CDNS - Earnings call transcript Q1 2021 | Cadence Design Systems, Inc.

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Operator

Good afternoon. My name is Olivia and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2021 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Alan Lindstrom Senior Group Director of Investor Relations for Cadence. Please go ahead.

Alan Lindstrom

Olivia. you, Thank to first like -- everyone welcome I XXXX thank earnings our quarter conference to would every call. and Wall, I am Anirudh Vice John Officer; Chief Tan, Officer. President Senior joined today Devgan, by President; Lip-Bu Chief Financial Executive and available A our and June XXXX. website through through webcast archived call be cadence.com this XX, of is will website conclusion of the copy prepared will remarks the A also be today. at of today's available on our call discussion the will forward-looking today Please note that statements. contain

business and our product not regulatory to limited projected statements and to strategy actual implied could risks Forward-looking plans, development, are today's uncertainties unknown statements include, and cause those about business or in results but are trends, statements market positioning. subject outlook, industry differ and to from that discussion. and size, known opportunities These materially

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

rely except events. forward-looking on make on and any disclaims statements You by should time this available the statements of update and of on any required to statements future discussion to Cadence forward-looking not information law. predictions All this as estimates call our obligation based we forward-looking as are us at

financial measures a and our Investors GAAP methodology financial found be addition financial useful April following on earnings other management it accordance certain financial dated in measures. non-GAAP be today's for commentary and between should Copies on to non-GAAP the companies. XX, comparable release to with substitute financial are or necessarily from we by present GAAP, quarter tables results financial as prepared our that CFO the In or not results. may non-GAAP their available GAAP XXXX in GAAP potential also financial and comparable not financial review are each direct the be for in A reconciliation prescribed April equivalent addition press results to can Principles to Cadence are today. using will financial similarly titled ended the release GAAP. are press with non-GAAP evaluating to not any reconciliation using it's measures prepared These nearest investors presented information review year most XXXX, standardized considered also measures Generally Accounting of website. accordance based in business, financial non-GAAP an statements. measures isolation in encouraged by certain with Accepted and results financial related measures GAAP also and non-GAAP our X, of measure These believes

time For like you the you of a questions limit I additional one over the and question ask would we you to Lip-Bu. now follow-up, today, Q&A session call one re-queue observe if would may permits. turn ask to will and And that

Lip Tan

great for first across innovative you with demand and like innovation being helping memory, and broad-based the as propel of and transformation digital providing had compute networking for pleased activity quarter through need actionable for to Data to continuing financial the edge joining are thank and and opportunities. to amounts autonomous cash Intelligent in design data of from end exciting and broad us well System this a strong Design of our revenue everyone outlook. several and data trends us ideally report and are These I'm capture driving as that provide updated moment AI/ML computing, growth, industrial insights strategy generated Analytics our industry. driving XG, strong profitability Cadence positions with the flow. spectrum continue drive hyperscale IoT will to the that in storage, start trends intelligence cloud results our afternoon markets, Good details demand a accelerating John massive a Generation today. transforming solutions, for the delivering outstanding the semiconductor to year to everyday. new

expanded Now in me ISD that Design included ongoing and aerospace Core highlights, simulation the with defense. defense aerospace talk custom let of in digital systems and our functional of had flow as our and the QX our as with solutions. well about starting marquee we full strength We the year And IP strategy. EDA off significantly proliferation our company collaborations Excellence

our business multiple nodes Increasing for best our Significant and using with a platform. trend hardware flow. ever. as prototyping process emulation nanometer Our hardware quarter assisted successfully was QX our certification has in expansions QX X standout below customers shaping revenue out quarter to as design quarter, a Digital Protium for and multiple Signoff full new driving contributed Palladium market secular continuous and complexity, wins a hitting digital strong well at revenue

endorsed XX we -- and current capacity XX X gig performance ZX associate AMD our million Additionally leading new times and and delivering and ZX software multibillion pre-silicon validation ARM. Nvidia, for systems. -- next-generation hardware This multibillion X.X by and design highest Palladium enables higher platforms announced the debug Protium and system times sorry throughput our than

