officer to XXXX you, welcome I Financial Officer.

could on recent and Form please filings the filings to the our factors today. information the our These company’s statements earnings regarding issued XX-Q, in cautionary Cadence’s in For Securities Commission. results, release that XX-K press forward-looking a future and refer on Exchange Form we include the cause with including difference comments and reports most

with Note reconciliations measures measures. their are to in using evaluating financial The also our business, Investor financial reconciliation results review Investors Generally In potential in GAAP financial from useful financial be longer social today’s to to review can a call of website. section certain and over turn XXXX the Apologies comparable we today’s at results dated GAAP there we management financial available tables now, Cadence most encouraged XX, addition with non-GAAP using press the Relations the glitches investors related and take XXXX, will today. And to for is and the of distancing Accounting to cadence.com. advance on prepared financial believes if usual. adhere available non-GAAP therefore XX, any conducting our are direct commentary results. little our CFO are GAAP, in to locations. to addition Cadence than quarter respective call Lip-Bu. present Principles that or that also results measures practices Accepted continuing ended earnings non-GAAP accordance will are June are the I certain Copies that remote also in it handoffs or July of release

Lip-Bu Tan

our excellent exceeded today. to Good challenges key navigated afternoon, an outlook everyone view team innovative of our annual environment us will outlook raising and second that results of year. by the design XXXX. quarter posed John financial We through environment, combined pleased achieved robust financial successfully pandemic. the we for strong report financial you thank I very are as a of the on on broad-based in outlook with joining for more for provide for solutions, and we metrics, details In QX all uncertainty, am continuing, the demand financial continued our our shortly.

staying are I employees, through and times to environment, and communities. customers continues top families our In that the priority going all ensuring are and and and safe you We your unprecedented our of safety healthy. well-being hope this be

be the Our appears base well from has future. least foreseeable which working for adapted employee home, normal, to to the new at

engineering application tracking our effectively deliverables customer are and well, our with teams engage continue R&D customers. to and Our sales and

such and hyperscale our AI the as order generational design high infrastructure collaboration increasing and the data-centric semiconductor demand drivers Fueled and investment to of in are We revolution maintain productivity. XG, employee level in computing, activity. is by platforms accelerating

solutions EDA very software, has demand and benefit well-positioned these widespread and System IP seeing are Intelligent us from we to Design trends. result, a our our hardware As for strategy

quarter. the at some look us let Now, our highlights for of Excellence Design

our deepened with expansion accelerate have of hardware innovation, and to partnership solutions. a through our their Renesas EDA wide-ranging We

new with broader full momentum proliferation flow EDA wins the solutions, continued including of full our technology quarter. our a digital new the iSpatial its innovative with Our during flow with through generation expanded for the partnership Azure. of Microsoft, XX flow to our Micron TSMC the customers deployment development accelerate timing full TSMC of digital collaborated their in technology Cadence products. signoff Cadence using designs, on signoff, next ensure to with and Microsoft solutions We

deepened several our Our across Cadence verification and medical verticals. custom throughput the analog expanded and a solutions. as digital best Verification delivers medical of usage networking technology they leading wins and company relationship had Verification Suite with our Suite, mobile, We

proliferating, steadily significantly another has simulators being expand We proposition custom its competitive continued customers. at customers combinations been ZX XX of increasingly and capacity ZX attractive value win compelling key underway. new from The quarter, customers. Our integrated with Xcelium with with unique emulator and the multiple had Palladium to migrations to architecture, chip-based simulator hardware outstanding existing the

ability XX strongly performance fast based performance. of and is The high mixed to accurate Protium the provide platform high ramped bring-up RF simulations. very circuit for analog, signal differentiated need and Our and prototyping time on the growth designs has driving

our multiple revenue again double-digit parallel won business was competitive and as especially massively hyperscaler. including circuit several like IP delivered X simulator Our displacements, growth. Spectre an at shaping a QX customers continued proliferating it at strong quarter market Skyworks for

pay-off. stereo particular Star and on SerDes Wireless at refined as high-speed continues nodes well the True and royalties. strong continues in IP advanced and strength to DDR vision applications, Our for demand Hi-Fi as Tensilica of Robust IP strategy most focusing had

