Cadence Design System stock has surged
in this market rally with shares
roaring to new highs in may and never
looking back the electronic design
software leader also is a member of
IBD's Long-Term Leaders portfolio
that underscores the company's long
track record of not just share price out
performance
but fundamental strength over the long
term too and who better to provide
insight into the company's success than
Cadence Design System CEO Lip-Bu Tan who joins me now
thanks for being here today Lip-Bu. Thank
you Alissa thank you for inviting me
okay great now the company is very
uniquely positioned to benefit from
long-term technological themes that are
still in the early stages like 5G
self-driving cars and artificial
intelligence just to name a few so talk
to us about how
Cadence is helping enable these sorts of
innovations
yeah and let me start with the overview
of the company
Cadence Design is a kind of
computational software
specialized in the electronic design
automation software
so we provide the software tool, IP
and hardware verification and that is
what we do
and then we have a strategy to move on
to Intelligent System Design
and in the way we provide the design
excellent that's EDA and IP that we have
currently and we move on to the next level next
layer is called Intel System Innovation
that is work on the system analysis
and also the embedded software then the
next layer will be the pervasive
intelligence that is AI
machine learning to the vertical market and
a little bit background the company is about
8,300 people and revenue is about 2.6 billion
and we grow about 11% a year
this year and then the operating
margin at 33%
market caps about 31 billion and
that's kind of our background
of the information of the company
great and let's talk a little bit more
about that growth that you mentioned
that the company
is experiencing what areas of the
business do you expect to
continue to drive that growth moving
forward over the next year
yeah a couple of things like you
mentioned earlier the 5G
you know the autonomous driving AI
machine learning
deep learning and also the industrial
automations
we call it the industry 4.0 and also the
whole hyperscale data center those are the
five generation of waves that happening
and then right at the foundation is that
electronic design
and that's where we come in and so this
is a very exciting time
and then the other part is basically
that drive the growth
is that we we move into I call it the
data centric
revolution it's all about data and so
how do you
and not create that you know collect
the data
you know by you know generating the data
and then to
organize the data labeling the data to
do the data analytics
and then how do you store and transmit
the data
and that is really transforming all
the vertical industry
and that is really exciting for us so I
think we have a couple of things that
working for us
one is a hyper skill data center they
are all quietly building their own
silicon
to optimize their workload and that was
really a nice growth for us
and then same thing with autonomous
driving they have all the silicon the
sensor development is very exciting for us
and then the other big one is the
industrial automation
they have all the data how do you use
that data to drive
efficiency and productivity and that
really drives some of this
I mentioned earlier intelligent
system design
that we increase our time from 10
billion to 30 billion
so there's a huge opportunity to grow
and that's what we're excited about
yeah it sounds like a huge total
addressable market there
can you put this into action for us a
little bit
give us an example of how you guys are
really
leveraging data to come up with
solutions
yeah so the design getting more and more
complex
and so it really needs our
Design Solution Software to really drive
the
the improvement and then even we use
ourselves the AI machine learning to our
own tool design
so that we use the parallelism we use
the AI machine learning because we have
so much data
how do we drive better solutions for our
customer
at the end of the day is we really want
to delight the customer
so that they can design all the cool
products that we you and I we can enjoy
using and that's something that we
provide
and then the innovation that you know
the tool improvement
and so that they our customer not
just a semiconductor company
also a lot of systems service providers
they can design their product
and then really optimize their solution
to address the different workloads
now when you're talking about a company
that has seen such a long successful track
record of growth as Cadence has
innovation as you're mentioning is
very key to making that happen so how
is Cadence is able to keep up with the
demand you know from your customers
to be able to deliver those cutting edge
solutions when you have
these new technological advancements
cropping up and
and things are changing constantly it
seems
yeah so couple of things you know I used
to be a basketball player
you know I like to have a good team and
so I think the team culture is very
important for us
and then the other part is you know
constant adaptive
learning that I mentioned is
important so that we keep learning
new things and also listen to the
customer closely
so I spend a lot of time with customers
so understanding what is their
challenges and how can we provide the
solution
and then I have a culture that in 48
hours we get back to a customer
so we listen to them they tell us where
we need to improve
and what are the challenges they need
and then most of the customers trust
us as a trusted partner because we
listen to them
we want to delight them we do all the
innovations to help them
and through some acquisition to you know
sometimes they even recommend which
company to acquire which product we need to have
so that we can serve them better so I
think at the end of the day is basically
you know we have the best product to
drive innovation to them
and one thing to highlight last three
years we have more than 20
organically developed products to
support the customer
and then thirdly we also use some of the acquisition
to help you know strengthen our products
and most important listen to the
customer and be their trusted partner
yeah and 2020 has been a year that has
thrown a lot of companies
curve balls so how have you
been able to adapt this year and what
would you say
is your biggest goal for the company in
the coming year and
what are you going to do to work towards
that goal yeah it's a challenging year
you know COVID19
pandemics but we basically you know
tried most of the
employees about 90% of
the employee working from home
so we try to make sure that they can be
productive so we
communicate a lot with our employee our
executive team
and then we also give them stipends to
you know get all the right equipment
the comfortable chair then you know you know
high-speed connectivity so that they can
be productive
and also we use all the different tools
for them to collaborate closely
and also can communicate with customers
engaging with customers
and so that's not we're not going to
lose a beat on that
and then I think that's very important
for us and then
able to continue to innovate I think
that's very important
and then the other part is also we want
to be another culture of
inclusive so that we include every
different race and inter
diversity in terms of gentle and so that
we can be worked together
collaboratively
and over communicating and that's very
important
and then also we want to take care of
the employee
so we give them extra time and sometimes
they work so hard with the Zoom
or Webex and then we basically give some
extra holidays for them
so that they can really spend balance
with the family
the children and then with work and so
that they can motivate it and enjoy what
they're doing and that's very important
and so far have been working very well
for us and then we're able to
reaffirming our 11% growth for the year and this is
very unusual
and very challenging market that we can
able to do that and then one is the team
working together
and then secondly because our resiliency
of our business
and we our business is very predictable
and also we are contract with our
customers two and a half years
and then we kind of work with them in
the long term you know the
trusted internship and then and also our
revenue model is a reticle model
so that is very predictable you know
85- 90% of revenue
is come from the backlogs and that is
very you know
shareholders love it and that is very
predictable
and then and then customers love it
so that we can work on more strategically
important to them and speaking of customers
who would you say are some of the key
customers that you have
and what would you say is the biggest
competitive advantage that Cadence has
in helping you win those customers
and we have a very broad customer base
you know in the thousands and so
big and small and they're all important
to me and
so it's ranging from you know the
infrastructure
player automotive player in a
mobile handset that you use and then
all the way to some of the industrial
electronics
so almost anything that's electronic
that depend on my
software tool and also IP for design and
so that is a very broad and
we're happy to have all the customers
that work closely with us
in terms of competitive advantage one I
mentioned earlier we work as a team
and so every function we work well
together as a team
and then secondly we delight the
customer
we pay attention to customers listen to
their pinpoint their challenges
we try to find solutions for them and
then thirdly
continue the innovations and i always
believe the best product win
and it's very important the customer
would like to have the best product
so we always look out you know 5
years 10 years
for the customer need and then how do we
build that
or through acquisition to get there so
that we can delight the customer
Alright well on that note Lip-Bu
we've got to leave it there but thank
you so much for your time today and for
explaining the driving forces behind the
company's impressive growth
thank you so much Alissa