and strong our CFD and that These Smart both business simulators, the Pointwise, year-over-year exciting Early a want Pointwise over solution and water. for analysis and accurately Fluid another experienced well the center for recently gain were America's and acquired proliferated generation our broadened data design analysis massively as in for double-digit for growth. business. Tensilica XX% racing its computational true of leader end PX our of was delivering was integrity before the strength first the ideas Pointwise test the revenue played RFIC expanded and Speakers fourth for to and demanding in and quarter system mesh XG, to over most revenue aerospace with capacity their Samsung, We analysis. have able Renesas. our and introduced power realism and aerospace for Fine/ Computational innovative IP high networking Wearables on high-speed month, organic New acquired the system growth. this their Bluetooth memory demand to XX% in Sigrity New solutions Virtuoso their mesh in There CFD by X, technologies to also their team next year-over-year wireless XX% IP Cup leverage concepts used simulation applications. for design and and generation And endorsements continued accuracy and markets. enable Our the products next-generation as to winning continued our boat interface customers simulator complements shaping simulations expand NUMECA the products footprint the The Marine Zealand system are won segment. dynamic in environments by It of flagship stereo advanced and for new several market We SerDes portfolio, Zealand time. a multiphysics delivered and engines segment, MediaTek Qualcomm system for thanks our for our design of HiFi we marquee level AWR headsets, Vision addition our -- to Emirates NUMECA's Dynamics. Technologies grid highly Clarity performance hyperscale, usage used a and to products NUMECA based team, and role provides and and new analysis in software up solutions being congratulate and fidelity the of boat, especially on signal generation customers, deliver its architecture team products. parallel CFD their IP Technology the touched Team modeling unprecedented long ever and The automotive our

few Let some me macro level a comments topics. conclude with on

customer supply to in continue and situation not monitor design across are seeing slowdown We we the activity our semiconductor so far, chain base. any

the state in regarding in edging the number cases regions, of with COVID-XX the evolving pandemic, countries toward in escalating is growing of are certain while there India. some concern a normalcy, especially Next,

paramount agencies. we safety customers continue As working interests health what local our partners best in employees, will doing is is while closely with and always and regulatory their the and of

including our this I and believe view as an for set a innovative At of ensure experience strongly acts justice enhances we diversity our company, has and committed Lastly, individuals many listening stand we'll take recent inclusiveness to an as our with year light as and challenges, have empathy, obligation past understanding. and against of example Americans. and brought spirit. Asian Cadence, result points racism social are of we different against that violence to that the a a inclusive

updated present XXXX go to Now turn the to I QX it over over our will outlook. and QX results and John

John Wall

of hardware all resulted afternoon that Thanks with our I'm many everyone. growth business metrics Broad-based our operating the of QX. report sales, good strong exceeded quarter. for in pleased across earlier some we key to than growth anticipated revenue lines Lip-Bu, combined in and

our We CFD April, the we leader analysis. invest mesh a space, platform Pointwise building when over second acquisitions of QX, focus half completing track delays the back hiring hiring expected The but expect second generation. in of year design in completed in continue CFD past a the to contributed and multiphysics We year. we on the pace get heavily system of in for to by acquisition out to the acquired some few in our to in months

was the first million. quarter, key EPS with the $X.XX. operating $XXX approximately P&L. GAAP margin through go revenue Non-GAAP was XX%. $X.XX let's EPS for beginning Now, was Total results non-GAAP and was the

sheet $XXX Operating shares. the repurchased $XXX during Next, million. and were of cash XX and we end turning days quarter DSOs At QX, value totaled million flow for the Cadence principal million of $XXX was cash to QX while was debt $XXX outstanding million. cash balance flow.

and updated what in a to assumptions year. headwind surge the with fiscal expected expect Before remainder outlook the recent create this constraints The chip moment QX, for the factored into for revenue India I outlook. capacity in IP like our been to cases for to provide take share impact of are outlook. I'd The XXXX ongoing our embedded for our a along has in revenue COVID-XX we