AWR new solutions IC very of Integration RF the well continue and customers. executed added comprehensive market at teams growth. advanced segment our over Business momentum was with Integrand expansions customers QX. high-frequency X delivering tools and momentum, underway, developing strong on platform. new with gain working shaping to XXX wins Several Analysis packaging revenue Innovation a multiple several customers double-digit The and is engagements new have designs. in and System existing progressing verticals AWR System across production multiple X.XD Our used on well, XD successfully

customers and Clarity market-shaping New new Celsius ASUSTEK. customers included a included hyperscaler

to the are months would about talk a intolerance. very Now, heartbreaking my diversity have close racial inequality take to significant few like These issues and societal past moment events heart. I Cadence, inclusion At our views led to and we one over different believe fostering perspectives, together stronger to culture. one by team. learn We another of and open and as being and become from are tenets we key embracing that

recruiting We initiatives pay underway, related several have others. including donations, equity, community training, support, career among advancement and

take with racism, each committed are respect against and proud stand other intolerance We are and prejudice, to violence. treating dignity and to

Now, I it turn John. to will over

John Wall

and and fiscal Lip-Bu good for Thanks, QX afternoon, updated I XXXX. for results am pleased with outlook our everyone.

would challenges financial Back revenue quarter. pandemic expecting QX were and hardware For we well delivery that April, due and a IP of in into that QX, installations not and feared. the COVID-XX we the team QX to those we QX QX metrics exceeded some to the our by all originally of that stronger impact we was challenges did pandemic. July the we our deliveries shift results to number key expected have our On challenges to might anticipated for part Ultimately, delay thought than adapted the QX. reflection, related presented our business delivery in

quarter by but in EPS remainder model challenges As we and a for record revenue in hardware moment, with visibility much our Non-GAAP $XXX us half of experience $X.XX. overcome any experience starting less in $X.XX QX, how was gives revenue of about I our second pandemic, strong that QX. on results non-GAAP we expect have with in recurring the Total our ability second embedded million. to and our the quarter, assumptions into last EPS share P&L. IP fiscal caused are to was outlook through approximately GAAP and key factored go concerned the revenue delivery operating our and will revenue XXXX. first much margin of Based we QX the more XX%. our estimate substantially the the on for was was let’s into

to sheet the cash and flow. balance turning Next,

Our cash million. Cadence approximately we was QX during $XXX million. shares. cash balance flow principal repurchased of XX billion, days. $X.X $XX for outstanding was were QX, Operating DSOs of while million $XXX debt value the was And

our in provide outlook. for Before would for I take to outlook a XXXX moment expect fiscal we our and like share to embedded assumptions I updated what QX, the

that exist customers of for for Our all today remain place certain assume the that outlook export limitations to XXXX. in continues

outlook COVID-XX also remain a assumes for year. pandemic the the will that of Our challenge the remainder

in steps have workforce commitments. a number prepare to result their from to some longer those and that to customers likely meet being of our a payment challenges customers liquidity taken for we anticipating are result, work will smaller experience home of As contractual will that unable we our

$X.XX; range revenue has with to the to accounts of repurchase cash outlook the of range be the believe impact outlook to been how XXXX. payments. our of non-GAAP of And $X.XX outlook precaution here have the recognition to $XXX We our range customers, range $X.XX operating GAAP of repurchase annual for approximately is ability XXXX expect for in fiscal operating $X.XX year. million non-GAAP our Cadence of is $XX in to EPS bookings of of where on QX: the in we cash revenue range range in our in XX%, updated non-GAAP the to $X.XX in remainder flow million; that, the of million $X.XXX to the collect there of XX%; pausing approximately in $XXX we expect we shares of EPS expect of in margin from non-GAAP million use EPS revenue financial taken into to currently GAAP to as $X.XX range approximately margin billion record to factored and The flow to $X.XXX Cadence of on free significant of operating the shares. uncertainty non-payment $XXX XX% expect we and $X.XX, to $X.XX; those that we And surrounding $XXX the to much our in EPS is and billion, of already follows:

further revenue for to our guidance are another year. You growth and in on will outlook as our analysis delivered CFO additional we strong expanding Cadence summary, of for available In as profitability the commentary the well quarter website. find items pleased raise and

from pandemic, sites around XX the the globe. Cadence across Before operated

We than from network of a X,XXX are now effectively more distributed operating homes.