Operating due for increase Embedding the finally, export the We've fiscal in half expect continue to outlook XXXX year, limitations in expenses as invest for free our XXXX. to cash outlook. second assumes exist least customers of $XXX the the primarily billion for flow of EPS we range assumptions $X.XX. in EPS the our multiphysics range revenue certain into expect $X.XX in growth to XXXX, of We of range included operating range of $X.XX in margin Non-GAAP place in outlook GAAP to in billion, our platform. XX% $X.XX remain Non-GAAP to XX%, our the that expect headcount $XXX XXXX. we the XX% repurchase acquisition cash to to we the $X.XX. today of that shares will the expanding at in to of and range flow to million our all of in these And million, to in Pointwise $X.XX Cadence use

expect non-GAAP million, For the of range revenue range $X.XX we in EPS operating $X.XX range margin QX the in of non-GAAP GAAP the to $XXX EPS $XXX approximately to of to $X.XX XX%, of in XXXX, and $X.XX.

on conclusion, of first another the and Cadence for to that Our I'd which with commentary, our remind their to now and to customers, driving our take CFO and operating growth. focused a like to remain priority. questions. further as our items non-GAAP We'd strong we'll revenue well solid course analysis start that available safety our team be our additional profitable delivered outlook operator, of website, like In GAAP for health continues as employees quarter to all, partners results includes And them And and on is XXXX. reconciliations. thank

Operator

first Jason comes And from our question Celino with Instructions] [Operator KeyBanc.

line Your open. is

Jason Celino

one, for now, on years has Protium ZX and questions. the first for my on taking how you the products, and strong toward could be? going latest emulation my side, because thanks have been hardware emulation think uptake do guys, historically especially products pace Hey of but Maybe that gravitated customers for greatest strength several

Lip Tan

So thank you for the question.

Anirudh Devgan

trying we XX an had to great you in our new We transitioning effect guidance that have midpoint was launched ZX QX, new that to we Yes. to might the try to That's beat manage noticed and of plan the as question, in sell prototyping Jason. many before place Osborn mean those and I -- of system. XXs products. on due Yes, ZXs our Palladium a incentive partly and

for incentive So, the we really new really for solutions. system a and the value testament uptick of a expect quarter with and well was level our They're hardware models. worked plan strong hardware providing the compelling across use QX products both It's customers those chip multiple strong us. to

Jason Celino

follow-up, here. my an for then maybe And great. explanation Okay, just

chip that constraints mentioned and India capacity John, IP. think a headwind in the being I you COVID impact for

John Wall

Yes.

Jason Celino

would maybe from background be you coming why quantify an maybe dollar and the the explain this or Maybe could percentage? my amount impact but topper -- a

John Wall

mean -- have expect now about And that's said if similar to to my -- our constraints. the year expectation probably worsening into that, in factored QX might was our thing and for slightly India out impact of chip sure. quarters. revenue the in North on relation last be some timing Yes, the America some year in back fluctuation certain on in is flat cause the we're delivery we Jason that we now, we when labs. build can down. to quarter prepared had XX, the I talked IPs impact I as royalties could in hardened pandemic do on be COVID last timing that's the recall, capacity them required same year-over-year. you India could but we updated in it remarks year, The us outlook, been challenges hoping between Last the testing bigger

So a headwind there this built is for that. into quarter the slight guide

Jason Celino

Great, get back in queue. I'll thank you.

Operator

from with Our Ader JPMorgan. next Jackson question next comes our -- comes

is open. line Your

Jackson Ader

backlog to the Thanks if pretty any for taking the guys bookings remaining compare, guys. quarter? just I'd down are wondering a and you I in performance questions but calculated additional bookings. a start They was the on performance to bunch commentary tough my in on had relative quarter like

John Wall

this Hi, John. is

the expect end quarter. just to remaining the a I back of before a Yes, of ratchet year. that's up low think obligations performance reflection we'd renewals

Jackson Ader

geography enough. And that the back down? impacted came looks side, particular kind the that IP first saw in then be back from geographic in the to fair here quarter. remarkable would second China segments, geo earth that like half we hardware, of Okay, Any on XXXX, growth for that software, product of coming down

John Wall

be mean more across I clearly based year. of appears it the levels this geographies back, the at normal more to because XX% strength back The China's to mainly Yes, level. is business stats broad

that recall QX, half all our to you and America we well -- outlook, recurring more half return the geographies. one a When week conservative in If along with less the fact that increased the assumed lot the mean, the all second 'XX the second quarter that fiscal regions, the for we kind the within have of really in revenue outlook to the balanced -- of at in The region usual and second as we in within then in visibility strength outlook summer, we'll -- Yes I've revenue and across into China contributes the of our for have half. the the into had revenue get to the North the across pipeline and update mix time. and they that half in quarter I QX, second a strong hardware this can the we

Jackson Ader

you. thank right, All

Operator

coming line Munda from is Gal Our next question the with Berenberg. of

is line open. Your

Gal Munda

taking Hi, my for thank you question.

said. bit expanding a John, just, maybe on little what one is First you just

be throughout this it tends lower I stronger and of your of equally sequentially and expect QX be in potentially historical slight of the kind be of you quarters at year? hardware to guidance well So the because QX revenues that slightly trends tends of split at fairly this pull mid-end materially QX. the than when Is look forward to

John Wall

try in sales and in of Yes, of more our I'd close originally possible XX and $XX hardware forecast than That for originally QX's -- in to successful incentivized as revenue, ZX about launch Gal. XX year incentive new and early the systems. as happen QX. we business and thought we million an ZX was to a the We preparation force implemented -- some the

at true beat, QX, of was million $X guess a probably happened million earlier I for was So and of QX the a fall $XX the million would little into QX. there's in beat thought midpoint bit what that originally that $XX we

Gal Munda

CFD time, adding around that platform really thinking And building little And physics Got your over maybe potentially strategic side. bit question then ending you the other a over kind is might you. Clarity just Thank about -- you. That's of be helpful. adds then which longer-term a capabilities us because to maybe the very and and that's want you that the partner, a potential is to everything to applicable the that for system, of bring you that that you cooling guys simulation your something of so of how other kind kind it? think or of do about of in-house think ones

Anirudh Devgan

you for Thank Yes, question. the

Let me answer this is that Anirudh.

So it some segment close and first mentioned very a big of excited into billion. are we time all, about last CFD, analysis $X.X to billion, $X.X like we is

work in to bring So on is and And them excited them technology, glad focused are machine Pointwise we are with a we so leader that. in-house.

Pointwise think art solution parallel in and capability give very, CFD the our we very organic and a distributed combining So computing market. with can for NUMECA state-of-the

you So we we sure with Clarity well want do are already and to as in Thermal with we in CFD make electromagnetics know, and Celsius.

of focus So our actually versus then look I for invest good are things you it. -- are had in continuing space far, at in these this we optimistic how QX And growth like areas see about we are we QX if now. But year, CFD, still think in optimistic. but these said, early John And segments. go so so we'll and results, to we last we are

Gal Munda

helpful. Thank really you. you. That's Got

Operator

coming Baird. Our Joe line next of Vruwink from question the with

line open. Your is

Joe Vruwink

silicon talk prototyping launching to Great. Hi about emulation everyone. behind that get each. I to time new was the same the new for platforms product two the at hoping just cycle and have

that. think that's I unique pretty a of

maybe but -- a that's maybe, Or just think half generation, you ultimately be could a you? possible of get the second demand I for driver higher of than possibility, on new incentivizing that performance timing-wise, older kind the it means and generation that John, probably do it's forecasted? be timing the net So, is more being of but the the

John Wall

think interfaces. that's building Yes, tight There with mobile Joe. systems are compiler consumer good and -- a unified by integration quickly challenges and most systems, That's dynamic designed those as for including faced the hyperscale The duo and as we applications, advanced for demand clearly can. the XX I designing there. Palladium systems Protium the We're computing to the address ZX the is design. observation electronic the

they important together, to and it so demand we're them duo, everything dynamic it achieve customers as capacity can times we the call work to -- we impact might So the performance launch the strong the more of second have team so for And like but for mean and half each and well have in they is us with can than expect the be up see X built as platform. together to improvements times I of them demand X.X like you we the them plenty say first. which the building so time quickly by them, there's to year very

Joe Vruwink

or being purely are guidance helpful. think there or that the that's $XX other then full mix Is and And on a half like for back you a by because million of weighted margin other Okay, product beating $XX ended higher the just things follow-up forecast function consider million. investments to in your by moves the year, well? up just hiring XQ million or I as some year $XX

John Wall

to a and of the on bit ZX little basically success year I some program CFD of the of in QX the as effect right getting hiring acquisitions Joe. of later exactly of you're the the That's it's earlier seeing and happening little sales space. that success we than It's incentive mean then forecast, XX focused bit because delayed in closing compounded originally is a revenue for the -- what and

Joe Vruwink

much. you thank Great, very

Operator

with next Vleeschhouwer Securities. the Our Griffin comes from of Jay question line

is line Your open.