they the We I intensely and customers delivering and for partners. as thankful employees how have are impressed on remain to successful but focused strong am only positively rising and leaders, world across outcomes our very not are to thriving our for the blessed many challenge, located

I partners, our to hardworking like for them that with our Finally, I by to continues health operator, close and And remind that now questions. safety And our thanking be all their they first priority. would customers, we will and that, to take do. would like employees all

Operator

Your from question [Operator Benchmark. Instructions] first Ruben comes Roy from

Ruben Roy

just of and questions the kind of taking in continuing times. these perform congrats and guidance and for are customers have for are ongoing customers, more you you numbers having reported liquidity you. I the have conversations my to to think you challenging for for talking thinking to well more are full about, Thank such this you some thank you this QX the the start anecdotal that is about this into John, in on and year? drill challenges you or Hi, of seen commentary the want so as that guided sort with

John Wall

would But some would we – expected I impact install compliance impact the our us impact the ways. containment question. everyone’s concerned Good we business last if day-to-day globe We quarter, measures customers’ with that thought and said, operations. IP. hardware Ruben. ability in to in to stronger Thanks, hardware. expected, was three around we as than our remain mean, offices were us And measures on on particularly those closed yes, that And

we that impact delivery and us the complete in script, for collections that those on would ability were own said impact unable side, would some smaller IP the many then our On concerned we disrupt were labs event the their would that, access liquidity. business of the pandemic to of on accounts in thing behind those the that would expected. fearful concerned than of that our if us were reflection what impact stronger we shelter-in-place we in business as I to was prolonged they restrictions operations were customers QX reflection, challenges purchased. our were about for And customers that and was preparing IP. normal to with and pay the On the And our IP other were ultimately,

is requests to delivery The of Our on from a remains team the collections from challenges. to well impact payments collections the to customers We issue customers adapted received us. smaller that concern. though delay potential a their number

best despite on collect get track some be of and and worth We get theirs reserved $XX of to accounts. basically XXXX to on of Right to that a we continue of And but may about number have those bookings. the not have likely able provide of will we eventually on from to we estimate million track XXXX, on of the end and back QX us, fail back chosen over to that customers to many, to in context, our pay for $XX is efforts worth put orders. our services and X-year will million now as didn’t collect best period

So we $XX of pause revenue million now on bookings. worth

So X we years. over covered for had twice are experience previous we the the

Ruben Roy

the on for Very was that’s and performance you helpful side term seem to looking the line June into core read that digital guess detail, would of bit are little bit in with is way a issues I a on going quick IC quarter the the that the on the items? at just design some a it follow-up, custom what John. near I IC maybe seeing up little side, down where sequentially the is poor

John Wall

Yes, on smaller impact absolutely, more slanted heavily collections software the business. towards with customers our is particularly

So challenging business are we revenue would the than in and are, say on get but impacts or we more on cases a expect think number hardware IP of payment it hardware the revenue we many because contracts upfront. front, collections up paused side, we where software that

much So as you exposure don’t have credit there.

have customers, is top On IP customers. balance our smaller credits IP or And top typically are sheets good side, isolated to from are of is which with the that of like outside kind customers, but really are they royalties And strong this it’s with royalties. the our group that customers very much XXX customers, revenue coming of the XXX.

Ruben Roy

Thanks. That’s okay. helpful. it, Got very

Operator

question Diffely Tom from comes next Your D.A. Davidson. from

lines Your open.