Jay Vleeschhouwer

for of John. Good paired you. for and technical couple Thank financial and questions Yes. evening. Anirudh A

versus recall, Anirudh on talked ago Xth or to you product you evolution computational may System methodologies? their compare as design package about system particularly commensurate methodologies your three intensity on strategy, else. AE Cadence takes respect time synthesis, effect CFD the in of with or the packaging differences to we And core customers' price how that like, Design for business? that EDA software classical requirements observation two then affect call, pricing and or the you The annual is implementation, overall at meaningful might other Thanks. is secondly, analysis, more First be as quarter RTL with months how and/or and and and anything follow-up customers the revolving. therefore the how as Could those is how of which between place, expect any there you made that flows we would parts and software physics do the strategy, R&D simulation any the add you are

Anirudh Devgan

question. Jay Thanks very good are Those for the question.

me one second Let take the first.

or it simulation Jay, in So logic EDA one-fourth maybe of our Like EDA I'll even software business more view business, circuit simulation-based. -- simulation. is and

more businesses simulation-based profitable are then those overall invariably EDA. So

for profitable So like Spectre usually is place than route, and more example.

I a to expect similar in trend happen Analysis. So System

it's CFD. by Analysis or System whether electromagnetic simulation-based, nature So Clarity, is it's

steady in I to state, EDA. So profitable Core do system than expect be analysis that more

build that we revenue, state, as we expect in scale up and nature, but do the case. there some be Now I are to steady transient

in the, far, with just growth, so the at performance pricing Analysis carefully that. on even revenue I we but looking think margin packaging terms are the question, discipline of And System it we of first and your pleased are And in business. actually not

mentioned I know as think flow more use I like you is like there time, lower last full big one trend, more already. nodes, and

selling of are we So tools these together. lot

anything So discipline on customers it work we our monitor continue do just teams. pricing? with add want and to you and to John, internal

John Wall

that's would R&D a I that I selling, can tools there then is we're groups. where kind that simulation There process tools. the of batch you're at every tools, software lot on what supporting really we bifurcate licenses tools that, the exactly is where they're you Jay, is of create the two there driver where of interactive R&D generally system X,XXX simulations our and if business of software all part why the in because are of business, business, our most the the required that's to is It's why the like part expenses that they headed see I tethered and like the being And intensity you kick-off analysis profitable. software licenses not look can to the part tools, the all is more want, is and and revenue mean relation the need into if the simulation simulation at look engineers mean, the and software, in profitable in partly Yes, in AE we the support tethered add terms right. of AE those engineer the but think to engineers not side, one you cases, dissemination. I license numbered

Jay Vleeschhouwer

very Understood. much. Thanks

Operator

Our Wells next question of from line coming the Fargo. Mobley Gary with

is line Your open.

Gary Mobley

are other Cadence's respect are that presumably ability export customers to business restrictions, specifically With processors, China? has good Thanks any around of companies customers. Wanted I export companies. and specific about afternoon. my in but from do ask those Department developing of handful the focusing what the half taking US to everyone, Hey, a way targeting all those about for realize those dozen China or supercomputer on your news question. not restrictions impacted Commerce to

Lip Tan

Yes, Lip-Bu. this is

John and Anirudh Let me just have that first -- can a answer then or it. onto add

built the we certain we user our into are already the on all, guidance. But specific our regulations we to you've So have the -- all -- not clearly of first that comment export clearly, with and control we we the to know going comply mentioned. continue But including will list and military we everything companies. end

Gary Mobley

was statement both can contributor NUMECA Okay. from first and as how Pointwise would you and that if expect $XXX much in roughly flow the confirm paid And for XXXX? cash amount you quarter NUMECA your to reported the a as John, million in

John Wall

mean, part Cadence family. very, Hi, try, not the Gary. to both very them have we're disclosing Nice those as separately, pleased acquisitions we're but I of and with delighted

Gary Mobley

you thank guys. All right,

Operator

John Our coming of Pitzer question the Suisse. next from Credit with line

open. Your line is

John Pitzer

afternoon see to year. about Thanks me that for I guys. your of some headwinds good letting just wanted this the Gentlemen, the question. back you Yes, to ask go commentary

understand that what's your confused be I I'm in though -- kind ship help revenue headwind kind the for up by volumes I issue. pretty royalty businesses? should a in Can tight you India little and market, industry. of unit capacity better still royalty the year-over-year me of the think we're bit the COVID understand because very significantly even causing volume-based a

John Wall

quarter, my QX unit detailed question. into I next be We analysis, QX, XXXX, out quarters unit in volumes looking through we'd mix the on our have and volumes. three -- thought be It's I but last the And unit they for of guess and the but expecting volumes. because revenue for depends of headwinds over built John, that Yes, a that flat any forecast slightly QX thought that on, think our improvement we forecast goes we'll I being good was year, team it in weren't the now royalty have, in fact flat down customers suggests their the that the into forecast. I

revenue from. relation mean that we customers royalty So I don't on to that commentary to be It's in just generate a the entire the industry.

expect be down. volumes to their unit We

John Pitzer

way customers you is into or those market are not sort going end any that there a to Is detail characterize that to play of give? level

John Wall

give can't sorry. We that, No.

John Pitzer

of geographic ask mix China my think I'm then about investor that be question asking when follow-up, the And some No, what's back a well, in full China forward. half that's guide, and to as pull curious, helpful. you was just year embedded concerns understand represented and for quarter. about I I'm restrictions. broadened because, sort way down out maybe year the of of of last Gary's may sort kind there the clearly current the significantly are another

within you guide, the you the China us give year is that broad full sort strokes any how trend guide? of is about on you As rest being year the there like feel of can think for the

John Wall

between normal last -- backed wasn't that's the particularly In all back John to for an wouldn't China revenue I revert in anomaly. half I basically our more felt I to happy average second And mean I happy than into half to XXXX, for the Yes, because that like extrapolate of revenue. that we year us China. and second wasn't the look had of upfront recurring expecting upfront mix business of

kind assume would that XX% guidance So XX% purposes that China than though, us. upfront normally for even conservative, hard may middle recurring out QX. but for right to XX% is XX% range that And I normal revenue that's thought expectation we to very range our company, to probably the we slightly and to the my and of predict, the would in of revenue in is -- that back revert for for be we where it mix somewhere came that more have to China then is

we've the what that's guide. So embedded into

the of year middle better visibility once of year we're to then. have will assuming I But derisk China. for kind get we that to best to way revert than thought we me, We the the was update we'll back the and

John Pitzer

Very helpful. you, Perfect. Thank John.

John Wall

Okay.

Operator

question of Davidson. the Tom D.A. next with from coming Our Diffely line

Your line is open.

Tom Diffely

good on the in Did Yes. margins in hardware. quarter one Thank all incentives your the afternoon. any just quarter more you really the strong at for John, impact and Maybe meaningful question way?

John Wall

naturally. revenue year. in QX, the I would be in and did The have hiring boosted that expense margins other. also would benefited and have the extra but quarter it delay The benefited the one QX would of at QX would say shift only between a

QX as course, we higher expect and the QX because didn't catch quickly in hiring, are thought year. we with as savings those up both to in We but of the

Tom Diffely

first more the if the wondering was in pricing quarter. so included went the incentives down discounts, I Well,

John Wall

I more No sales the I'm The incentives were me sales team. sorry, incentives let for our incentives, about clarify. talking was

Tom Diffely

Okay.