Tom Diffely

are a small to Yes, out there the good customers about? at bend is to afternoon. first you the John I last worried guess question, point just geographic that

John Wall

Tom? Sorry, you can that? repeat quite get that. didn’t I

Tom Diffely

the the Sorry were is you the that yes it customers is about there a across based geographic broad or bend customers concerned towards world? smaller

John Wall

been probably No there’s smaller or hardware. very that’s hit, right it the software if much customers, in particularly. IP mean, I smaller mostly that demographic over the particular in globe, is it is but any across customers and

Tom Diffely

the that today? Okay, high much bifurcation sounds like was kind across board. business seemingly your any your and are if the But performance I is compute of customers fairly seeing are between strong customers you you wondering stronger consumer-driven

John Wall

that are think certainly That’s first like the on think I random down of side, kind and across across where it I and the business the we customers. in parts they royalties higher is think of it for on credit were, half have strength I the the board the for first are XX% this royalty the challenge hard it to I seen strength like in in think of the break it the XXXX. of half their side pool terms the, board is is quite in in different smaller the of in

Tom Diffely

there in a are But the customers to have of lot a high board sounds consumer. a in is weakness lot say have kind of what like offsetting new? of performance strength it compute you you continuing strength like sounds see some across it seen so Okay, from suppliers out

John Wall

just the I were Well to million first IP for up the electronics mean, year. royalty for I royalties strong. the mainly, around seeing there first our to say the of I we Yes. under like related compared million half are XX% market but was $XX the revenues year think consumer strength and last half $XX

leading on Tensilica then with to side, and deployments and including networking at QX nodes Demand with along design highlights IP performance our the off. and on vision were strong stereo high-speed scalable the mobile IP to customizable, wireless and deployments And scale true DSP IP, there the customers. strong the of continues that the DDR to Star front a revenue very focusing advanced SerDes have storage hyper be for strategy most strong in continue helped our IP On for refining pay IP. royalties applications

Lip-Bu Tan

this Lip-Bu. then on, add And is

scale, beside we of the a strong area, a work I because people very cloud, scaling see on block home. of so the infrastructure we think hyper from data but that also in very see of kind of I when question center There is – too. strong think clearly, base demand it's your lot

Tom Diffely

Thank Okay. you, Lip-Bu.

Operator

from from question John Your next comes Pitzer Suisse. Credit

John Pitzer

to thought dissipate might COVID me guys. around the that September afternoon why back of into would quarter, that that last more flow letting front-end the the down relative loaded similarly, have we understand good guess just I of but sequentially? several I of Thanks sides current has as you half your the weighted I help coin, XX% the margins incur questions. maybe actions it’s to cash for environment, half, guide about in look years, only op feels you driving same that ask actually half first than maybe is have Yes, different? into go cash mitigation like am the maybe over there John, And it’s the what perhaps thing, different might the what’s don’t second some second operating half were been same might be you me wondering driving costs the as the is year. operating which flow.

John Wall

Yes, that the of in the op is – terms profile coupe margin yes, there a John, that in of on question things question. good

thought little from a guidance So, get let of we that QX QX expectation revenue QX. that shift into some that we op the when and me we the margin in bit unpack it might for terms had profile, was

was shift typically be expect Cadence XXX, We an something at which that XXX, was mean, XXX, a you which out or other we to QX, QX. followed QX there XXX much, I having with would XXX for pretty look would of you midpoint you experience the Our expect thought the if maybe mean our I way. was actual fact net went that guidance,

we expecting from So, million to $XX into QX QX. were about push

as As And there was in million new QX about that revenue done than deliveries that $XX QX, second some course, when on we going approximately just customers down And through deliver you $XX moved, the, – as accelerate they QX, have million the time Cadence, it in that quarter direction. $XX that in probably just from couldn’t of installation happened had or of about is guys they that customers will we they maybe couldn’t were $XX I had at in list. bookings purchased to, each your of orders the you the to the they when in we any what customers trying maybe now but quarter typically month other moved on lifted million billion the in like had of had June less that. to get has our they mean, into came have, would the fall bookings has quarter two-thirds wanted quarter. that one last know kept things into that

it’s get $XX I net-net, high QX into QX. So, such is the was there million to experience – million QX delivered to $XX probably quarter, of QX, amount unusual say, some maybe in a -- QX from revenue about million for in like we shift but to our from $XX

are up resilient, in side, the overcoming looked in resilient on hiring that, like then very this in the we quarter. it into the Once – the has offers the that was know revenue expense comfortable offer what, uncertainty and got start challenges the late continued of were of released QX, we team of held good the of quarter we the the letters in we quarter and some On because in terms until customers our accelerated at end the you we for that that hiring quarter. contrast of to very

operating have QX then some up a mean, to So, is to shifted to last you and that’s the at deliberately for and closed but operating expenses to meant say from end our – you I are some if XX% some business XX% mentioning compared we year. we And you QX we there from it, paid revenue quarter, hesitate seeing QX got guidance cash like flow, then we think with in Also, I XX%. QX shifted business. live this, last and probably I you QX were is mentioned what margin I of in recall strategic that that early quarter, mean, to is had QX

if an level in to seen I now off burn So, deferred and you have paid through be be revenue right deferred we will in expectation because probably this early. my of from the would cash aim an uptick uptick year, wouldn’t the surprised end get deliberately revenue.

John Pitzer

what critical of my there China about last China, is of if then doesn’t manage several you the That’s the there stable from follow-up, semiconductor U.S. quarters to remained perhaps us the try in fairly the to do percent has relations That could of that between China. chain the some just helpful. of how supply going Is it’s and over you then at low buy ebbs to in still seeing pull that through that revenue flows governments kind are see as nice concern you given And some forward a of Wondering as worrying are China? you on handicap China double-digits. forward and a overall and the U.S. risk in the prevent is and just China tensions there today? how

Lip-Bu Tan

question. good Yes,

hardware customers are IP, think good. with I and and mentioned, overall we are meanwhile all which quite and remained regulations. very our so closely the built we and uncertainty very to fluid business but globally IP monitoring then into I more So, it, I an think to clearly And has already our help. U.S. think that as I we the our it’s far we estimates. comply John – think And the And are that QX upfront China providing overall, revenue QX, the I and think

China it overall, think but in are we I confident quarter-to-quarter and is think varies, overall, I strong think sometime I a think I I continue, think Asia we So, XX% us. for business

John Pitzer

Perfect. Thanks, guys. Congratulations on results. the strong

Lip-Bu Tan

Thank you.

John Wall

Thanks.

Operator

from Markets. Steves comes question Capital next Mitch RBC from Your

Mitch Steves

Hey, my guys. questions. Thanks taking for

up of of U.S. the significantly. kind like movements it kind geographic the looks just first want pretty drill is to here, on the one So I

the am I money I are larger about players of players off is and – make that payments investing assume any for concerned to basically what this is But the that more, able you know So, we guys with not thinking kind are there some chance tech you what end rolling of or lot design. the being the are guys smaller a there. I any chance maybe these actually companies pushing up of up forward about larger because incorrectly, chip picked on front kind

does that be actually side? So the smaller spending off while benefit offset a and larger kind actually get when EDA to end the customers to tools, ones you in of guys, the up if pushed more

Lip-Bu Tan

Yes.

I think that question. – good Mitch,

I activity, I geographically, design don’t the see any slowdown. the was think think board overall, that we strong see across I all we think

in highlighting We this triple with next R&D pay down all and of generation golden is this flow to think this like of are kind question from design. in shaping the the are the hyperscale a guy, to and can drivers data you industry really think those kind we and attention lot all answer industry. the clearly your of development silicon XG, I I big silicon monthly big And into all generational of AI, terms – market-shaping of the my full a in Renesas with read crowded for in you double, lot know a data-centric products. the that the this leader and transcript and market move this you this the opportunity is that a driving proliferation customers,

leaders. be there this when will much recovers, stronger cycle So

the are design we doesn’t the big R&D. slow your And work question, partner the actually, with be And activity really so driving really, trusted them. to answer are delighted guy down, those to

John Wall

that mean, this customers the here. have we the that I had is in despite that smaller more raised collection – R&D. Yes. we some customer the the investing illustrates year some challenges fact Wall John are that And fact Mitch, just we base larger

Mitch Steves

I can it’s And core quarters update just Understood. and maybe that, to about of interest what’s on Clarity, the much going what interesting sort front? of customer COVID maybe a more is about provide two Clarity strange, anything the hear you be backlog products I or it. that you but with XD guys XD so, hear you are like if Clarity the switching been so bit is environment will gears the kind or an EDA, it realized Got product little with talking happening on XD wins, think then