John Wall

customers. for Non-incentives

Tom Diffely

is the when if look years, that every transitions between and three node longer duration or term Anirudh goes or the years at All you whether every two maybe how in then right. for underlying is still you, for between nodes the strong? it question And impactful demand industry Lip-Bu,

Lip Tan

Anirudh then chip and first start can can in. I

very that the five is strong on Now, phase. complexity of of dynamic demand clearly the the I think generation and

are on design. see don't so the We And any we excited. slowdown

in forward right of we're a marching engaging process In that. down node migrations, that's terms in clearly and on to design, X of demand But five production always clearly, lot now.

is new We us and we very because very that, every investing about for are heavily opportunity in it. nodes are excited a

can we the update of and technology where Anirudh process terms In you might are. be

Anirudh Devgan

is the exciting Yes. there only are thing transitions Thank mean just I one I believe add I want the to is node that Lip-Bu. continuing. -- not you,

is foundries an X-nanometer which now. also there but you of already X-nanometer early these on working mostly multiple that design kind are we know, nodes. activity, R&D, of promising are is advanced doing what terms is In

overall healthy. pretty seems think I So the industry

just not working mode. advanced are foundries, several all -- key there on So

of we that IC, advanced Lip-Bu as is And with advanced think are there activities coupled activity we like lot nodes, see of So these XD I nodes. said, these optimistic we and lot a see. that design

Tom Diffely

out fab new be? helpful when node same a So a the as new node with that's would to as flavor comes almost you a with

Anirudh Devgan

R&D than That, the that get less same I is for node standpoint new customer on variant the variant work same R&D ready a of for on to do work I variant some node. is node. we mean or a depends adoption. of a node -- from the think just new there The work

requirements. customer to standpoint. a based in nodes would on, just But them in on like customers depends with choose flavor the and it So will work they adoption terms from work which of depends their whichever we adopt

Tom Diffely

you. Okay, thank

Operator

the from UBS. line coming Instructions] next Our of question Pradeep Ramani [Operator with

open. is Your line

Pradeep Ramani

had Hi, platform finally I a investment of sort question one-year thing or an like to of that for are horizon together investment go-to-market duration the mode? be Pointwise, feel a had what NUMECA both or more and of taking of And you've environment first and time cycle? feel or Pointwise in and a you if bolted have sort look less like, their integrated to had the investment environment maybe of sort do look thanks it -- onto question. need longer a System it so, scale even a R&D on is is NUMECA you questions sort do couple distribution now you that is, like like Maybe you it Analysis. my Cadence

Anirudh Devgan

a question. great that's Yes,

I our System have will in all, will we further. so mentioned, investments technologies terms, already can pretty connections. this Analysis. -- of investment good built we we point, them force more like -- with we first scale At organically Lip-Bu NUMECA, about and and like Pointwise and all at time feel think do of distributed They feel are enhance our in significant good so good are R&D mentioned already I organic And guidance scale already sales we John and and we have with our some definitely and computing, the enhance scale So into we same customer they and technologies. them them parallel these

products. So because Clarity other of and

So we good. feel

have amount R&D we of In we'll there. of from the already and invested go terms

I the line, our have organic we feel scale it development, and and capabilities that we but So, NUMECA think CFD bottom was point lot of in the market.

Pradeep Ramani

terms customer how part maybe and terms you of the of sort on as of of sort Analysis in And AWR more us doing year-over-year in System of my is tracking AWR, growth as business? follow-up, can sort update Okay. of

Anirudh Devgan

Yes, definitely.

from Analysis part you There part is M&A, is organically, expanded well know acquisition that. as QX Clarity. of AWR but growing going and So, also last if our you year right, to significantly XX% to if Lip-Bu's compare this and AWR use a and integrand some mentioned are AWR of of is that is prepared year business, key is EMA and close comments, well we the up after our System QX both Qualcomm see you it --

and separately but these they system So after Clarity, there. AWR design and Because we solution growth analysis Integrand can are overall Virtuoso, out break different solution. it well along happy complete of more a the growing and don't products, provide are we acquisition with we overall

Pradeep Ramani

Thank you.

Operator

WestPark Our from next coming line the Capital, with your line open. Ruben of question is Roy

Ruben Roy

and The of in for of place a and might Obviously, just given on XXXX. the John Is supply supply some year you've you has terms on guidance wondering been from quick when industry the full might if folks the on I'm see second you're seeing sort your then? you. chip as any Thank over have thinking half. all improvement about soon improvement full-year it we that perspective business? your some when a impact in us situation. thinking follow-up about talking impacts you're XXXX when how and the as with commentary some

John Wall

there Ruben, like IP generate Sure it of provided team revenue was recovering forecast for we royalty QX from look in mix customers the in my particular QX. that the like may softness QX that looked was and Yes. and it

the for we from. point, that don't that industry gets think revenue mix I any of on the your to but just customers be commentary royalty recognize It's I in mean this way. any again,