John Wall

I earlier, customers together with is our – is see up continue this a Yes, This think happy you, time XX XXX This to very this share $XXX currently, for and market-shaping product good markets clearly us. mentioned about we have in have a engagements as to we the market million, with with XXx highlight accuracy. we we go then then to providing And hyperscale us. over performance Celsius. strong

wins And at of think lot expansion – momentum, important a new customers. a lot so I more of the the existing multiple of and

the leading the that to overall, differentiation and the with So I customer think the really we about see can are very and continue we value. engaging excited product we drive have

Mitch Steves

Okay, great.

one, this to continue Just small are flattish be they one year kind bookings up really of a or to XX? go going should

Lip-Bu Tan

again. question your Sorry,

Mitch Steves

a year, couple a the because from pretty Just they we to quarters go guys for backlog have up last we really you is on your small or be up year on it’s XX This backlog? XX%. that to expect quarterly really, should stable basis, and now expect should more realized just trying stable understand provided what

Lip-Bu Tan

to want you highlight John, that?

John Wall

– year. kind our were of from not to dramatic surprised QX business early mean, in of some in QX. that business end Yes. don’t early year am we the some bookings. wouldn’t the flat given closed expect I RPOs year. have killed in the a change from But some I that guide But business the and the between Mitch, out pulled later year we and now I deliberately

Mitch Steves

very you Thank perfect. Okay, much.

John Wall

Thank you.

Operator

Mobley Your next question Fargo. Wells Gary comes from from

Gary Mobley

question. to deeper Hey, the on a start I bit strong Congrats digging guys. out the by quarter. a Thanks for little conversation. China into wanted

have as newest update, but we see guys topics this working to the restrictions. you export answer clarity here perhaps on even see and as Mill can an I or at and know have it quarter XXX% And try year Arrow I of of have us your know ‘XX how new you you beyond? part looking it the we today, And don’t some maybe impacts fiscal if so maybe rule been hard as it today, fourth to give

Lip-Bu Tan

this about military arrow? asking new the Just direct from product rule and the use

Gary Mobley

right. That's

Lip-Bu Tan

Okay.

So are use. outlook our complying clearly, impact make not on to us to monitoring the commit trade the overall customer that estimate restriction all military and is are I we all the think turning our very to the sure carefully, we included on not requirements the

work and one so, comply a the we think are the priority customer and but requirements. complying and working all that equally delay made sure that number more And have and lot it's for support of are we is important, to I towards the us we is now there

Gary Mobley

Okay.

John Wall

of the And Okay. product in Gary, or guidance. the metal rules is any our impact already direct in use, included military

Gary Mobley

it's it year an in go into but doesn't not Okay, so of much ‘XX fiscal so September right. not effect really until mistaken impact much

John Wall

like everything have the into I the outcome included we potential year. said of our know Again, remainder we and on impact for our business reviewed today guidance

Gary Mobley

what mistaken, and for my of realize the to sort talk some year. fiscal growth for and any roughly not basis are points you year preliminary revenue to may going gears give I as week revenue acquisitions guidance shift contributing about, I be setups Okay, if wanted I'm up, not sort the year. this of extra follow of But ‘XX. to XXX

next an headwind we perhaps get think year? the of on into we so, this looking of about amount year, flipside equal And a should

John Wall

I Yes, the on I like million, about extra next mean, on basis, that for. with expense small. revenue to expense. a I the expect to revenue extra the, about But when our a full side, full closer year, It’s guess again $XX acquisitions would impact million. to said now. that GAAP about Gary, be that the XX Right think I we I the needs would revenue you it's, be when $XX it's but revenue, it's side, maybe we the of for consideration last of business get recording but part week on be it'll quarter, I I probably non say think will a of think that week definitely XX-week pretty impact are get

my revenue own are we expense. assumed that you a million week, like are to XXXX. not adjust naturally a I guiding you for year, XX modeling $XX say, about comparing And have that you of for do XX-week $XX year impact for I when the think it, I XX-week to million kind but So of if

Gary Mobley

it. guys. Alright. you Got Thank

Operator

Your Rich from next from comes Valera Needham. question

Rich Valera

you. Thank

Let my team in me congratulations quarter conditions. Cadence to strong the add for another tough

around John, strength in So I questions feared guess in less by understand was and quarter, driven than to which dislocation the up the the I just on follow hardware wanted the or full are other some Is contributed that accounted for the in increase year your increase that areas guide guide? also in what to product businesses. there the annual overall the IP

John Wall

Yes.

were we business pleased our with, how think, I is IP very doing. with

business, that category. it's the I product functional think verification mainly

guidance. up based its continuing already customers maybe win for QX mean, expand at that's strong driving prototyping a probably quarter, think net hardware in combination included were very million performance uptime hardware customers on slight increased XX XX, that I to and it shift, a customers for was between that selling continuing provide shift that seeing from because key the was in significantly differentiated ramped integration are But QX have increasingly QX the saw and I get a I XX now, And that am and and looking I that continue. range ZX side, most, QX and when and compelling we to fast mean we of early capacity how that of hardware the revenue partly the we has to outstanding for sure resilient and that new was high see a revenue then architecture attractive thinking ZX cross is And strongly pandemic with we that's versa, is customers. much that again, vice chip are existing gave of strong hardware and now, shift did we QX again. proposition in the apparent the delivery. strength bring quarter. weeks but as there to that's custom the got not again the the on earlier behavior has one compelling ZX platform very, the unique a And Protium ability I with $XX and emulator very the it's July, and the it's with really value customers, and of

Rich Valera

my sort one to have follow-up, to wins wins number. you pivoted engagements? over that’s system have opposed will number, just wanted helpful. XX Thank of QX very was quarter been and Is I And you compare revert to a out engagement ask we of there at analysis seem you use point an towards another as you. the that from engagement expanded how plus it That’s on quarterly maybe to kind for the to maybe to quarter products, equivalent could giving number giving last think some and last an

Lip-Bu Tan

Yes.

two XXX is and for well of we the and in this We with much Celsius. them. very products win offering stronger highlight them been Clarity do a think then have about were The platform, product have more a on we received us. I strong most can over even that

And far so good great consolidations, the for to now then companies drive our I for and in both them but a each way and companies the and one grow have then trusted bigger that so you try and think and alluded footprint companies, own to are to very be are with partner them continue to then accessible. to solutions work to we better them unique

Rich Valera

have I then And Understood. follow-up. quick

have multiple customers terms multiple from revenue when curious or deployments significant cloud transitioning at increasing One businesses of from or other here that pretty cloud from cloud of are uplift have deployments just There on-premise the see a on-premise. deployments, some the today the for presentations have software DAC I and to was offerings is versus that cloud deployments of in the Cadence either virtual on-premise cloud deployment. demand on we and

John So, associated in curious, was similar do with relative uplift revenue see on-premise? you Lip-Bu, to I or deployments just cloud

Lip-Bu Tan

compelling first to manage of to flexibility productivity in have at a and fill more. the cloud as performance. and EDA you performance cost model the you solution the better use the the range unlimited I that the We of and the to them also customer you we start for different the hardware And then the also theory, cloud we and either day, drive customers, important. want include even are can for if effective using are productivity should more try Clearly, John for their really server, And provide scalability provide from and want to benefits. Cadence then by end software then very platform can and and really the manage the or customer.

And is flexibility to to them we the that we they that delighted in the tool, signoff to and And to Qantas And I throughput do for them the the cost. are Microsoft point key of can have create cloud for that. want and campus and way TSMC cloud highlight so optimize that with we gives collaboration flexibility our and then the using the bus go. think this

are we towards cloud. going be think very I moving the to cautiously

So over And I solution. cloud. tool for product XX we And try tools we Analysis it cloud. And to System adopted a customers and so customer we optimizing benefit cloud be people tool, making think by and all highlight new kind under our the then develop can are staking native tool that – cloud progress. like into as much see the EDA of great the far the will using moving easier we so the

increasing delighted are that at. So we is

Rich Valera

Great. you. Thank

Operator

KeyBanc. comes question Jason next Celino Your from from

Jason Celino

Hi everyone. for me fitting Thanks in.

scale companies was announced with the adding, been expanded you and comments? product kind or the companies, Just of you that other but semiconductor for most when and with some customer this customer, then also, Celsius a expanding the of to has think they already they and me, hyper about expansions are if their one a do your scalar customers clarity about has have win new of talked hyper you and electronics today ecosystem the reference