Ruben Roy

And... appreciate that. Okay. Yes. I

John Wall

seeing We slowdown design in not activity any Cadence. are at

Ruben Roy

right. Right,

just a talking with North in points trying for obviously again I but Lip-Bu, you you business is guess early am as foundry for bit competitor. that. or your the and quick can. and into Anirudh thanks customer I partnerships your get just Okay, the many data to cited little I on American foundry, here, as customers And follow-up about of -- getting and has back large sort

you business look on from going you're any that you any and seeing chip benefits like Just wondering what's on with if here coming the years? have like add your or next several things sector customer as perspective if on to that over things

Lip Tan

in always Yes, I terms in course welcome is manufacturing any IP a is and of think and expansion that US new foundry tool clearly us for enablement. of good in or

packaging so opportunity will of have also. customer excited also requirement the nodes meet activity we you and increase And the and design then the and advanced

we as a and overall, we to positive that enable provide service development to the and think welcome think I that. and So IP design opportunity

Ruben Roy

you All thank right, Lip-Bu.

Operator

Vivek Arya last of Bank the our question America. line of with And coming from

Your line is open.

Vivek Arya

I'm of regions? a more kind Is other is about you're to there for US wanted business your just is your or that follow-up doing based on what and in and last commentary manufacturing. I substitute US to incremental activities. other if packaging curious Lip-Bu manufacturing just that

Lip Tan

very it be think it's now tell, we're Yeah, a because I hard should clearly, excited. overall net increase, to but

partnership of it deep the move And process is the at term overall will they increase. the to Samsung and requirements own be and lot overall, view, and and their different to a want point day, And be with Anything of the lot a foundry, we're of have and and new to PDK of a meet then, my have I when net and our customer foundry, world. not then this happy for new end net a how then, EDA a help. process of and us. rivalry. would optimizing optimization of TSMC, tools I more it the improvement think they need think is from IP so also into they a And think there We in I

Vivek Arya

on Got it. one operating margin. then, Very helpful. And for John, maybe you

and think when what suggesting than my lower right I So QX, back had year you're to leverage XX% for XX of and year. extra half last rule is to of you the back last you think can But guiding so lower think I of XX%, in of importantly, half week the you model one are you to full second QX that half able you at model just will do could the about But Obviously thinking guiding right. this XX about be how I'm the curious, year if before? you're to back you in were year. be this more achieve even get XX% had

John Wall

glad incremental see Vivek. at the the mean with margins good operating XX.X% near-term think ceiling we're was outlook I Yes questions at we that margins. I any I comparing even XX% midpoint now to at see to that's don't XXXX. on XXXX

What and delayed have all combination XX% also the of the it's the in future. say, investing incremental seeing merit there that into multiphysics is two the operating building for in of impact the cycle a clearly that I leverage. reason of model. acquisitions slightly July As is we're out That half, as Like heavily leverage second said in that margins the that's where X. with operating no second we're in near-term lower you're puts kicks delivering half to platform that the activity ceiling that there are we operating -- a long in hiring margins

Vivek Arya

it. Thank you. Got

John Wall

worries. No

Operator

to the I like that's now for turn gentlemen today. over Tan to back the would remarks. all and time we Ladies closing Lip-Bu for have call questions

Lip Tan

joining you very XXXX. in I'm excited far afternoon. for momentum business opportunity Thank so about the the all and us this market growing

benefit I'm history list. which strategy marks to For, and unprecedented the in want Companies Cadence our seventh opportunities recognized Design work one behalf System one their innovation. of expanded our the an Intelligent Work share Great and and Board that honored Pervasive prestigious XXX Our this out and System from in our we of Excellence, was Intelligence Cadence's this thank very during pleased to people-first time. is best Best customers named as very being for, new us nicely Fortune and market. the role also XXXX culture addressable Design confident Work total as on and to of and trust as our of company the to for Directors, as The Place outstanding employees to playing to lastly, in And we continued thanks of the year Innovation partners

Operator

[Operator Instructions]

Cadence Design Systems (CDNS) 27 Apr 212021 Q1 Earnings call transcript