Lip-Bu Tan

question. quick A

a product us, think for is I this Clarity. clearly enough So new

product And they new new any are. new in highlight way customer, the are we us other that to so

we don’t that business have Now before.

is So Celsius hyperscale existing a important think wins, and for to thing think it, the customers then than and performance, validation that validation that XX is important, at they market-shaping, good we good output really of our multiple have I And benefit and use of Tech I the Asus product. and incumbents. our it customers and the they And more. would the the then times is using the who parity very engagements, up not hyperscale the to better the most is good we like XXX new delighted buy for a not the see highlight expansions are most they

John Wall

not quarter to but, question, relation us, but Jason, scalar for scalar of Clarity this new new Clarity, new hyper included that. but didn’t a for market customers our one we specifically, for us. Clarity, shaping in a It’s hyper I your have think for for

Jason Celino

kind side? quick hyper more simulation one then, it using And scale needs their with this of on the up of Okay. all their to like it supplement some follow a electromagnetic processes or customer adopting for

Lip-Bu Tan

Yes, customer, usage. I but a just continue it’s amount of wants expand again, existing know, product is think that to I to think

Jason Celino

Appreciate the Okay, time. great. Thanks.

John Wall

Thank you.

Lip-Bu Tan

Thanks.

Operator

from comes Gonzalez America. from Adam Our final Bank of question

Adam Gonzalez

question. But that it concentrated smaller solid market more Hi, exposure broad-based? is on Congrats the with some in end customers your squeezing or of thanks or a results customers, minor guys. and this particular that have are for clarification just a application the experiencing me is on collection you issue

John Wall

to just smaller the we we the across do it’s but not Yes, customer across value And customers to But companies It’s we some of won’t hopefully that is consistent lose P&L so I good what million on we it’s as smaller, orders likely mean, for have bookings. that we won’t be as are not and are that, that’s it’s but more continue what But pandemic. we to and trying broad-based, there services even thing smaller we revenue. And a Adam. long broad-based $XX is is typically this base, can, I of the as get paid in impact won’t paid. the those to there revenue will because customers, help we and think will those that provide globe. part we customers. about don’t taking paused cases, But we but get though continue value done

Adam Gonzalez

of be driving implied the year extra Is apologies really my off that’s the before That’s towards the week seems and in QX. guidance, helpful. that second and half if it. the this the the favored middle connection heavily call. the QX And for But split revenue cut fiscal second Got QX to Thank is that? between just you. in then asked question

John Wall

into from we into QX, QX week similar for may some we the to estimate QX, again, in higher trying If I will shift mean, QX, we to a a means we QX that went if we there QX see be from which we I’m That’s of extra I’m But not expect QX range. revenue into see be there at from the any up it’s also, why of versus slightly end that to of what have right what range to an don’t the falls from is wider with of QX. It’s a fall QX. best what doubt on I about experience experience record shift where learning I a the that. versus guess remainder really, our QX, XXX now QX just there’s QX. learning the of to of have Yes, year was XXX. based we would big expect part course, know or

Adam Gonzalez

Thanks much. Helpful. Got it. so

Lip-Bu Tan

Okay.

Operator

to for remarks. Lip-Bu Tan closing now will turn I back the call

Lip-Bu Tan

afternoon. joining all you us for this Thank

very these Our out by to Intelligent very I System delighting and we benefit am opportunities System innovating Innovation customers, the especially our our Excellence, from as in continue commitment new is Design Intelligence impressed shown of during Pervasive total and and Design market. and uncertain expanded nicely and dedication playing proud strategy an employees addressable times.

in are they this We behalf employees Board and for company, together this Directors, this we of come convinced fight others frontlines. and to extremely continue will on afternoon. the courageous thanks this want And all to joining the and unfortunate healthcare we to lastly, pandemic. tirelessly to brave Thank collectively our heartfelt workers am you work give on us stronger of all our all And that as a as community. our of and a situation out I

Operator

participating call. XXXX for This in second conference Cadence you today’s concludes Thank call. quarter today’s earnings

You may disconnect. now

Cadence Design Systems (CDNS) 20 Jul 202020 Q2 Earnings call transcript